Nidhi Company Amendment Rules 2022

The Ministry of Corporate Affairs (MCA) has changed the laws that regulate Nidhi companies, making prior declaration essential for some entities before they begin taking deposits. Before taking deposits, public enterprises wishing to operate as Nidhi’s must acquire a prior declaration from the federal government. In this article we’ll talk about Nidhi Company Amendment Rules 2022.

Brief Introduction about Nidhi Company

A Nidhi Company is a type of Non-Banking Finance Company (NBFC). Nidhi Companies are companies that borrow and lend money to its members. It is founded on the premise of mutual benefit and instils in its members the habit of saving. These businesses are particularly prevalent in India’s south. Nidhi Companies are exempt from registering for a licence with the Reserve Bank of India (RBI). They must, however, be registered as a public corporation, and their names must conclude with ‘Nidhi Limited.’

Nidhi companies are formed in order to lend and borrow money to all of their members. This is built on the mutual benefit concept and instils the habit of saving in all of its members. 

Nidhi Company Amendment Rules 2022

The government of India amended the original Nidhi rules 2014, as amended by Nidhi (amendment) rules 2019, and came out with Nidhi (amendment) Rules 2022 in response to specific suggestions from the committee created for Nidhi Company’s operations. The government wants to protect the interests of the general public and wants that before becoming a member of a Nidhi company, one must ensure that the company has been declared as a Nidhi by the Central Government.

To that end, a few necessary/important amendments to the Rules have been carried out, which are applicable to companies incorporated after the Nidhi (amendment) Rule, 2022.

• Nidhi Company must file NDH-4 – within 4 months (120 days) after its formation.
• Prerequisites for submitting NDH-4:
  • Nidhi must have at least 200 members and a Net Owned Fund (NOF) of at least 20 lakh.
  • The company’s Promoters and Directors must fulfil the qualifications for a fit and suitable person as outlined in the rules.
• After completing form 20A a Nidhi company can begin its business operations.
• It is essential for the government to approve NDH-4 within 45 days after filing; if the government does not offer a revert or approval, NDH-4 will be presumed authorised.
• Form 20A must be filed after receiving NDH-4 permission; thus, you are not permitted to begin Nidhi business operations prior to receiving NDH-4 approval.
• Filings of NDH-1 and NDH-2 are not required for companies formed after the implementation of these laws.
• For existing companies prior to the beginning of these amendment rules, the minimum capital for a Nidhi company is 10 lakhs; this requirement must be met within 18 months of the commencement of these regulations. 

Continuation of Nidhi Company Amendment Rules 2022

• No Nidhi Company shall obtain loans from a bank or other financial institution for the purpose of extending loans to its members.

• During the term of the loan or deposit, a member may not transfer more than fifty percent of his ownership (as of the date of the loan or deposit).
• The Net Owned Fund (NOF) limit should be 20 lakh and should be fulfilled within 120 days (4 months) of incorporation for new companies. For existing Nidhi’s companies, this rule is relaxed and those companies will have an 18-month time limit to maintain this NOF limit from the date of the commencement of these rules.
• To Open New Nidhi Branches – According to the specified guidelines, Nidhi can apply for branches to the Regional Director (RD) using form NDH-2.
• For the closure of Nidhi branches, Nidhi must apply to RD in NDH 2 at least 60 days before the plan’s closure, and the plan must be approved in a board meeting. Nidhi must also apply in NDH-5 format, which must be published in the newspaper, and NDH-2 must be filed within the time frame specified in the rules.
• Any place where a Nidhi operates that is not a registered office or a branch must be closed within six months of the commencement of the Nidhi (Amendment) Rules, 2022, and notification must be sent to the Registrar in Form NDH-2.
• Loans against silver can also be made available to Nidhi members.
• In the event of an unexpected commitment, a temporary withdrawal may be granted with the prior consent of the Regional Director by filing a request in NDH-2.

Document Prerequisites for Incorporation of Nidhi Company

There are following requirement for incorporation of Nidhi Company:

• PAN Card of the proposed Company’s Members and Directors. In the case of foreign nationals, a passport is required.
• Identity proof for the prospective Company’s members and directors; (Aadhar Card/Voter ID/License/Passport) Driver’s
• Members’ and Directors’ Address Proof (Utility Bill/Telephone Bill/Mobile Bill/Bank Statement no older than two months)
• Members’ and Directors’ most recent passport-size photographs
• Proof of Business Address and Owned Property: (Copy of Registry and Latest Govt. Electricity Bill or Water Bill)
• Proof of Business Address rented or leased: (Rent Agreement, NOC from the Owner, Latest Govt. Electricity Bill or Water Bill)

Procedure for Incorporation of Nidhi Company

The following is the procedure for incorporation of Nidhi Company:

Step 1:Fill out the Application Form: You must first complete the easy questionnaire supplied by our experienced staff.

Step 2: Document Processing: In the second phase, we will need your documents in line with the questionnaire you filled out so that we may arrange them as needed and process them.

Step 3:DSC Application: First and foremost, a DSC (Digital Signature Certificate comprised of E-signatures) must be produced. Moreover, for incorporation of Nidhi Company, obtaining a declaration from the Government is necessary which shall be duly submitted at the time of incorporation of Company.

Step 4:Name Availability: The next step is to examine the availability of the name. The name should be distinct and not identical to the name of any other company registered. It is possible that it will take at least 1-2 days.

Step 5:E-filing for Company Incorporation: Once the name has been authorised, an online application must be completed using SPICE+ together with the essential documentation collected from the customer with ROC. Both the MOA and the AOA must be submitted online. This procedure, once again, takes around 2-3 days.

Step 6:Obtain a Certificate of Incorporation: Once the company is formed, we will distribute all documents such as the Incorporation Certificate, MOA, AOA, and Digital Signatures.

Advantages of Incorporating a Nidhi Company

The following are the advantages of Nidhi Company:

• Small-Scale Finance: Nidhi Company lends money in distant and rural sections of the country, as well as in off-site places.

• • Limitation of Liability: Members’ responsibility is restricted to the amount of capital deposited by them in the Company, and so they cannot be held personally accountable for it. It is also a legal entity, which means it is distinct from its Members and Directors.
  • Less Complicated: Nidhi Company includes fewer complexions and may be established with a sum of Rupees 10 Lakhs, which is to be increased to 20 Lakhs within 120 days of formation, and Nidhi Company loans can be obtained at lower rates than NBFC loans.

• Excellent method for saving money: Because they may only lend and borrow money from their members, the major goal of founding Nidhi Company is to instil a culture of saving among the people for their mutual benefit.

• Improved Credit Cooperative Society: Nidhi Company is akin to a co-operative society and is appropriate for small financiers. Once registered, it will be able to take use of the benefits of a credit co-operative organisation.

• Simple Access to Public Funds: Nidhi Company can accept deposits from its members via several accounts such as Saving Account, FD A/c, and Rd A/c, which is less complicated than obtaining funding from banks and other financial institutions.

Endnote

These amendments must necessitate changes by the government in respect to Nidhi companies. Prior to these laws, most professionals and businesses did not know how to contact Regional Directors for Branch clearances or NDH-4 Filings. We attempted to provide information about the Nidhi (Amendment) Rules 2022 in a concise manner.