If a company falling under Rule 2 violates any of the provisions of the rules prescribed herein, the company and any officer of the company who is in default shall be liable to a fine, which may be up to five thousand rupees, and if the violation continues, an additional fine, which may be up to five hundred rupees for each day after the first day, on which the offence continues. A Nidhi company is a type of business in the Indian non-bank finance sector recognized under Section 406 of the Companies Act 2013. [1] Its main activity is to borrow and lend money between its members. [2] They are also known as permanent funds, benefit funds, quasi-banks, mutual funds and mutual benefit companies. They are regulated by the Ministry of Corporate Affairs, which is also empowered to instruct them on matters related to their deposit-taking activity. In recognition of the fact that these companies only deal with their shareholders. Nidhi means a society founded for the purpose of developing the habit of savings and reserve funds among its members, and also receiving deposits and loans to its members solely for their mutual benefit. Rule-23(1): In order to enforce these Rules, the Registrar of Corporations may request from Nidhi such information or reports as he or she considers necessary and may, from time to time, retain the services of auditors, acting corporate secretaries, cost accountants or any of their offices to assist the Registrar in the performance of his or her duties. The Ministry of Corporate Affairs, in its communication of February 18, 2020, further amended the Corporations (Incorporation) Regulations, 2014 with effect from February 23, 2020, replacing the former Form INC-32 (ePIS) with the ePiCP+ web service as well as certain other amendments. Rule-3B (5): If the central government is satisfied that the society meets the requirements of sub-rules (2) and (3), it shall notify it in the Official Gazette and declare it as Nidhi or fraternal benefit society, as the case may be: Registration of Nidhi companies is simple and less complex compared to other types of financial companies such as NBFC, that require an RBI license to start. A Nidhi company can be incorporated with an initial capital of Rs.5 lakh and requires a minimum of seven people (minimum 7 members).

The registration of Nidhi companies also requires three directors initially. Every promoter or director needs a copy of the PAN card, proof of identity and proof of address to apply for a Nidhi company in India. [citation needed] class=”MsoNormal” style=”text-align: justify; >The Ministry of Corporate Affairs (MCA) reports the Nidhi Rules (Second Amendment) 2020 on February 14, 2020 to further amend the Nidhi Rules, 2014. These rules enter into force on the day of their publication in the Official Journal, i.e. 15 February 2020. Each year, the auditor of the company submits a certificate attesting that the company has complied with all the provisions contained in the rules, and this certificate is attached to the audit report and, in case of non-compliance, the rules of non-compliance are expressly indicated. The Nidhi 2014 rules apply from 1 April 2014. The Nidhi 2014 rules were last amended by the Nidhi 2022 amendment rules.

Nidhi companies existed before the existence of the Companies Act 2013. The basic concept of Nidhi is the “principle of reciprocity” [3] These companies are more popular in South India, and 80% of Nidhi companies are located in Tamil Nadu. However, this requirement does not apply to a company within the meaning of paragraphs (a) and (b) of Rule 2. Article 23(2): In respect of any Nidhi who has violated these Regulations or who has not worked within the meaning of the Memorandum and the Statutes, the Central Government may appoint a Special Representative to take charge of the administration of the Nidhi, and such Special Representative shall act in accordance with the directives established by the Central Government: Provided also that no entity that has failed to comply with the requirements of this Rule or this requirement from the coming into force of the Nidhi (Amendment) Rules, 2022, or if the application filed by the Society on Form NDH-4 is or has been rejected by the central government, raises a deposit with its members or makes loans to its members in accordance with the provisions of this Regulation from the date of such non-compliance, or the effective date of the above rules or the date of rejection of the application on Form NDH-4, whichever is later. Nidhi companies are subject to the Nidhi rules of 2014. They are incorporated in the nature of a public company and must therefore meet two standards, one under the Companies Act, 2013 and the other under the Nidhi Rules, 2014. No approval from the RBI is required for the registration of the company as the RBI has specifically excluded this category of NBFC in India in order to comply with its basic requirements such as registration with the RBI, etc. Each Nidhi society must ensure that it has at least 200 members within one year of its establishment. 17. February 2020 | by TeamLease RegTech Legal Research Team Upon receipt of the application (in form NDH-4 with fees) from a public company for the Nidhi declaration and after being satisfied that the company meets the requirements of this Regulation, the Central Government shall notify the company as Nidhi in the Official Gazette: Provided also that if a filing is made by a corporation after the date of non-compliance, or the effective date of the above rules or the date of rejection of the application in Form NDH-4, whichever is later, is deemed to have been raised in accordance with Chapter V of the Act and is subject to all the requirements of this Chapter; or in accordance with other provisions of the Act or the regulations made under it.

Provided also that nothing in this rule applies to companies incorporated as Nidhi as of the entry into force of the above rules. Rule 8(2): Except as otherwise authorized by these By-laws, each Nidhi shall ensure that its members are never reduced to less than two hundred members. [In Rules 23A and 23B, the words “nine months” were replaced by Rules Nidhi (Second Amendment), 2020 w.e.f. 15-Feb-2020] Rule 4(4): Subject to the provisions of paragraph (e) of Article 6, no nidhi in its articles shall have any other object than that of cultivating the habit of saving and saving among its members, of receiving deposits from its members and lending to them only for their mutual benefit. Provided that deposits on behalf of a minor can be accepted if made by the natural or legal guardian member of Nidhi. Rule-5(3): If a Nidhi does not comply with clauses (a) or (d) of subsection (1) above, it must submit an application to the Regional Director on Form NDH-2 with the fees set out in the Companies (Registrars and Fees) Rules, 2014 within thirty days after the end of the first fiscal year, and the Regional Director may review the application and issue orders within thirty days of receipt of the application. Rule 11(4): The ratio referred to in subsection (2) also applies to additional deposits. Provided that a savings account holder and a return deposit account holder hold at least ten rupees of shares. Rule-3B(3): In order to determine whether a promoter or director is a “suitable person”, the following must be taken into account, namely: Rule-4(1): A Nidhi must be a joint-stock company and have at least ten rupees lakh of equity.