Nidhi Company

Nidhi Company is governed by Section 406 of the Companies Act, 2013 and Company Nidhi Rules, 2014. The company is incorporated as a public company. • As per Section 406, “Nidhi” means 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.

Sec 406

Incorporation and incidental matters ( Rule 4 )

Rule 4

1. Incorporated only as a public company

2. Minimum paid up equity share capital of 5,00,000

3.No Nidhi shall issue any preference shares

4. Any preference shares issued by a Nidhi before commencement of the companies act 2013, shall be redeemed in accordance with the terms of issue of such shares.

5. Last words 'Nidhi Limited' as part of its name

General restrictions or prohibitions (Rule 6)

Rule 6

Share capital and allotment. ( RULE 7 )

(a) Every Nidhi shall issue equity shares of the nominal value of not less than ten rupees each.

(b) No service charge shall be levied for issue of shares.

(c) Every Nidhi shall allot to each deposit holder at least a minimum of ten equity shares or shares equivalent to one hundred rupees.

Rule 7

Membership

Rule 8

(a) A Nidhi shall not admit a body corporate or trust as a member.

(b) Except as otherwise permitted under these rules, every Nidhi shall ensure that its membership is not reduced to less than two hundred members at any time.

(c) A minor shall not be admitted as a member of Nidhi.

(d) Deposit made by a member ( as a guardian ) in the name of minor: permitted

Net Owned Funds

RULE 9

Every Nidhi shall maintain Net Owned Funds (excluding the proceeds of any preference share capital) of not less than ten lakh rupees or such higher amount as the Central Government may specify from time to time.

Branches

Rule 10

A Nidhi may open branches, only if it has earned net profits after tax continuously during the preceding

three financial years.

Acceptance of deposits by Nidhis.

A Nidhis shall not accept deposits exceeding twenty times of its Net Owned Funds (NOF) as per its last audited financial statements.

The ratio specified in sub-rule (2) shall also apply to incremental deposits.

Rule 11

Application form for deposit

(1) Every application form for placing a deposit with a Nidhi shall contain the following particulars,namely:-

(a) Name of Nidhi;

(b) Date of incorporation of Nidhi;

(c) The business carried on by Nidhi with details of branches, if any;

(d) Brief particulars of the management of Nidhi (name, addresses and occupation of the directors, including DIN);

(e) Net profits of Nidhi before and after making provision for tax for the preceding three financial years;

(f) Dividend declared by Nidhi during the preceding three financial years;

(g) Mode of repayment of the deposit;

(h) Maturity period of the deposit;

(i) Interest payable on the deposit

Rule 12

Deposits

Rule 13

(a) The fixed deposits shall be accepted for a minimum period of six months and a maximum period of sixty months.

(b) Recurring deposits shall be accepted for a minimum period of twelve months and a maximum period of sixty months.

(c) In case of recurring deposits relating to mortgage loans, the maximum period of recurring deposits shall correspond to the repayment period of such loans granted by Nidhi.

(d) The maximum balance in a savings deposit account at any given time qualifying for interest shall not exceed one lakh rupees at any point of time and the rate of interest shall not exceed two percent above the rate of interest payable on savings bank account by nationalised banks.

(e) A Nidhi may offer interest on fixed and recurring deposits at a rate not exceeding the maximum rate of interest prescribed by the Reserve Bank of India which the Non-Banking Financial Companies can pay on their public deposits.

Un-encumbered term deposits

Rule 14

Every Nidhi shall invest and continue to keep invested, in unencumbered term deposits with a Scheduled commercial bank (other than a co-operative bank or a regional rural bank), or post office deposits in its own name an amount which shall not be less than ten per cent of the deposits outstanding at the close of business on the last working day of the second preceding month.

Loans

Rule 15

(1) A Nidhi shall provide loans only to its members.

(2)The loans given by a Nidhi to a member shall be subject to the limits specified under the Act.

(3) For the purposes of sub-rule (2), the amount of deposits shall be calculated on the basis of the last audited annual financial statements.

(4) A Nidhi shall give loans to its members only against the securities specified:

(a) gold, silver and jewellery (b)immovable property (c)fixed deposit receipts, National Savings Certificates, other Government Securities and insurance policies

Rate of interest

RULE 16

The rate of interest to be charged on any loan given by a Nidhi shall not exceed 7.5%. above the highest rate of interest offered on deposits by Nidhi and shall be calculated on reducing balance method

Rules relating to Directors.

Rule 17

(1) The Director shall be a member of Nidhi.

(2) The Director of a Nidhi shall hold office for a term up to ten consecutive years on the Board of Nidhi.

(3) The Director shall be eligible for re-appointment only after the expiration of two years of ceasing to be a Director.

(4) Where the tenure of any Director in any case had already been extended by the Central Government, it shall terminate on expiry of such extended tenure.

Dividend

Rule 18

A Nidhi shall not declare dividend exceeding twenty five per cent. or such higher amount as may be specifically approved by the Regional Director for reasons to be recorded in writing and further subject to the following conditions, namely:-

(a) an equal amount is transferred to General Reserve;

(b) there has been no default in repayment of matured deposits and interest; and

(c) it has complied with all the rules as applicable to Nidhis.

Auditor

(1) No Nidhi shall appoint or re-appoint an individual as auditor for more than one term of five consecutive years.

(2) No Nidhi shall appoint or re-appoint an audit firm as auditor for more than two terms of five consecutive years.

Rule 19

Filing of half yearly return

Rule 21

Every company covered under rule 2 shall file half yearly return with the Registrar in Form NDH-3 along with such fee as provided in Companies (Registration Offices and Fees) Rules,2014 within thirty days from the conclusion of each half year duly certified by a company secretary in practice or chartered accountant in practice or cost accountant in practice.

Auditor’s certificate

Rule 22

The Auditor of the company shall furnish a certificate every year to the effect that the company has complied with all the provisions contained in the rules and such certificate shall be annexed to the audit report and in case of non-compliance, he shall specifically state the rules which have not been complied with

Penalty for non-compliance.

Rule 24

The company and every officer of the company who is in default shall be punishable with fine which may extend to five thousand rupees, and where the contravention is a continuing one, with a further fine which may extend to five hundred rupees for every day after the first during which the contravention continues.

1. M/s Kashi Mutual Benefits Nidhi Lid. Is Incorporated as a Nidhi Company under the Companies Act, 2013. The Board of directors of the company seeks your advice on the following issues as per the provisions of the Companies Act, 2013 read with rules, Advise.

(i) The Board of Directors is planning to Issue preference shares.

(ii) The Board of Directors have decided to provide locker Facilities on rent to its members and have estimated that rental income from such letting will be around 30% of the gross income of the company.

(iii) The Board of Directors of the company is planning to declare dividend for the current year at 45%

(iv) The Board of Directors of the company have decided to appoint Mr. Prince (a minor) as a member of the company.

2. Akri Nidhi Limited proposes:

(i) To reappoint Mr. X, a director who has completed a term of 10 consecutive years as director of the Nidhi

(ii) To pay dividend at the rate of 45%.

Examine and analyse the validity of the above proposals with reference to Nidhi Rules, 2014 formulated under Companies Act, 2013.

3. M/s Kaberi Mutual Benefits Nidhi Ltd. is incorporated as a Nidhi Company under the Companies Act, 2013. The Board of Directors of the company have decided to appoint Mr. Raja ( a minor) as a member of the company. Referring to the applicable provisions of the Companies Act, 2013 read with rules thereunder, advise them.

FAQ