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Nidhi Rules, 2014

In exercise of the powers conferred under sub-section (1) of Section 406 read with sub-sections (1) and (2) of Section 469 of the Companies Act, 2013, the Central Government hereby makes the Nidhi Company Rules, 2014, namely:-

Short title and commencement

These Rules may be called Nidhi Rules. They shall come into force on the 1st day of April, 2014.

Application

These rules shall apply to,-

(a) Every company which had been declared as a Nidhi or Mutual Benefit Society under sub-section (1) of Section 620A of the Companies Act, 1956;

(b) Every company functioning on the lines of a Nidhi company or Mutual Benefit Society but has either not applied for or has applied for and is awaiting notification to be a Nidhi or Mutual Benefit Society under sub-Section (1) of Section 620A of the Companies Act, 1956; and

(c) Every company incorporated as a Nidhi pursuant to the provisions of Section 406 of the Act.

Definitions

In these rules, unless the context otherwise requires,-

(a) “Act” means the Companies Act, 2013 (18 of 2013);

(b) “Doubtful Asset” means a borrowal account which has remained a Non-performing asset for more than two years but less than three years;

(c) “Loss Asset” means a borrowal account which has remained a Non-performing asset for more than three years or where in the opinion of the Board, a shortfall in the recovery of the loan account is expected because the documents executed may become invalid if subjected to legal process or for any other reason;

(d) “Net Owned Funds” means the aggregate of paid up equity share capital and free reserves as reduced by accumulated losses and intangible assets appearing in the last audited balance sheet:

Provided that the amount representing the proceeds of issue of preference shares shall not be included for calculating Net Owned Funds.

(e) “Non-Performing Asset” means a borrowal account in respect of which interest income or installment of loan towards re payment of principal amount has remained unrealized for twelve months;

(f) “Standard Asset” means the asset in respect of which no default in re-payment of principal or payment of interest has occurred or is perceived and which has neither shown signs of any problem relating to re-payment of principal sum or interest nor does it carry more than normal risk attached to the business of the company registration in Madurai;

g) “Sub Standard Asset” means a borrowal account which is a Non-performing asset: Provided that reschedulement or renegotiation or rephasement of the loan installment or interest payment shall not change the classification of an asset unless the borrowal account has satisfactorily performed for at least twelve months after such reschedulement or renegotiation or rephasement.

Words and expressions used herein, but not defined in these rules and defined in the Act or in the Companies (Specification of definitions details) Rules, 2014 shall have the same meaning as assigned to them in the Act or in the said Rules.

Incorporation and incidental matters

A Nidhi to be incorporated under the Act shall be a public company and shall have a minimum paid up equity share capital of five lakhs rupees. On and after the commencement of the Act, no Nidhi shall issue preference shares. If preference shares had been issued by a Nidhi before the commencement of this Act, such preference shares shall be redeemed in accordance with the terms of issue of such shares. Except as provided under the proviso to sub-rule (e) to rule 6, no Nidhi shall have any object in its Memorandum of Association other than 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. Every Company incorporated as a “Nidhi” shall have the last words ‘Nidhi Limited as part of its name.

Requirements for minimum number of members, net owned fund etc

Every Nidhi shall, within a period of one year from the commencement of these rules, ensure that it has-

(a) Not less than two hundred members;

(b) Net Owned Funds of ten lakhs rupees or more;

(c) Unencumbered term deposits of not less than ten per cent of the outstanding deposits as specified in rule 14; and

(d) Ratio of Net Owned Funds to deposits of not more than 1:20.

Within ninety days from the close of the first financial year after its incorporation and where applicable, the second financial year, Nidhi shall file a return of statutory compliance in Form NDH-1 along with such fee as provided in Companies (Registration Offices and Fees) Rules, 2014 with the Registrar duly certified by a company secretary in practice or a chartered accountant in practice or a cost accountant in practice. If a Nidhi is not complying with clauses (a) or (d) of sub-rule (1) above, it shall within thirty days from the close of the first financial year, apply to the Regional Director in Form NDH-2 along with fee specified in Companies (Registration Offices and Fees) Rules, 2014 for extension of time and the Regional Director may consider the application and pass orders within thirty days of receipt of the application.

