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Annual Compliances for Nidhi Company

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Annual Compliances for Nidhi Company

Annual Compliances for Nidhi Company

Nidhi Company is categorised under the Non-Banking Financial Company or NBFC, which does not involve the Reserve Bank of India (RBI) license. Section 406 of the Companies Act, 2013 acknowledges a Nidhi Company and is managed and controlled by the Ministry of Corporate Affairs. Their primary fundamental business is borrowing and lending money between its members. Nidhi Company is based on the concept of the ‘Principle of Mutuality’ or ‘Paraspara Sahaya’.Entities who wish to operate a lending business with low funds investment can opt for Nidhi Company. A Nidhi Company functions for the common benefit of all its members and shareholders. Section 406 of the Companies Act, 2013 and Nidhi Rules, 2014 prescribes some major compliance for a Nidhi Company.

Nidhi Company is registered under the provisions prescribed in Companies Act, 2013. The only objective of forming a Nidhi Company is cultivating the habit of thrift and savings amongst its members. The minimum capital requirement to start a Nidhi Company is Rs.5 lakh. Since Nidhi Company is not bounded to receive a license from the Reserve Bank of India, hence it is easy to form. Moreover, it is registered as a Public Limited Company and must have “Nidhi Limited” as the last words of its name. Now we are aware of the process of Nidhi Company Registration so, let’s learn about the crucial compliances.

What are the Compliances of a Nidhi Company?

Compliances of a Nidhi Company are divided into three parts:

First is Pre-Incorporation Compliances,

Second is Post –Incorporation Compliances, and

Third is Event-based Compliances.

 

Know about the Pre-Incorporation compliances of Nidhi Company:

Every Nidhi Company has to follow some mandatory compliance to obtain Nidhi Company Registration.

The necessary compliances to be followed are mentioned below:

  1. Minimum of seven members is needed to start a Nidhi Company, out of which three members must be the Directors of the Company.
  2. Minimum paid-up equity share capital of Rs. 5 lakh is required to start a Nidhi Company.
  3. Not to issue preference shares and if it is issued the same to be redeemed as per the terms of the issue.
  4. Nidhi Limited” must be used as part of the name.
  5. Minor cannot be a member of a Nidhi Company.
  6. A trust or body corporate cannot be admitted as a member of Nidhi Company.
  7. Cannot accept the deposit of more than 20% of Net Owned Funds.
  8. Nidhi Company cannot open branches if it has not earned any profit after tax for consecutive three financial years.
  9. The rate of interest on the loan shall not exceed 7.5% above the highest rate of interest offered on deposits.

What is the Post –Incorporation Compliances of Nidhi Company?

Post Incorporation of Nidhi Company compliance is divided into two:

  1. General Compliances
  2. Annual Compliances
  1. General Compliances

What are the General Compliances to be followed by a Nidhi Company?

The Nidhi Company must ensure the following compliances within a year of Nidhi Company registration:

The number of members should increase to at least 200 within one year of its incorporation.

The Net owned Fund should be Rs. 10 lakh or more.

The ratio of Net-owned Funds to the deposits must not exceed  1:20.

As prescribed in Rule 14 of the Nidhi Rules, 2014, the deposits should not be less than 10% of the outstanding deposits.

Maintenance of Books of Accounts.

 Maintain the statutory Registers.

Convene Statutory Meetings.

  1. Annual Compliances

 What are the General Compliances to be followed by a Nidhi Company?

The Nidhi Company must ensure the following compliances within a year of Nidhi Company registration:

  1. The number of members should increase to at least 200 within one year of its incorporation.
  2. The Net owned Fund should be Rs. 10 lakh or more.
  3. The ratio of Net-owned Funds to the deposits must not exceed 1:20.
  4. As prescribed in Rule 14 of the Nidhi Rules, 2014, the deposits should not be less than 10% of the outstanding deposits.
  5. Maintenance of Books of Accounts.
  6. Maintain the statutory Registers.
  7. Convene Statutory Meetings.

 

What is the Annual Compliance of a Nidhi Company?

  •  AnnualCompliances

It is compulsory for a Nidhi Company to follow Annual Compliances as mentioned in the tabular format:

Form No.

