Introduction

A Nidhi Company is a mutual benefit financial institution incorporated under Section 406 of the Companies Act, 2013, and governed by the Nidhi Rules, 2014. It is required to maintain a minimum paid-up equity share capital of ₹10 lakhs at the time of incorporation. However, to expand operations, meet compliance, or strengthen financial stability, a Nidhi Company may decide to increase its paid-up capital. Increasing paid-up capital involves a structured legal process requiring approvals, documentation, and filings with the Registrar of Companies. This explanation outlines the step-by-step procedure to increase paid-up capital in a Nidhi Company.

Board Meeting and Approval

The process begins with a Board Meeting where the directors of the Nidhi Company discuss the proposal to increase the paid-up capital. A resolution is passed approving the increase and calling for an Extraordinary General Meeting (EGM) of the shareholders to seek their approval for issuing additional shares. The board also decides the number of shares, price, and mode of allotment.

Shareholder Approval in General Meeting

An Extraordinary General Meeting is convened where shareholders vote on the proposal. A special resolution must be passed to authorize the increase in authorized and paid-up capital. The resolution must also authorize the directors to take necessary actions to implement the decision. The approved resolution is recorded in the minutes and forms the basis for regulatory filings.

Increase in Authorized Share Capital (if required)

If the company’s authorized share capital is not sufficient to accommodate the proposed paid-up capital increase, it must first increase its authorized capital. This requires amending the capital clause in the Memorandum of Association (MOA). The company must file Form SH-7 with the Registrar of Companies along with the special resolution and updated MOA.

Allotment of Additional Shares

Once authorized capital is in place, the company proceeds to allot additional shares to existing or new members. The allotment must follow fair valuation principles and be offered by the Articles of Association. Share application money is collected, and share certificates are issued to the allottees within the statutory time limit.

Filing of Return of Allotment

The company must file Form PAS-3 with the Registrar of Companies within 15 days of the allotment. This form includes details such as the number of shares allotted, the identity of the allottees, and the consideration received. Supporting documents such as the board resolution, special resolution, and list of allottees must be attached.

Updating Statutory Registers and Records

After allotment, the Register of Members and Register of Share Allotments must be updated to reflect the new capital structure. Share certificates must be issued to the new shareholders within two months of allotment. All changes must be recorded and signed by the company’s authorized signatories.

Reflecting Changes in Financial Statements

The increased paid-up capital must be reflected in the company’s books of accounts, annual financial statements, and annual returns filed with the Registrar. These changes help improve the company’s creditworthiness and are considered during regulatory inspections and audits.

Conclusion

Increasing the paid-up capital of a Nidhi Company strengthens its financial base, enables regulatory compliance, and supports expansion. The process involves a series of approvals, filings, and updates that must be carried out by the Companies Act and Nidhi Rules. Proper execution of each step ensures transparency, legal compliance, and efficient capital management, thereby enhancing the credibility and operational capacity of the Nidhi Company.

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