What are the internal rules for Nidhi Companies?

1. Membership and Shareholding Regulations

  • Only individuals are allowed to become members of a Nidhi Company.
  • A member must subscribe to a minimum number of equity shares, as prescribed in the Articles of Association.
  • Companies, trusts, and other corporate entities are not eligible for membership.
  • A Nidhi Company must have at least 200 members within one year of incorporation.
  • Every director must also be a member and hold qualifying shares.

2. Deposit and Lending Controls

  • Deposits can be accepted only from members, and in the form of savings, fixed, or recurring deposits.
  • The total deposit acceptance must not exceed 20 times the Net Owned Funds of the company.
  • At least 10% of total deposits must be maintained as unencumbered term deposits with a scheduled bank.
  • Loans must be issued to members only and must be fully secured.
  • The interest on loans must not exceed 7.5% above the highest deposit rate offered.

3. Restrictions on Business Activities

  • A Nidhi Company is not permitted to carry out business like chit funds, hire-purchase, leasing, or insurance.
  • It cannot issue preference shares, debentures, or other financial instruments.
  • Raising funds from the general public or external investors is strictly prohibited.
  • All operations must be conducted within the member circle only.
  • The company is not allowed to appoint agents or brokers for business promotion.

4. Operational and Governance Structure

  • The company must have a minimum of 3 directors and comply with governance rules under the Companies Act.
  • All directors must be members and serve for a maximum tenure of 10 years, with a 2-year cooling-off period thereafter.
  • Board meetings and member meetings must be conducted regularly and documented properly.
  • The company must maintain statutory registers, books of accounts, and records.
  • Internal decisions, policies, and operations must follow the company’s MOA and AOA.

5. Compliance and Filing Obligations

  • Form NDH-1 must be filed within 90 days of incorporation to declare compliance.
  • Form NDH-3 must be submitted every six months with a deposit and member details.
  • Form AOC-4 and MGT-7 must be filed annually for financial statements and returns.
  • Audited financials and statutory records must be kept ready for inspection.
  • Continuous adherence to the Nidhi Rules, 2014, and the Companies Act, 2013, is mandatory to retain legal status.

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