The government has amended rules governing Nidhi companies whereby its prior declaration will be mandatory for certain entities before they start accepting deposits, a move aimed at protecting the interests of the public.
The amended rules state that public companies desirous to function as Nidhis must obtain a prior declaration from the central government before accepting deposits.
Under the Companies Act, 2013, there was no need for a company to get a declaration from the central government to function as a Nidhi company.
Nidhi companies are non-banking finance entities that are into lending and borrowing with their members.
“To safeguard the interest of general public, it has become imperative that before becoming its member, one must ensure declaration of a company as a Nidhi by the central government and towards this, few necessary/important amendments in the rules have been carried out which are applicable to the companies to be incorporated after Nidhi (Amendment) Rule, 2022,” the government said in a statement.
A public company incorporated as a Nidhi with a share capital of Rs 10 lakh needs to first get itself declared as a Nidhi from the central government by applying in form NDH-4 with a minimum membership of 200 and Net Owned Fund of Rs 20 lakh within 120 days of its incorporation.
A committee was constituted to make recommendations on the issues arising from the implementation of the Companies Act, 2013 and it was felt that “the earlier provisions under the Companies Act, 1956 requiring the approval of the central government for declaration as Nidhi were appropriate since they provided a centralized and more restrictive frame work for regulation of such entities,” it added.
Accordingly, rules were amended with effect from August 15, 2019 to bring back the requirement of declaration as a Nidhi by the central government, it further said.
“Such companies were required to only incorporate as a Nidhi and meet requirements under sub-rule (1) of rule 5 of Nidhi Rules viz., minimum membership of 200, Net Owned Fund (NoF) of Rs 10 lakh, NOF to deposit ratio of 1:20 and keeping 10 per cent unencumbered deposits in scheduled commercial banks or post offices within one year of commencement of Nidhi Rules, 2014,” it said.
The promoters and directors of the company have to meet the criteria of fit and proper person as laid down in the rules, the statement said.
For timely disposal, it has also been provided in amended rules that in case no decision is conveyed by the central government within 45 days of the receipt of applications filed by companies in form NDH-4, approval would be deemed as granted. This would apply for such companies which shall be incorporated after Nidhi (Amendment) Rules, 2022.
