1. Governing Law under the Companies Act, 2013

• Nidhi Companies are governed primarily by Section 406 of the Companies Act, 2013.
  
• This section defines Nidhi Companies and provides the basis for their legal structure.
  
• It mandates registration as a public company with specific objectives of mutual benefit.
  
• The Act outlines incorporation procedures, member requirements, and operational restrictions.
  
• It empowers the central government to make rules for regulating Nidhi Companies.
  

2. Nidhi Rules, 2014

• The detailed operational framework is provided under the Nidhi Rules, 2014.
  
• These rules were notified by the Ministry of Corporate Affairs to implement Section 406.
  
• They specify norms for membership, deposits, loans, financial ratios, and compliance.
  
• Rule 6 restricts Nidhi Companies from engaging in unauthorized financial activities.
  
• The rules are binding and must be strictly followed by all registered Nidhi Companies.
  

3. Role of the Ministry of Corporate Affairs

• The Ministry of Corporate Affairs (MCA) is the regulatory body for Nidhi Companies.
  
• MCA monitors incorporation, compliance filings, financial performance, and governance.
  
• It provides approvals, processes filings, and enforces penalties in case of violations.
  
• It also issues notifications and amendments to the Nidhi Rules as required.
  
• All registration and filings are conducted through the MCA portal.
  

4. Registration and Statutory Requirements

• Nidhi Companies must be incorporated as public companies with at least 7 members and 3 directors.
  
• They must use “Nidhi Limited” as part of their company name.
  
• Within one year, they must attain at least 200 members and a net owned fund of ₹10 lakhs.
  
• Financial ratios, such as the 1:20 deposit-to-fund limit, must be maintained.
  
• Companies must also maintain 10% of total deposits in unencumbered term deposits.
  

5. Compliance and Reporting Obligations

• Nidhi Companies must file statutory forms such as NDH-1, NDH-2, and NDH-3 regularly.
  
• Annual compliance forms like AOC-4 and MGT-7 must be submitted to the Registrar of Companies.
  
• Financial statements must be audited annually and kept available for inspection.
  
• Any failure to comply with the rules may lead to penalties or cancellation of status.
  
• Continuous adherence to the legal framework is essential to retain recognition as a Nidhi Company.