How to Start a NIDHI COMPANY COMPLIANCE

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Overview of Nidhi Company Compliance

A Nidhi Company is a type of non-banking financial institution that facilitates lending and borrowing among its members. Unlike other financial institutions, it is not required to obtain a license from the Reserve Bank of India (RBI). However, like all other companies, a Nidhi Company must comply with certain regulatory requirements, known as Nidhi Company Compliances, which are governed by the Nidhi Rules, 2014 and the Companies Act, 2013. These compliances are crucial for ensuring transparency and accountability, reflecting the company’s operational and financial performance over time.

Nidhi Companies are obligated to fulfill these annual and event-based compliances within the prescribed time frames.

Pre-Incorporation Nidhi Company Compliances

Before registering a Nidhi Company, certain key requirements must be fulfilled:

  • Minimum Members: A Nidhi Company must have at least 7 members, with a minimum of 3 of them serving as Directors.
  • Minimum Capital: The company must have a minimum capital of ₹5 lakhs or more.
  • Branch Opening Restrictions: The company cannot open any branches if it fails to achieve profitability for three consecutive financial years after inspection.
  • Interest Rate: The interest rate on loans cannot exceed 7.5% above the highest interest rate offered on deposits.
  • Company Name: The name of the company must include "Nidhi Limited" at the end.
  • No Trusts or Corporates: Trusts or corporate bodies cannot be members of a Nidhi Company.

Post-Incorporation Nidhi Company Compliances

After the Nidhi Company is incorporated, it must adhere to the following ongoing compliance requirements:

  • Member Count: The company must have at least 200 members within one year of incorporation.
  • Net Owned Funds (NOF): As per Nidhi Rules, 2022, the company must maintain a minimum Net Owned Funds (NOF) of ₹20 lakhs.
  • NOF to Deposits Ratio: The ratio of NOF to total deposits should not exceed 1:20.
  • Books of Accounts: The company must maintain accurate and up-to-date books of accounts.
  • Statutory Registers: The company is required to maintain various statutory registers.
  • Statutory Meetings: Regular statutory meetings must be convened in accordance with legal requirements.

Types of Nidhi Company Compliances

Nidhi Company Compliances can be broadly categorized into two types:

  1. Annual Compliances: These are periodic compliances that need to be filed annually. They reflect the company’s performance and status for the entire year. Some annual compliances may also require filing after specific intervals.

  2. Event-Based Compliances: These compliances are triggered by changes or alterations in the company’s structure. They are not required on a regular basis but must be fulfilled whenever there is a structural change or significant event in the company.

By ensuring adherence to these compliance norms, a Nidhi Company can operate smoothly and maintain its legal standing under the Companies Act, 2013, and Nidhi Rules, 2014.

Annual Compliance for Nidhi Companies in India

Annual compliance for Nidhi Companies is essential to ensure that the government stays informed about the company’s activities and functional operations. These annual filings help maintain transparency and ensure adherence to the regulatory framework. Nidhi Companies in India are required to follow the annual compliance guidelines outlined below:

Form Compliance Due Date
Form NDH-1: Return of Statutory Compliance This form provides comprehensive information on reserves, deposits, loan members, and other key financial aspects of the company for the entire financial year. e-Form GNL-2 is used for document submission to the Registrar. Within 90 days from the end of the financial year.
Form NDH-2: Extension of Time This form is required if:
• The company fails to have at least 200 members within one year of incorporation.
• The company does not maintain the prescribed NOF to deposit ratio of 1:20.		 To be filed within 30 days from the end of the financial year, along with the applicable fees.
Form NDH-3: Half-Yearly Return This form must be filed with the Registrar of Companies (ROC) to report the company’s compliance status on a half-yearly basis. Within 30 days from the end of the half-year.
Form NDH-4 This form is used for declaring the company's status as a Nidhi Company and for updating its details.
• New Company: To be filed within 120 days after the end of one year from the incorporation date.
• Existing Nidhi Company: To be filed within 1 year of incorporation or within 6 months from the commencement of Nidhi Rules, whichever is later.		  
Form AOC-4 This form is used to file financial statements and other supporting documents with the ROC. To be filed within 30 days of the Annual General Meeting (AGM).
ITR-6 Income Tax Return for companies, applicable to Nidhi Companies. By 30th September of each year.
Form MGT-7 This form is for filing the Annual Return of the company. To be filed within 60 days of the Annual General Meeting (AGM).

Event-Based Nidhi Company Compliances

Event-based compliances are typically filed once during the registration process and are required whenever there are changes in the company structure. These are non-periodic filings and must be completed when specific alterations occur. Below is a list of event-based compliances for Nidhi Companies:

  • Change in the company name
  • Change in the registered office address
  • Transfer of shares
  • Appointment of Key Managerial Personnel (KMP)
  • Appointment, removal, or registration of directors or auditors
  • Increase in the authorized capital of the company
  • Alteration of the company's objectives
  • Any other structural changes or alterations

By adhering to these compliance requirements, Nidhi Companies ensure legal compliance and transparency in their operations, fostering trust and accountability within the regulatory framework.

 
 
 

Penalties for Non-Compliance

Compliance with regulations is mandatory for every Nidhi Company in India. Failure to meet these compliance requirements can result in penalties for the company as well as its responsible officers. The penalties for non-compliance are as follows:

  • If a Nidhi Company fails to comply with the prescribed regulations, both the company and its concerned officers may be fined up to ₹5,000.
  • If the non-compliance continues, the company will be charged an additional fine of ₹500 per day until the violation is rectified.

These penalties emphasize the importance of adhering to the compliance requirements to avoid legal and financial consequences.

New Rules for Nidhi Company Compliance

The Ministry of Corporate Affairs (MCA) has introduced stricter compliance regulations for Nidhi Companies through the Nidhi (Amendment) Rules, 2022. These new rules aim to strengthen the operational framework and ensure better governance. Here are the key updates:

  • Any public company registered as a Nidhi Company with a share capital of ₹10 lakhs must submit Form NDH-4 and apply to the Central Government for notification as a Nidhi Company within 120 days of its incorporation.
  • Nidhi Companies must obtain approval from the Central Government to operate within 14 months of their incorporation.
  • The company must have at least 200 members and maintain a Net Owned Fund (NOF) of ₹20 lakhs.
  • If the Central Government does not respond within 45 days of submitting Form NDH-4, the approval will be considered as granted by default.

Restrictions on Nidhi Companies in India

While Nidhi Companies play an essential role in promoting savings and lending among members, there are several restrictions that they must adhere to. These restrictions ensure that Nidhi Companies operate within their intended framework and safeguard the interests of their members. Key restrictions include:

  • Prohibited Activities: Nidhi Companies cannot engage in leasing finance, chit funds, acquisition of securities, insurance business, or hire purchase activities.
  • Current Accounts: Nidhi Companies are not allowed to open current accounts for their members.
  • Asset Pledging: Members are prohibited from pledging any assets they’ve submitted as security with the Nidhi Company.
  • Non-Members: Nidhi Companies cannot lend or accept deposits from individuals or entities that are not members of the company.
  • Preference Shares & Debentures: Nidhi Companies cannot issue preference shares or debentures.
  • Brokerage Payments: Nidhi Companies are not allowed to pay brokerage or enter into any agreements that encourage deposits.
  • Advertising: Nidhi Companies are restricted from issuing any form of advertisement to attract deposits.

These rules and restrictions are designed to maintain the integrity and transparency of Nidhi Companies, ensuring they operate within the legal framework and in the best interest of their members.