Introduction
A Nidhi Company is a type of Non-Banking Financial Company (NBFC) recognized under the Companies Act, 2013, that operates with the primary objective of encouraging savings and thrift among its members. These companies are formed to promote mutual benefits and cater exclusively to their members by accepting deposits and providing loans. Governed by Section 406 of the Companies Act, 2013, and the Nidhi Rules, 2014, Nidhi companies are unique entities focused on fostering financial discipline within a close-knit community.
What is a Nidhi Company?
A Nidhi Company, as defined under the Companies Act, 2013, is:
- Formed for cultivating the habit of saving and thrift among its members.
- A mutual benefit society that provides loans to its members against minimal collateral.
Key Characteristics of a Nidhi Company
1-Exclusive Membership
Nidhi Companies operate solely for their members and do not engage with non-members.
2-Restrictions on Business
Nidhi Companies cannot undertake activities like chit funds, hire-purchase finance, or insurance.
3-Minimum Membership
At least 200 members within one year of incorporation.
4-No External Ownership
A Nidhi Company cannot accept deposits or lend money to individuals who are not its members.
5-No Shareholding Preference
A Nidhi cannot issue preference shares.
Compliance Requirements under Companies Act, 2013 & Nidhi Rules, 2014
Nidhi Companies must adhere to specific compliance obligations to ensure proper governance and financial discipline.
Compliance/ Form | Description | Due Date | Applicable Section/Rule |
NDH-1 | Return of Statutory Compliance (membership and financial ratio) | Within 90 days from the end of the financial year | Rule 5 of Nidhi Rules, 2014 |
NDH-2 | Application for extension of time for meeting membership requirements | Before 90 days from the end of the financial year | Rule 5(5) of Nidhi Rules, 2014 |
NDH-3 | Half-yearly return with ROC regarding membership and deposits | Within 30 days from the end of each half-year | Rule 21 of Nidhi Rules, 2014 |
AOC-4 | Filing of audited financial statements with ROC | Within 30 days of AGM | Section 137 of the Companies Act, 2013 |
MGT-7 | Filing of annual return | Within 60 days of AGM | Section 92 of the Companies Act, 2013 |
DIR-3 KYC | KYC of Directors through their DIN | By 30th September annually | Rule 12A of Companies (Appointment & Qualification of Directors) Rules, 2014 |
DPT-3 | Annual return of deposits (if applicable) | By 30th June annually | Rule 16A of Companies (Acceptance of Deposits) Rules, 2014 |
Key Points to Note
1-Net Owned Funds:
A Nidhi Company must maintain at least ₹20 lakhs in Net Owned Funds (NOF).
2-Membership Compliance:
Within one year of incorporation, a Nidhi Company must:
- Have a minimum of 200 members.
- Maintain a Net Owned Fund to deposit ratio of 1:20.
3-Prohibition on Certain Activities:
- Cannot carry out chit fund, leasing, or hire-purchase business.
- Cannot issue preference shares.
4-Deposits and Loans:
- Accepts deposits from members only for a tenure of 6 months to 5 years.
- Provides loans only to members against securities such as gold, property, or other approved collateral.
Summary
Nidhi Companies are specialized financial entities promoting savings and providing credit access within a close-knit membership framework. They operate with strict adherence to the provisions of the Companies Act, 2013 and the Nidhi Rules, 2014, ensuring financial stability and discipline. Key compliances, such as filing NDH-1, NDH-3, and maintaining membership ratios, are vital for their proper functioning.
Conclusion
Nidhi Companies are essential for promoting financial inclusivity and self-reliance among their members. By complying with statutory obligations and fostering mutual benefits, they maintain their credibility and purpose. For those seeking a simple and community-focused financial framework, Nidhi Companies are an ideal choice.
IMPORTANT DISCLAIMER: The Incorporation of NIDHI Companies is currently not allowed from the MCA, since they have discontinued the NIDHI type of entity until further notice.