What are the responsibilities of a director in a limited liability company? Introduction Certain functions and duties are associated with the function of director of a limited liability company. Many directors of a company hold the position solely as […] A Nidhi company is a company recognised under Section 406 of the Companies Act 2013 in conjunction with the Nidhi Rules 2014. Its main functions are borrowing and lending between its members and are in the Indian non-bank financial sector. It is a company founded for the express purpose of cultivating the habit of saving and saving among its members. They are known by various names such as Benefit Fund, Permanent Fund, Mutual Fund or Fraternal Benefit Society. According to the newly inserted Rule 3B, the corporation that wishes to be declared as Nidhi must complete the following steps: With new rules, the government is trying to simplify things so that Nidhi Company can be declared Nidhi Company by obtaining its NDH4 approval within strict deadlines set out in those rules. The Government of India, following some recommendations of the committee formed for the work of the Nidhi Company, amended the original Nidhi Rules of 2014 as amended by the Nidhi Rules 2019 and submitted the Nidhi (Amendment) Rules in 2022. As before these rules, most professionals or businesses do not know how to contact regional directors to obtain establishment permits or NDH-4 filings. The MCA notified the Nidhi (amendment) rules, 2022.
Under the amended rules, public companies wishing to be declared as Nidhi must apply for the declaration as Nidhi on Form NDH-4 within 120 days of incorporation if these two conditions are met. In addition, the amended rules provide that a corporation that has not met the requirements of that rule or does not comply with that requirement at or after the coming into force of the amending rules, or if the application filed by the corporation on Form NDH-4 has been rejected by the government, the corporation may not collect deposits from its members or make loans to them. The new Nidhi Company Rules are an update to the Nidhi Amendment Rules, which were last updated in 2014. The new rules of Nidhi society are in place for the public good, and the focus is on the explanation that each organization must receive from the central government in order to establish a Nidhi society. Obtaining such an explanation was previously required under the old rule, but no one followed it, it is now made necessary. The strict standards are enforced so that the company can comply with them, as it previously ignored the acceptance part of the central government`s statement. Once the corporation files the application on Form NDH-4, the same as under – According to Rule 6 of the Nidhi Rules 2014, a Nidhi corporation cannot engage in the following activities: Under the Companies (Registrars and Fees) Rules, 2014, a Nidhi entity cannot close a branch unless the proposed closure of the branch is accompanied by a payment of existing deposits and collection of existing deposits. The loans were approved by the Board of Directors at a meeting and received prior approval from the Regional Director. Within 30 days of receiving the application, the Regional Director must make an approval decision. According to the fourth condition, the society is not allowed to demand deposits from its members or grant them loans if: The government wants to protect the interests of the general public and wants that before becoming a member of the Nidhi society, it must be ensured that a company is declared Nidhi by the central government and in this direction. Only a few necessary/significant changes have been made to the rules, which apply to corporations to be incorporated under the Nidhi (Amendment) Rule, 2022. Within one year of incorporation, a Nidhi company must meet the following conditions: However, if a deposit collected by a corporation after the date of non-compliance or the date of coming into force of the above rules or the date of rejection of the application on Form NDH-4, whichever is later, is deemed to be collected under Chapter V of the Act, This means that the filing provision applies to and is subject to all the requirements of this Chapter or other provisions of the Act or the regulations made under it.
A Nidhi company that has not made continuous profits in the previous three financial years cannot issue new loans exceeding 50% of the above maximum amounts. A participant is not eligible for a loan if he or she defaults on a previous loan. Loans may be granted only on the following guarantee: According to the fifth condition, if the company has paid an advance payment, it is collected in accordance with Chapter V of the Act. CA Poonam Gandhi is a chartered accountant and lawyer. With extensive practical experience and a thorough understanding of various laws and taxes, she was a freelance professional writer in the field of taxation, finance and law.