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Nidhi Companies Rules 2014- An analysis w.r.t. Nidhi Company Registration

“Nidhi is a company formed with the exclusive object of cultivating the habit of thrift, savings and functioning for the mutual benefit of members by receiving deposits only from individuals enrolled as members and by lending only to individuals, also enrolled as members”
-       Section 406, Companies Act, 2013 & Companies Rules 2014

Nidhi Company are registered or formed only for the benefit for its members only, an outsider i.e. who is not the member of the Nidhi Company is not allowed to deposit any money or doing any kind of business with the concerned Nidhi Company. In this article we will analyze the impact of Nidhi Companies Rules 2014 on the registration of Nidhi Company
Incorporation of Nidhi Company
i)      A Nidhi Company to be incorporated under the Companies Act, 2013 (“Act”) shall be a public company and with a minimum paid up equity share capital of five lakh rupees;
ii)     On and after the commencement of Companies Act, 2013, no Nidhi Company shall issue preference shares;
iii)    Except as provided under the provisions of Nidhi Companies Rules 2014, no Nidhi Company shall have any object in its Memorandum of Association other than the object of cultivating the habit of thrift and savings amongst its members, receiving deposits from and lending to, its members only, for their mutual benefit;
iv)   Every company incorporated as Nidhi shall have the last words “Nidhi Limited” as part of its name.
Structure of Nidhi Company
i)      Within a period of one year from the commencement of the Nidhi Companies Rules 2014, every Nidhi Company shall ensure that it has:
a.    Not less than two hundred members;
b.    Net Owned funds of ten lakhs or more;
c.    Unencumbered term deposits of not less than 10% of the outstanding deposits;
d.    Ratio of Net Owned Funds to deposits of not more than 1:20
ii)     A Nidhi Company shall not admit a body corporate or trust as member
iii)    A minor shall not be admitted as a member of Nidhi Company;
iv)   Except as otherwise permitted under the Nidhi Company Rules, 2014, every Nidhi Company shall ensure that its membership is not reduce to less than two hundred members at any time.
Opening of Branches
i)      Any kind of public deposit business runs on its branch offices. A Nidhi Company may open branches, only if it has earned net profits after tax continuously during the preceding three financial years. A Nidhi Company may open up to three branches within the district;
ii)     No Nidhi Company shall open branches or collection centres or offices or deposit centres or by whatever name called outside the State where its registered office is situated;
iii)    A Nidhi Company shall not close any of its branch unless it :-
a.      Publishes an advertisement in a newspaper in vernacular language in the place where it carries on business at least thirty days prior to such closure, informing the public about such closure;
b.      Inform the Registrar within the thirty days of such closure
Deposits
i)      The fixed deposits shall be accepted for a minimum period of six months and a maximum period of sixty months;
ii)     Recurring deposits shall be accepted for a minimum period of twelve months and a maximum period of sixty months;
iii)    The maximum balance in a savings deposit account at any given time qualifying for interest shall not exceed one lakh rupees at any point of time and the rate of interest shall not exceed 2% above the rate of interest payable on savings bank account by nationalized banks;
iv)   A Nidhi Company may offer interest on fixed and recurring deposits at a rate not exceeding the maximum rate of interest prescribed by the Reserve Bank of India which the Non-Banking Financial Companies can pay on their public deposits.
v)    A Nidhi Company shall not accept deposits exceeding twenty times of its Net Owned Funds (NoF) as per its last audited financial statements
Loans
i)      A Nidhi Company shall provide loans only to its members;
ii)     A Nidhi Company shall give loans to its members only against the following securities namely:
a.    Gold, silver and jewellery
b.    Immovable property;
c.    Fixed deposit receipts, National Savings Certificates, other Government Securities and insurance policies

 Dividend
A  Nidhi Company shall not declare dividend exceeding 25% or such higher amount as may be specifically approved by the Regional Director for reasons to be recorded in writing and further subject to the following conditions, namely:-
i)      An equal amount is transferred to general reserve;
ii)     There has been no default in repayment of matured deposits and interest and
iii)    It has complied with all rules as applicable to Nidhi Companies
 For further details on Registration of Nidhi Companies, please click on the link below:
Or contact us at admin@equicorplegal.com / +91 9958709189

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