Explanation-For the purpose of this rule “Regional Director” means the person appointed by the Central Government in the Ministry of Corporate Affairs as a Regional Director;

If the failure to comply with sub-rule (1) of this rule extends beyond the second financial year, Nidhi shall not accept any further deposits from the commencement of the second financial year till it complies with the provisions contained in sub-rule (1), besides being liable for penal consequences as provided in the Act.

General restrictions or prohibitions

No Nidhi shall-

(a) Carry on the business of chit fund, hire purchase finance, leasing finance, insurance or acquisition of securities issued by any body corporate;

(b) Issue preference shares, debentures or any other debt instrument by any name or in any form whatsoever;

(c) Open any current account with its members;

(d) acquire another company by purchase of securities or control the composition of the Board of Directors of any other company in any manner whatsoever or enter into any arrangement for the change of its management, unless it has passed a special resolution in its general meeting and also obtained the previous approval of the Regional Director having jurisdiction over such Nidhi;

Explanation.-For the purposes of this sub-rule, “control” shall have the same meaning assigned to it in clause (27) of section 2 of the Act;

(e) Carry on any business other than the business of borrowing or lending in its own name:

Provided that Nidhi which have adhered to all the provisions of these rules may provide locker facilities on rent to its members subject to the rental income from such facilities not exceeding twenty per cent of the gross income of the Nidhi at any point of time during a financial year.

(f) Accept deposits from or lend to any person, other than its members;

(g) Pledge any of the assets lodged by its members as security,

(h) Take deposits from or lend money to any body corporate;

(i) Enter into any partnership arrangement in its borrowing or lending activities;

(j) Issue or cause to be issued any advertisement in any form for soliciting deposit:

Provided that private circulation of the details of fixed deposit Schemes among the members of the Nidhi carrying the words “for private circulation to members only” shall not be considered to be an advertisement for soliciting deposits.

(k) Pay any brokerage or incentive for mobilizing deposits from members or for deployment of funds or for granting loans.

Share capital and allotment

Every Nidhi shall issue equity shares of the nominal value of not less than ten rupees each: Provided that this requirement shall not apply to a company referred to in sub-rules (a) and (b) of rule 2. No service charge shall be levied for issue of shares. Every Nidhi shall allot to each deposit holder at least a minimum of ten equity shares or shares equivalent to one hundred rupees: Provided that a savings account holder and a recurring deposit account holder shall hold at least one equity share of rupees ten.

Membership

A Nidhi shall not admit a body corporate or trust as a member. 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. A minor shall not be admitted as a member of Nidhi: Provided that deposits may be accepted in the name of a minor, if they are made by the natural or legal guardian who is a member of Nidhi.

Net owned funds

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

Branches

A Nidhi may open branches, only if it has earned net profits after tax continuously during the preceding three financial years. Subject to the provisions contained in sub-rule (1), a Nidhi may open up to three branches within the district. If a Nidhi proposes to open more than three branches within the district or any branch outside the district, it shall obtain the prior permission of the Regional Director and intimation is to be given to the Registrar about opening of every branch within thirty days of such opening. No Nidhi shall open branches or collection centers or offices or deposit centers, or by whatever name called outside the State where its registered office is situated. No Nidhi shall open branches or collection centers or offices or deposit centers, or by whatever name called unless financial statement and annual return (up to date) are filed with the Registrar. A Nidhi shall not close any branch unless it-

(a) Publishes an advertisement in a newspaper in vernacular language in the place where it carries on business at least thirty days prior to such closure, informing the public about such closure;

(b) Fixes a copy of such advertisement or a notice informing such closure of the branch on the notice board of Nidhi for a period of at least thirty days from the date on which advertisement was published under clause (a) ; and

(c) Gives intimation to the Registrar within thirty days of such closure.

Acceptance of deposits by Nidhi

A Nidhi shall not accept deposits exceeding twenty times of its Net Owned Funds (NOF) as per its last audited financial statements. In the case of companies covered under clauses (a) and (b) of rule 2 and existing on or before 26th July, 2001 and which have accepted deposits in excess of the aforesaid limits, the same shall be restored to the prescribed limit by increasing the Net Owned Funds position or alternatively by reducing the deposit.