Nidhi Company Compliance – A Complete Analysis

Encouragement of Savings and Thrift: Nidhi companies are specifically designed to foster thrift and saving practices among their members. They offer a platform for people to save and invest their money, creating a culture of financial discipline and responsibility.

Credit: Nidhi companies lend to their members, which can be especially advantageous for individuals who do not have easy access to formal financial institutions. Members can borrow money for a variety of reasons, such as small enterprises, education, and crises.

Local Economic Development: Nidhi companies are frequently found in semi-urban and rural locations where access to financial institutions is limited. Nidhi companies contribute to the economic development of these regions by offering financial assistance to local inhabitants and businesses.

Financial Inclusion:Nidhi companies play an important role in financial inclusion by reaching out to underbanked and unbanked populations. They provide services to those who may not have access to traditional banks, eliminating financial inequality.

Building Community: Nidhi companies are often member-driven, generating a feeling of community among their members. This can lead to enhanced community trust and collaboration, which can be good for social and economic development.

Ease of Membership: Joining a Nidhi company is frequently easier than following the rigorous standards of regular banks. This makes it easier for people to join and profit from their services, especially in remote areas.

Limited Government Intervention: While Nidhi companies are regulated by the government, they generally face fewer regulatory constraints than traditional financial institutions. This gives them greater flexibility in meeting the demands of its members.

Transparency and Accountability: Nidhi companies must keep correct financial records and make frequent reports to regulatory authorities to ensure transparency and accountability in their operations.

Affordability:Nidhi companies frequently have streamlined operational structures, lowering the costs associated with maintaining a financial institution. Members may benefit from cheaper fees as a result of this.

Support for Small and Micro Businesses: Nidhi companies typically lend financing to small and micro-enterprises, assisting in their growth and sustainability. This has the potential to significantly promote local entrepreneurship and employment creation.

Liquidity Management: Nidhi companies assist members in managing their liquidity requirements. Members can access their funds as needed, creating a financial safety net for unforeseen emergencies.

1 : To establish a Nidhi Company, a minimum of seven members are required. Three of its members must be Directors.

2 : The company’s name must include the suffix “Nidhi Limited,” and it must be a public company.

3 : Minor organizations, body corporate, or trusts are not eligible to join Nidhi.

4 : A minimum of Rs. 5 lakhs must be the paid-up share capital.

5 : If Nidhi Company has not made a profit after taxes for three consecutive fiscal years, it is not permitted to open branches.

6 : The company is not permitted to issue preference shares; if shares of this type were issued by the company before the Act’s implementation, they must be redeemed.

7 : The interest rate on the loan cannot be more than 7.5% higher than the highest interest rate given on deposits.

8 : The company’s main goal should be to help its members develop the habit of saving money.

NDH-1

Nidhi Companies must file the NDH-1 form with the appropriate fees and have it duly approved by an authorized chartered accountant, company secretary, or cost accountant. Once your registration is complete, the company should file the annual return within 3 months or 90 days of the end date of the first or second year.

NDH-2

If the following Compliance are not met, the form NDH-2 must be completed to request a time extension:

1 :If the company fails to add at least 200 partners in a year.

2 :If the company is unable to maintain a net owned fund to deposit in the ratio of 1:20.

3 :after which the director can pass the orders within a month or 30 days from the date of receipt of the application.

NDH-3

It is also an important annual return form that the Nidhi Company must file twice a year.

Accounts books

Every Nidhi company must ensure that its books of accounts are kept up to date.

Keep a Statutory Register

According to the Companies Act 2013, Nidhi Company is required to maintain the statutory registers. It is one of the mandatory requirements for a Nidhi Company to file its annual returns.

Convene Statutory Meetings

Conducting a Board meeting with the company’s Directors and Shareholders Financial report or statement preparation It is required for a Nidhi company to prepare financial reports and statements, which include the Balance Sheet, Cash Flow Statement, and Profit & Loss Account Statement.

Income Tax Returns

Nidhi Company must file annual income tax returns on or before September 30th of the following fiscal year.

Financial Statement Returns Filing (AOC-4)

The form AOC-4 contains nuances of the Nidhi Company’s budget statement or reports. Additional documents that are supported to transfer along this form preserve this form. MGT-7-ROC Annual Return Filing Annual Profit) Nidhi Company must submit an annual return to the MCA or Ministry of Corporate Affairs (MCA) using Form MGT-7.

The following are the event-based Compliance:

1 : Any name changes for the company.

2 : Alteration to the registered office address.

3 : Director appointment, resignation, or removal.

4 : Auditor appointment, resignation, or removal.

5 : Any changes to the company’s goal.

6 : Share transfer.

7 : Increase in the company’s authorized capital.

8 : The appointment of key management personnel.

9 : Any other event-driven adjustments.