Rules Regarding Nidhi Company
Nidhi company is a type of company which accepts deposits and lend money to its members only. Under this, profit earned by members of the Nidhi company is shared among themselves. Nidhi company can only be registered as a public limited company. It falls under the purview of Non-Bank Financial Institution or an NBFC. The main object of the Nidhi Company is cultivating the habit of thrift and savings amongst its members, receiving deposits from, and lending to, its members only, for their mutual benefit. In this blog post, we will talk about the rules regarding Nidhi Company registration.
Rules Regarding Members and Net Owned Fund
As per Nidhi Rules, 2014 it is required for every Nidhi Company to ensure the following:
(a) Not less than two hundred members;
(b) Net Owned Funds of 10 lakh rupees or more;
(c) Unencumbered term deposits of not less than 10% of the outstanding deposits as specified in rule 14
(d) The ratio of Net Owned Funds to deposits of not more than 1:20.
- Nidhi Company is not allowed to admit a body corporate or trust as a member.
- In Nidhi Company it shall ensure that its membership is not reduced to less than two hundred members at any time.
- Minor shall not be admitted as a member of Nidhi Company.
Rules Regarding Branches
Nidhi company is allowed to open branches in case it has earned net profits after tax during the preceding three financial years. They are allowed to open up to three branches within the district. Nidhi companies are not allowed to set up branches outside the state where its registered office is situated. No branch office can be closed unless it 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 and intimation is given to the Registrar within thirty days of such closure.
Rules Regarding Deposits
- In Nidhi company, fixed deposits shall be accepted for a minimum period of six months and for a maximum period of sixty months.
- Recurring deposits shall be accepted for a minimum period of twelve months and a maximum period of sixty months.
- In Nidhi Company maximum balance in savings account at any given time qualifying for interest shall not exceed one lakh rupees and the rate of interest shall not exceed two percent above the rate of interest payable on savings bank account by nationalized banks.
- Nidhi company may not offer interest on fixed and recurring deposits at a rate exceeding the maximum rate of interest prescribed by the Reserve Bank of India on which the Non-Banking Financial Companies can pay on their public deposits.
Rules Regarding Loans & Directors
In case of Loans
- Nidhi company shall provide loans to its members only.
- Amount of deposits shall be calculated on the basis of the last audited annual financial statements of the company.
- Only against the following securities, Nidhi company shall give loans to its members
- Gold, silver, and jewelry
- Immovable property
- Fixed deposit receipts, National Savings Certificates, other Government Securities and insurance policies.
In the case of Directors
- Director shall be a member of Nidhi company.
- The Director of a Nidhi company shall hold office for a term up to ten consecutive years on the
- Board of the company.
- The Director shall be eligible for re-appointment only after the expiration of two years of ceasing to be a Director.
Rules Regarding Dividend & Auditor
In the case of dividend
Nidhi companies shall not declare dividend exceeding twenty-five percent. 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:-
(a) An equal amount is required to be transferred to the General Reserve;
(b) There has been no default in repayment of matured deposits and interest and
(c) It has complied with all the rules as applicable to Nidhi companies.
In case of Auditor
- Nidhi companies are not allowed to appoint or re-appoint an individual as an auditor for more than one term of five consecutive years.
- Nidhi Company is not allowed to appoint or re-appoint an audit firm as auditor for more than two terms of five consecutive years;
- Provided that an auditor (whether an individual or an audit firm) shall be eligible for subsequent appointment after the expiration of two years from the completion of his or its term.