Compliance

Due Date

NDH-1

This form is used to file Return of Statutory compliance which includes details regarding company’s members, loans, deposits, reserves etc. for the complete financial year

Within 90 days from the closure of the first financial year after incorporation

NDH-2

This form is used for filing application for extension of time.

It must be filed with the Regional Director within 90 days of the closure of financial year.

NDH-3

This form is used for filing Half yearly return with the Registrar of Companies (ROC)

Within 30 days from the end of each half year along with prescribed fees. It must be duly certified by a practising chartered account, or company secretary or cost accountant

AOC-4

Filing of financial statements and other related documents with the ROC

Within 30 days of the conclusion of the Annual General Meeting

MGT-7

Annual Return

Within 60 days of the conclusion of the Annual General Meeting

ITR-6

Return of Income Tax

By 30th September of every year

 What are the penalties for Non-Compliance?

Timely filing of compliances is mandatory for every Nidhi company. Non- Compliance attracts penalty for the Nidhi Bank Operators.

  • If the company does not meet the compliance, the organisation and the concerned officers will be fined an amount up to Rs. 5,000.
  • In the case of continuation of infringement, the company will be charged a further fine of Rs.500 per day.

Hence it is important to hire professionals to help in the compliance procedures.

What are Event-Based Compliances of a Nidhi Company?

Generally, event-based compliances are required to file only once during the company registration process. Furthermore, these compliances must be followed when there is any change also in the Nidhi company’s structure which are non-periodical in nature.

Below is the list of event-based compliances:

Any change in the company’s name.
Change in Registered office address.
Appointment or Resignation or Removal of Director.
Appointment or Resignation or Removal of Auditor.
Any amendment in the company’s objective.
Transfer of shares.
Increase in the authorised capital of the company.
Appointment of the Key Managerial Personnel.
Any other changes that are event-based.

FAQ

The real meaning of Nidhi in Hindi is treasure. The word Nidhi is also used to name girls in India. It is said that the girl named with Nidhi possesses a treasure of knowledge and wealth. In legal terms, there is no official definition of Nidhi and hence we borrow the general meaning of Nidhi which means treasure.

Nidhi Company is one of the forms of Non Banking Financial Company (NBFC) which do NOT require RBI approval. The Nidhi Company has been exempted by the Reserve Bank of India (RBI) from taking the registration. Further, there is no required for keeping the minimum capital at Rs.2 crore to start the Nidhi Company in India.

Nidhi Company is not governed by the RBI but by the central government and hence the central government has introduced the Nidhi Company rules 2014 in order to better govern the company in a more transparent manner.

No, Nidhi Company is not allowed to do microfinance business in India. These are because micro finance is a completely different set of business for an NBFC and require more capital to do the same. Hence, Nidhi Company cannot engage itself into micro finance business. Further, since Nidhi Company raise fund from deposits and hence, if it passes the same to member without any security, then there will be great chances of customer default which will ultimately results into bankruptcy of the Nidhi Company.

No, Nidhi Company does not require any RBI license to start the business in India; this is because Nidhi Company has been exempted by the RBI from its core provisions and hence, there is no RBI requirement for Nidhi Company registration in India.

A Nidhi Company can open up to 3 branches after three years of continuous profit running of the business. Further, these three branches can be opened within the district only. Further, to open any branch outside the district, you will require the Regional Director (RD) permission.

Also, a Nidhi Company cannot open a branch outside the state.

No, it is not mandatory to have Nidhi Company software to run your finance business. However, if you want to run the business properly, then you shall require the Nidhi Company software. Nidhi Company main business is to accept deposits and lend money to its members and so calculation of interest etc requires typical calculations and hence, it is advised to use Nidhi Company software for proper and efficient working.

Mutual Benefit Company is nothing but a Nidhi Company. Mutual benefit is the previous name of the Nidhi Company. After 2013, it was made mandatory to use the name of Nidhi Limited instead of Mutual benefit for registration of Nidhi Company in India.

A Nidhi Company is allowed to take the maximum of 20 times the net owned fund. Net owned fund means the total fund invested by the owner less any accumulated loss. For example, if you have invested Rs.1 crore, then you are entitled to raise funds up to Rs.20 Crore.