Nidhi Company Rules is a great way to invest in savings habits and mutually benefit each other. Read on to get an overview regarding documents, membership rules, prohibitions, and loans of Nidhi Company.

Nidhi Company Rules is a group of members formed to help each other financially. Any member of the Nidhi Company can lend and borrow money.

The Company comes under the Non-banking finance sector. It specifically helps in saving money by creating a habit of saving and using it when necessary for investments. The RBI looks after the finances of the Nidhi Company , and it comes under the Ministry of Corporate Affairs of the Indian Government.

Nidhi Company Rules and Regulations 2023

There are few Nidhi Company rules set for proper functioning and providing mutual benefits to all. The rules are as follows:-

Any company registered as a Nidhi Company should be Public limited, it can’t be private.

1. The minimum amount every member of the Nidhi Company should contribute or Equity share capital paid up should be 5 lakh rupees.
2. According to the Companies Act of 2013, the Nidhi Company can’t issue preference shares to its members.
3. In the memorandum of the company, it should be mentioned that the funds of the company are only for creating habits of savings and encouraging investment. The fund should be used for lending and borrowing money between members only.
4. The company registered as Nidhi Company should have “Nidhi Limited “as its last words with the company name.
5. There should be at least seven members to start a Nidhi Company . Out of these seven, three should be directors. One year after completing the Nidhi Company, there should be a minimum of 200 members.

Restrictions of a Nidhi Company

 Nidhi Company rules state that it is not allowed to advertise itself or by using third parties. 

1. The members of a Nidhi Company can’t open a current account in the banks in the name of the company.
2. According to Nidhi Company rules, it should not accept deposits or lend money to anyone who is not a member of the company.
3. A Nidhi Company can’t be involved in chit funds, leasing funds, acquisition of security, hire purchase businesses. It should be solely for the mutual benefit of the members.
4. According to Nidhi Company rules, a company should not be in agreement or brokerage for any kind of deposit.

Nidhi Company- Necessary Documents Required

The mandatory documents required for registering as a Nidhi Company include a valid ID proof of all the shareholders and directors. There should be proof of the address of the office. The residential proof of the shareholders and directors is also necessary. An Aadhar card of the members of the company is a must, along with passport size photos.

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Opening and Closing of Nidhi Company

There are a few sets of checkpoints one needs to tick for the opening and closing of Nidhi Company offices or branches. The Nidhi Company Rules for opening are listed below:-

Opening 

1. A Nidhi Company Registration can only open its branch if it has earned profits after paying tax continuously for the three last financial years.
2. A maximum of 3 branches can be there in the district in which Nidhi Company is working. For more than three branches, Regional director permission is mandatory.
3. A Nidhi Company can’t open deposit centers, offices, or branches by any different names outside the boundaries of its state of registered office.
4. The latest financial statements and annual returns should be filed up to the registrar before opening branches. You can also know about the Tax Exemptions in Nidhi Company.

The Nidhi Company Rules for closing branches are listed below:- 

Closing 

1. Before closing the branch, publishing an advertisement in the newspaper at least 30 days in advance is necessary. The information should be in the local or regional language.
2. Along with the publication of advertisements in newspapers, it should also be attached to office notice boards giving a deadline of 30 days.
3. The information about office closing should reach the Registrar thirty days in advance.

Loan Sanctions

• The sanction of loans is for the members of the Nidhi Company only. There are certain limits applicable to loan amounts corresponding to deposits by members.
• For a loan amount of rupees 2 lakhs, the deposit should be fewer than two crores, whereas for a loan amount of rupees 7.5 lakhs deposit should be more than 2 crores but less than 20 crores.
• For a loan amount of Rs. 12 lakhs, the deposit should be more than 20 crores but less than 50 crores.
• The deposit amount should be more than 50 crores if the loan amount needed is 15 lakhs.
• If the payee turns out to be a defaulter, they will not be able to get any loan in the future. In the case of a loan against property, the maximum amount granted for the loan will be 50% of the property value.
• The collateral against the loan can be silver, gold, and jewellery. The repayment period for these will be one year. The amount of the loan should not be more than 80% of the value of the jewellery. A loan can also be granted against government securities, national savings certificates, and fixed deposits. In the case of fixed deposits, the repayment period should be the unexpired time left by the FD.
• The interest rate on loans should not exceed 7.5% more than that provided by Nidhi company on deposits and will be calculated on the reducing balance method.

Rules and Penalties for Directors

The Nidhi Company rules state that the director of the Nidhi Company should hold the company for ten continuous years. After the two-year expiration of ceasing to be a director, he should meet the eligibility criteria. He should meet the requirements prescribed under Nidhi Rules, 2014. In case of extension of tenure by the central government, it will be terminated on extended tenure expiration.

In case of failing the Nidhi Rules and Companies Act 2013, the defaulter has to pay a fine of up to ₹ 5000. In case of opposition by the company side, after serving punishment, the defaulter has to pay ₹ 500 per day till the period ends. 

Vakilsearch is a platform that caters to all your legal needs. Do visit the blog on How to start a Nidhi Company on their website for more information.

Read more:-

• Nidhi Company Loan Rules
• Can a Nidhi Company Take Loan From Bank?
• Processing Fees and Necessary Documents Nidhi Company