Nidhi Company Compliances in India

Compliances of Nidhi Company are regulated as per the provisions of Nidhi Companies Rules, 2014. Typically, a Nidhi company belongs to the non-banking financial sector with the principal objective of borrowing and lending money among its members. Such Companies are incorporated with the object of inculcating the habit of thrift and reserve funds amongst its members.

Understanding the compliances of Nidhi Company is as significant as it is for you to start your own Nidhi Company. Therefore, in this blog, we will enrich your knowledge about the same.

Nidhi Company Registration in India

Nidhi company is one of the NBFCs (Non-Banking Financial Companies) and Banking Companies, but with a minute difference. Unlike Banking Companies and NBFCs, a Nidhi Company doesn’t require any permit or license from the RBI (Reserve Bank of India) to operate.

Nidhi Company works through its members and have the primary goal of lending and accepting loans to its members only. Furthermore, a Nidhi Company is registered as a public limited and must have “Nidhi Limited” as the last words of its name.

Since we are aware of the Nidhi Company registration in India, now, we can move towards learning its crucial compliances.

Important Compliances of Nidhi Company in India

We will discuss the compliances of Nidhi Company in two sections which are:

• Pre-incorporation compliances, and
• Post-incorporation compliances.

Pre-Incorporation Compliances of Nidhi Companies

Pre-incorporation, as the name suggests, is the compliance which is mandatory for every Nidhi Company to follow after the registration. There are certain requirements that applicants must fulfill for obtaining Nidhi Company Registration. The requirements are as follows:

• There should be a minimum of 3 Directors and 7 Shareholders for registering your firm as a Nidhi Company, and
• You must have a minimum paid up share capital of Rs. 5 lakhs.

Post-Incorporation Compliances of Nidhi Companies

Post-compliances of Nidhi Company further divides into two categories:

• Generic compliances, and
• Annual compliances.

Generic Compliances

Generally, these compliances are the one that every Nidhi Company needs to follow after the incorporation has been registered as Nidhi Company. Under this compliance, you have to ensure the following within a year of Nidhi Company registration:

• A minimum number of members or shareholders should increase to 200 within 1 year of incorporation;
• The net owned fund of the company should be Rs. 10 lakhs or more. (The Net Owned Fund is the sum of paid-up equity share capital and free reserved as reduced by the stored and intangible assets appearing in the last audited balance sheet);
• The unencumbered deposits should be equal to or more than 10% of the outstanding deposits as specified in Rule 14 of Nidhi Rules, 2014.
• The ratio of net owned funds to the deposit must not be more than 1:20.

Annual Compliances of Nidhi Company in India

Being a Nidhi Company, you should mandatorily comply with three extremely essential Nidhi Company Compliances as described below:

Form NDH-1

NDH-1 is the Return of Statutory Compliances. If Nidhi Company satisfies all the above conditions, then it should file NDH-1 along with the prescribed fees within 90 days from the closure of the first financial year after incorporation.

The form must be duly certified by the practicing chartered accountant or company’s secretary or cost and management accountant.

Form NDH-2

NDH-2 is the application for extension of time. If the Nidhi Company isn’t complying with the above compliance, then it should apply to the regional director in Form NDH-2 within 90 days from the closure of the financial year along with the prescribed fees.

The Regional Director will then examine the application and pass orders within 30 days of the arrival of the application.

Form NDH-3

NDH-3 is known as the half yearly return. You need to file this form with the Registrar of Companies (ROC) within thirty days from the end of each half year with the prescribed fees as described in Companies Rules (Registration Offices Fees) Rules, 2014 duly certified by a practicing company secretary or chartered accountant or cost accountant.

The Penalty for Non-Compliance by Nidhi Company

Being a Nidhi Company, if you fail to comply with any provision or compliances, then the company and every officer in Default shall be held punishable with a fine that could extend to Rs. 5000/-. In the case, the contravention continues then the company would be punishable with a penalty that may exceed Rs. 500/- per day till the contravention continues.

Wrapping up

The core conclusion from this write-up is that Nidhi Company compliances aren’t that challenging to comprehend. There are just three annual compliances that you have to comply by, excluding the compliances of Companies Act, 2013. With the least involvement of the RBI, Nidhi Companies are easy to operate. With small funding, an ordinary businessman can also set up a Nidhi Company and enjoy the business of financing without following the RBI compliances. The only thing you are supposed to do is to follow the compliances strictly, or you would be subject to hefty penalties as described above.

So if you still have doubts regarding Nidhi Company compliances, then contact us. We have a team of highly qualified legal experts with good hands-on solving doubts relating to various aspects of Nidhi Company Registration.