Annual Compliance of Nidhi Company

Narendra Kumar

11 Jan, 2021

Every Nidhi company has to submit its annual returns to MCA and another regulatory department by 30-09 of the following financial year. In this article, we will discuss the annual compliance of Nidhi company.

What is Nidhi Company?

Nidhi Company is a kind of company which is registered under the Companies Act, 2013. Nidhi Company is the public limited company which is made with the only purpose of accepting deposits and lending money only to its members. It is also Non-Banking Financial Company (NBFC) that has been exempted from the provisions of Reserve Bank of India (RBI)^[1].

In other words, we can say that Nidhi companies are allowed to take a deposit from their members and lend to its members only. As a result, the funds contributed to Nidhi company are only from its members (shareholders) and are used only by the shareholders of the Nidhi Company. Therefore, Nidhi Company is an ideal entity to take a deposit from and lend to the specific group of people.

Is There the full form of Nidhi Company? What is the mutual benefit Company?

No, There is no full form of Nidhi Company, as it is in itself is a full form. Mutual benefit Company is another name for Nidhi Company.

How many people are required to register a Nidhi company?

At least 3 directors & 7 shareholders are vital to register Nidhi Company in India.

How long is registration of the Company valid?

As soon as the Nidhi Companies is incorporated, it will be active & in-existence as long as annual compliances are met regularly. A Nidhi Company must have at least 200 shareholders and comply with other required criteria within 1 year of incorporation. In the event, annual compliance isn’t fulfilled then, the Nidhi Companies will be asked to refund the deposits.

What all can a Nidhi Company do?

A Nidhi can do :

• The secured loan, i.e. it can only give loan against certain securities like gold, silver, immovable property etc.
• Take deposits in the ratio of 1:20. I.e. if paid up capitals Rs.10 lakh, then max deposits will be 2 crores.
• Can offer a locker facility and charge fee for the same.
• Can open collection centers if all compliances are duly fulfilled.

A Nidhi cannot do :

• Unsecured loans, i.e. it cannot extend loan based on surety, guarantee, ITR based etc.
• No Microfinance work can be done under Nidhi Companies and no vehicle loans, etc.
• A Nidhi cannot pay commission to leverage deposits.
• A Nidhi cannot invest in land, in other companies, in stock market etc.

What are the Advantages & Disadvantages of Nidhi Company?

Advantages of Nidhi Company

• Can accept deposits
• Less capital required
• Base to establish NBFC
• Best to finance business

Disadvantages of Nidhi Company

• Cannot run microfinance
• More restriction on business
• Cannot invest in any company
• No advertisement allowed

What are the important Compliance of Nidhi Company in India?

There is various compliance are to be taken care of like ratio, company law, money laundering etc. Hence, a study of all relevant act is important. Further, important compliance as per Nidhi Rules and Companies Act are as follows:

• Every Nidhi Company is required to file form NDH-1 along with the prescribed fees and duly certified by the company secretary in practice or a chartered accountant in practice or a cost accountant in practice. It has to be filed within the period of 90 days from the close of the first financial year after its incorporation and where applicable, the second financial year.
• Nidhi Company needs to file form NDH-2 along with the prescribed fees with the regional director for an extension of time In case of non-compliance with the following:
• 1. To ensure 200 members in a financial year.
  2. To maintain the Net owned funds to deposit ratio of 1:20.

  Regional Director may consider the application and pass orders within the period of 30 days of receipt of the application.

• Nidhi Company is also required to file form NDH-3. This is a half-yearly return which is required to file for at the end of 30th September and 31st March every time. Under this return details pertaining to Nidhi company including the number of members ( existing, newly admitted and ceased), total deposits, loans etc. are to be disclosed.
• In case of non-compliance of Rule 5 sub-rule (1) beyond the second financial year, Nidhi Company shall not accept any further deposits from the commencement of the second financial year till it complies with the provisions contained in rule 5 sub-rule (1) of Nidhi Company Rules2014, besides being liable for penal consequences as provided in the Act.

Read our article: Advantages and Disadvantages of Nidhi Companies in India