Rules and regulations under Nidhi company registration are covered in section 406 of Companies Act 2013 and Companies (Nidhi Companies) Rules, 2014.
Objectives of a Nidhi Company
A Nidhi Company Registration is done with the following objectives:
- Soaking up the propensity for thrift and savings among its members.
- Receiving and lending deposits from/to its members for their mutual benefit, which agrees to the rules of Chapter XXVI of Companies Rules, 2014.
Nidhi signifies ‘treasure’. In the budgetary division, nonetheless, it implies any mutually helpful society that has been advised by the middle, which tries to cultivate the propensity for savings among its members.
The companies doing Nidhi business are known by multiple names like Permanent Fund, Benefit Funds, Mutual Benefit Funds and Mutual Benefit Company. This sort of an organization is mainstream in the southern part of the country and are considered to be limited single office foundations. They are mutual benefit social orders as their dealings are restricted to its members and the membership is constrained. The establishment of funds for such a society is the contribution from its members. Loans, for the most part, are secured and given out are at sensible rates and the vast majority of the loans are for the development of house, or repairs
Since the majority of the funds originate from the members, deposits along these lines raised by a Nidhi organization are very little when contrasted with the composed saving money division.
Since Nidhi’s go under one class of NBFCs, the RBI is enabled to issue directions to them in matters identifying with their deposit acknowledgment activities. In any case, since Nidhi’s manage their shareholder-members just, RBI has exempted such told firms from the center provisions of the RBI Act and different directions material to NBFCs. As on date (February 2013), RBI does not have any specified administrative structure for Nidhis.
Rules and regulations under Nidhi company registration 2014
The Center Government made ‘Nidhi Rules, 2014’ with the end goal of completing the objectives of “Nidhi” companies. These rules should be applied to:
- A Nidhi or Mutual Benefits enlisted under Section 620A(1)of Companies Act, 1956
- Each organization working on the lines of a Nidhi organization or mutual benefit society yet has either not applied for or has applied for and is anticipating warning to be a Nidhi or Mutual Benefit Society under Section 620A(1)of Companies Act, 1956
- Each organization incorporated as a Nidhi concerning the provisions of Section 406 of the Companies Act, 2013.
Requirements for Nidhi Company Incorporation
Mentioned below are the requirements to operate as a Nidhi Company.
- A Nidhi organization that must be incorporated under this Act might be an open organization.
- It must have a minimum paid-up share capital of Rs.5,00,000.
- There will be no issuances of preference shares. On the off chance that such shares had as of now been issued by a Nidhi Company before the commencement of this Act, such preference shares are to be recovered as per the terms of the issue of such shares.
- The target of such a firm is soaked up in the members a propensity for thrift and saving and the administrations would just be restricted to its members.
- The name must incorporate the term ‘Nidhi Limited’.
- It should likewise guarantee that the ratio of net owned funds to deposit is not more than 1:20.
- Unhampered term deposits ought not to be under 10% of the exceptional deposits, in this manner specified in Rule 14.
Limitation as per Rule 6
As indicated by Rule 6, no Nidhi company should
- Bear on the business of:
- Chit Fund
- Hire Purchase Finance
- Leasing Finance
- Preference Shares
- Whatever other debt instruments by any name or in any frame at all
- Open any Current Account with its members
- Acquire another organization by:
- Purchase of securities.
- Control the composition of the Board of Directors of whatever other organization in any way at all.
- Go into any arrangement for the change of its management, unless it has passed an extraordinary determination in its general meeting and furthermore acquired the past endorsement of the Regional Director having jurisdiction over Nidhi.
- Bear on any business other than the business of obtaining or lending in its own particular name; It’s basic to note that Nidhi which have clung to every one of the provisions of these rules may lease facilities of lockers to its members. The lease must not exceed 20% twenty for each penny of the gross income of the Nidhi any time of time amid a money-related year.
- Acknowledge deposits from or loan to any individual, other than its members.
- Must not pledge any of the assets that have been held up by its members as security.
- Take Deposits from or loan cash to anyone corporate.
- Go into any Partnership Arrangement in its getting or lending activities.
- Issue or cause to be issued any commercial in any shape for requesting the deposit.
- Pay any brokerage or motivating force for assembling deposits from members or for the organization of funds or the granting loans.
Related: A Complete Guide to Nidhi Company