What is Nidhi Company and points to be considered

My this article talks about the meaning of Nidhi company, its requirements, how does it work, what are the criterias and usefulness, filing and other statutory requirements with ROC and other relevant topics. Nidhi companies are very much relevant in South India and not very much known in other parts of India, but the benefits from such companies are much more. I have explained the same in detail.

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What is Nidhi Company ??

Nidhi companies are the limited companies registered under Companies Act, 2013. The main object of the company is to take deposit from shareholders and lend money to the members itself and no outside transaction takes place. Nidhi company is similar to NBFC. RBI has also exempted from the provisions which are applicable to other NBFC to Nidhi company. Nidhi companies are also known as Mutual Benefit funds as they have internal effect only, Mutual benefit company, Permanent Fund, Benefit fund, etc. Around 80% of the Nidhi companies are situated in Tamil Nadu.

Statutory Requirements :-

To start a Nidhi Company there should be minimum 3 directors and 7 shareholders, if not then the incorporation of the same is not possible, as the same is required in case of a Limited company incorporation. The object of the Nidhi company should be only that of lending money, and taking deposits from its members for its mutual benefit only.

Criteria :-

After the incorporation of the Nidhi-company, within one year of its incorporation it should comply with following criteria :

• They should not be having less than 200 members or shareholders, by whichever name called.
• Unencumbered deposits should not be less than 10% of the outstanding deposits.
• Net owned funds * should not be less than 10 lakhs.
• Net owned funds to deposits ratio should not be more than 1:20

*Net owned Funds = Paid up Equity share capital + Free reserves – Accumulated losses – Intangible Assets.

If Criteria is satisfied :-

If the Nidhi-Company satisfies the above criteria than company shall have to file a return in due of statutory compliances as Form NDH-1 duly certified by CA or CS or ICWA by paying requisite fees on the ROC site, within 90 days from the close of the first financial year or from starting of the second financial year.

If Criteria is not satisfied :-

If at the end of the first financial year, if Nidhi-Company is not able to satisfy the above requirements than the Nidhi-company have to apply to Regional Director in Form NDH-2 for the extension of time from 30 days of the close of financial year.

Even if after applying the Regional Director for extension of time and if not satisfied than such Nidhi company shall not accept any further deposits from the second financial year till the year it satisfies the above all conditions and has also to pay the relevant penalty for the same.

Conclusion :-

The Nidhi -company is not found in many regions of the country because its purpose is very much less and is to be created for only above said purposes. So the person wanting to start the company for the above said purpose than only should start a Nidhi company otherwise not.

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