Introduction
Nidhi Companies are non-banking financial institutions (NBFCs) unique to India, primarily formed to encourage saving habits among its members and provide them with affordable credit facilities. These companies are regulated by the Ministry of Corporate Affairs (MCA) under the Nidhi Rules, 2014. Nidhi Company compliance involves adhering to various regulatory requirements to ensure transparency, accountability, and good governance.
Key Compliance Requirements
Membership and Deposits
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Minimum Members: Ensure that the Nidhi Company maintains a minimum of 200 members at all times within one year of incorporation.
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Deposit Acceptance: Nidhi Companies can accept deposits only from their members and must comply with the restrictions and limits prescribed under the Nidhi Rules, 2014.
Financial Reporting
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Preparation of Financial Statements: Prepare annual financial statements, including Balance Sheet, Profit and Loss Account, and Cash Flow Statement, in compliance with the applicable accounting standards.
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Filing of Annual Returns: File annual returns (Form NDH-1) with the Registrar of Companies (RoC) within 90 days from the end of the financial year, providing details of deposits, loans, and other financial activities
Loans and Investments
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Restrictions on Loans: Ensure compliance with the restrictions on the amount of loans granted to members, which should not exceed 25% of the net owned funds.
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Investment Restrictions: Adhere to the investment limits and restrictions prescribed under the Nidhi Rules, 2014, for investing in specified assets and securities.
Board Meetings and Resolutions
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Conduct of Board Meetings: Hold at least four Board Meetings in a calendar year with a gap of not more than 120 days between two consecutive meetings.
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Approval of Loans and Investments: Obtain approval of the Board of Directors for granting loans, making investments, and any other significant financial transactions.
Statutory Registers and Records
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Maintenance of Registers: Maintain statutory registers such as Register of Members, Register of Deposits, Register of Loans and Investments, etc., at the registered office of the company.
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Compliance with RoC Filings: File necessary forms and returns with the RoC for any changes in directors, share capital, registered office address, or other key information within the prescribed timelines.
Compliance with Nidhi Rules, 2014
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Adherence to Rules: Ensure compliance with all provisions of the Nidhi Rules, 2014, including those related to share capital, reserves, loans, deposits, and other regulatory requirements.
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Compliance Reporting: Maintain proper records and documentation to demonstrate compliance with the Nidhi Rules, 2014, and other applicable laws and regulations.
Penalties for Non-Compliance
Non-compliance with Nidhi Company regulations can lead to penalties, fines, and other legal consequences, including:
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Imposition of fines by the RoC for delayed filing of annual returns, financial statements, or other statutory documents.
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Prosecution of directors and officers of the company for defaults and violations of regulatory provisions.
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Disqualification of directors and the company itself from holding office or exercising certain rights under the Nidhi Rules, 2014.
​Conclusion
Nidhi Company compliance is essential for maintaining the integrity and credibility of these financial institutions, safeguarding the interests of their members, and ensuring financial stability and security. By adhering to the prescribed regulatory requirements, maintaining transparency, and upholding good governance practices, Nidhi Companies can build trust with stakeholders, mitigate risks, and contribute to the socio-economic development of communities they serve. It is imperative for Nidhi Companies to prioritize compliance and seek professional guidance to navigate the complexities of regulatory requirements effectively and efficiently.