Overview of Nidhi Company Compliance

Nidhi company is a kind of Non-Banking Financial Company aka NBFC. Because of the benefits Nidhi Company offers it is also called as Mutual Benefit Finance Company. Like every company, Nidhi Company also consists of few annual compliance popularly known as Nidhi Company Compliances. The statutory compliances related to Nidhi Company are disclosed in Nidhi Rules 2014 and the Companies Act 2013.

Provisions of the Section 406(1) of the Companies Act, 2013 defines the Nidhi Company as “A company which has been incorporated as a Nidhi with the object of cultivating the habit of thrift and savings amongst its members, receiving deposits from, and lending to, its members only for their mutual benefit.”

Nidhi Company is the perfect choice for those who want to indulge in lending business with minimum fund investment.

Nidhi Company Compliances Requirement

• Compliances help in forming exact insights about the company’s working performance.
• It is necessary for every company which is registered under the Companies Act 2013 to file for the compliances.
• Moreover Nidhi Company falls under the category of public company hence in order to protect the interest of its stakeholders it becomes compulsory for the Nidhi Company to follow the compliances.

Nidhi Company Compliance Categories

Benefits of Nidhi Company Registration

• Easy Formation

  1. A total of 7 persons where 3 will be appointed as Director can form a Nidhi Company

  2. Hassle free registration process

  3. Will take 10-15 days to register

• Cost Efficient Registration

  Rs 5,00,000 is the minimum capital requirement for registration of Nidhi Company. The company also provide the opportunity to invest the capital within 2months once the registration is done.

• No RBI Regulations

  Though Nidhi Company falls under the criteria of NBFC but they do not need any approval from RBI. Nidhi Rules, 2014 are drafted for such companies to regulate their activities and working performance.

• High level of certainty in Nidhi Company

  The primary motive of Nidhi Company is to boost the habit of savings amongst its member. Hence, Nidhi Company can be counted as long term investment as its members will not stop savings anytime.

• Less level of Risk

  The level of risk involved in the Nidhi Company is minimal due to its nature of accepting deposit and providing loans to its members as stated in Nidhi Rules 2014. It is a trust worthy and secured way of granting loan also loans provided to members are at a very less rate.

Pre-Incorporation Compliances of Nidhi Company

Necessary compliances to be followed are:

• Minimum of seven members can form a Nidhi Company out of which three are appointed as Directors of the company
• Nidhi Company can come into existence with a minimum share capital of Rs 5, 00,000.
• In case preference shares are issued they are to be redeemed as per the same terms of the issue.
• A minor cannot considered as the member of Nidhi Company
• Company must have “Nidhi Limited” in its name.
• Minor cannot be a member of a Nidhi Company
• A trust or a corporate body cannot be the member of Nidhi Company
• Can't acknowledge the store of over 20% of Net Owned Funds.
• Nidhi Company can't open branches in case it fails to earn any profit after assessment for sequential three money related years.
• The rate of interest on the credit will not surpass 7.5% over the most noteworthy pace of intrigue offered on deposits.

Post-Incorporation Compliances of Nidhi Company

• The number of members should not be less than 200 within one year of its incorporation
• The Net possessed Fund ought to be Rs. 10 lakh or more.
• The proportion of Net-possessed Funds to the stores must not surpass 1:20.
• As mentioned in Rule 14 of the Nidhi Rules, 2014, the stores ought not be under 10% of the outstanding deposits.
• Support of Books of Accounts.
• Keep up the legal Registers.
• Gather Statutory Meetings.

Annual Compliances for Nidhi Company

The nature of annual compliance is periodic in nature. Often these compliances are presented annually hence they are needed to be filed after regular intervals of time.

The purpose of these compliances is to give a clear picture of the work status and performance of Nidhi Company during a period.

It is necessary for Nidhi Company to meet all the compliance as mentioned in the Companies Act 2013 as well as in Nidhi Rules 2014.

List of annual compliance for Nidhi Company

• NDH-1

  Filing NDH-1is necessary for Nidhi Companies submit the NDH-1 along with the prescribed fees and make sure that it is duly certified by either the chartered accountant, cost accountant or by the company secretary.

  File the return within 90days, begin from the end date of the first or second financial year once your incorporation is done.

• NDH-2

  The purpose of filing for form NDH-2 is to appeal for request for time extension in case following compliances are not met:

  1. Fails to add minimum 200 members in a financial year

  2. Inability to keep net owned fund to deposit ratio 1:20

  NDH-2 form is submitted to the Regional Director with the prescribed fee; the director can accept it and pass orders within 30 days from the date of receiving application.

• NDH-3

  It’s a half-yearly return form which is filed by the Nidhi Company.

• Maintaining Books of Accounts

  Each Nidhi organization needs to guarantee that it will keep accurate books of accounts.

• Maintain Statutory Register

  As per Companies Act 2013 it is essential for Nidhi Company to maintain statutory registers. It is one of the mandatory compliances for a Nidhi Company.

• Convene Statutory Meetings

  Conducting meeting of Board of Directors and Shareholders

• Preparation of Financial Statements

  Financial statements of a Company include Profit & Loss Account, Balance Sheet and Cash Flow Statement, it is compulsory for a Nidhi company to prepare financial statements.

• Income Tax Returns

  Nidhi Company should file for annual income tax returns by 30th September of the next fiscal year.

• Financial Statement Returns Filling (AOC-4)

  The form AOC-4 is loaded up with subtleties of the budget reports of the Company. This form is upheld by other documents that are endorsed to transfer alongside this form.

• Annual Return Filling (MGT-7-ROC Annual Return)

  Nidhi Company is required to file for an annual return with the Ministry of Corporate Affairs (MCA) via Form MGT-7.

Important Dates

Penalties

Documenting compliances on time is required for each Nidhi organization. Not meeting the equivalent can draw in punishment for the Nidhi Bank Operators.

If the Company neglects to meet the compliance, the substance and concerned officials will be fined up to the extent of Rs 5000.

If the infringement proceeds, the further fine will be Rs 500 consistently.

Consequently, it is vital to take compliance maintenance administrations from industry master experts.