Compliances under NIDHI Company

What is NIDHI Company?

As per section 406 of Companies Act, 2013 NIDHI Company is a non-banking financial business organization. The main function of NIDHI Company is lending and borrowing money with its members for mutual benefit of the members. This is also known as Benefit fund, permanent fund, mutual benefit fund, mutual benefit company, etc.

It promotes the culture and habit of saving among its members. Formation of NIDHI Company is easy and less complicated. It does not require obtaining any license from Reserve Bank of India like other financial institutes.

Features of NIDHI Company

The basic characteristics that describe a NIDHI Company are:

• Formation of NIDHI Company is easy.
• Lending and borrowing is allowed only to its members not to the outsiders.
• It is a type of public limited company.
• It doesn’t require any license from Reserve Bank of India.
• Minimum 200 members are required to form within 1 year of formation of a NIDHI company.
• Minimum 5 lakh is required to start a NIDHI company.
• The ratio of Net owned fund to deposit should not be more than 1:20.

What are the restrictions on NIDHI Company?

The restrictions on NIDHI Company are:

• It cannot open the current account of the company member.
• It cannot lend or borrow money from any outsider.
• It cannot undertake the business of hire purchase, chit fund, and lease finance, acquisition of securities or insurance.
• It is not allowed to issue preference debentures or shares.
• It is not allowed to issue any type of advertisement.
• There are some conditions that should be followed by NIDHI Company to grant loans. The conditions are:

1. • The deposits which are accepted by the NIDHI Company should not surpass 20% of its net owned funds.
   • The fixed deposit amount can be accepted for a minimum of six months and maximum 60 months while the periodic deposits can be accepted for a minimum of 12 months and maximum 60 months.
   • The interest rate on deposit should never exceed 2% above the rate presented by the nationalized bank.

What are the key points regarding branches?

NIDHI Company can open their branches only when it has earned a net profit after tax, constantly during the three preceding years and submitted their financial statement and the annual return with the registrar. After three years has lapsed it can open its branches in the district.

What are the limits against the deposit made for permitting the loans?

The limits set against the deposit made for permitting the loans are:

What are the various returns required to be filed by NIDHI with ROC?

NDH-1 (Return of Statutory Compliances)NIDHI Company is required to file return of Statutory Compliances in E- form NDH- 1 within 90 days of the closure of the 1^st financial year or the second financial year as the case maybe. This return is duly certified by the Practicing Company Secretary or a Practicing Chartered Accountant or a Practicing Cost Accountant.

NDH-2 (Application for extension of Time)
If the NIDHI Company has failed to file a return by the end of 1^st financial year, it shall within 30 days file NDH -2 with the Regional Director for extension of time that can be granted till the end of the second financial year.

NDH-3 (Half yearly filing)
Form NDH-3 is required to file half yearly by NIDHI Company with registrar. NDH-3 contains details such as Number of the Members admitted during the half-year, a number of members ceased to be members, total number of members as on the date and total amount of Loan granted by NIDHI company against the security and the amount of deposits accepted by the NIDHI company form its members.

NDH-4 (Declaration of compliance)
Every NIDHI Company is required to file form NDH-4, a one Time declaration of the status of company as NIDHI Company along with a declaration that NIDHI has complied with the minimum no of required member’s i.e. 200 and net owned funds of Rs. 10 Lakh along with other compliance declaration as per the NIDHI Rules, 2014

Annual filing of financial statements and annual Return by NIDHI Company

AOC-4 (filing financial statements
AOC 4 is required to file for the financial statements along with Notice of General Meeting, Directors Report, Auditors Report and Balance sheet to ROC within the 30 days from the date of Annual General Meeting of the Company of NIDHI Company each financial year with the Registrar of Companies (ROC). In the case of consolidated financial statements, the company shall file the AOC 4 CFS.

MGT-7 (Annual Return)
MGT 7 form is required to file by every NIDHI company with ROC containing the details of their annual return along with the list of members within 60 days from conducting annual general meeting.