YOU NEED TO KNOW WHAT ARE THE PROVITION ARE APPLICABLE TO NIDHI COMPANY?
What is a Nidhi Company?
Provition Are Applicable to nidhi company: A Nidhi Company is a type of non-banking financial institution (NBFC) in India that functions as a mutual benefit society. Its primary objectives are to promote thrift, savings, and the efficient use of the financial resources of its members, and to offer them loans at reasonable rates. Nidhi Companies are distinct from traditional banks and other NBFCs as they exclusively serve their members, who contribute to a common fund and, in return, are entitled to take loans and enjoy other financial benefits. Visitofficialwebsite
Purpose and Objectives
Nidhi Companies are established with the following core objectives:
- Cultivating the habit of thrift and savings among members.
- Receiving deposits and lending to members for their mutual benefit.
- Providing easy access to credit at reasonable rates.
- Promoting financial inclusion by serving small and economically disadvantaged members.
Formation and Incorporation
Minimum Capital Requirements
- As per Nidhi Rules, 2014: A Nidhi Company must have a minimum paid-up equity share capital of Rs. 10 lakhs.
Name Reservation
- The name of a Nidhi Company must include the words “Nidhi Limited” as the last words of its name.
Object Clause
- The primary object of a Nidhi Company must be the cultivation of thrift and savings amongst its members.
- Secondary activities may include receiving deposits and lending to its members, subject to the limits and restrictions defined in the rules. Provition Are Applicable to nidhi company
Management and Governance
- The management and governance of a Nidhi Company are to be conducted by a Board of Directors, with key managerial personnel such as the managing director, chief executive officer, and company secretary.
- The number of directors on the board should not be less than three and not more than seven.
- The directors are elected by the members in a general meeting.
- The board is responsible for managing the company’s affairs, including lending activities, compliance, and financial management. Provition Are Applicable to nidhi company
Nidhi Status
- To qualify as a Nidhi Company, a minimum of 200 members is required within a year from the date of incorporation.
- The company must apply to the Registrar of Companies (ROC) for Nidhi status, which includes demonstrating compliance with the Nidhi Rules, 2014, and other statutory requirements. Provition Are Applicable to nidhi company
Lending and Borrowing Activities
Limitations on Lending
- Nidhi Companies can provide loans to their members, but the total loan amount to any single member should not exceed 2 lakh Rupees if the net-owned fund is less than 2 crore Rupees.
- If the net-owned fund exceeds 2 crore Rupees, the loan limit can be extended to 20 lakh Rupees.
- The total loans provided to all members should not exceed 25% of the net-owned fund. Provition Are Applicable to nidhi company
Interest Rate Restrictions
- Nidhi Companies can charge interest on loans provided to members, but the rate of interest should be reasonable and competitive.
- Interest rates should not exceed the maximum rate prescribed by the Reserve Bank of India for NBFCs.
Security and Prudential Norms
- Nidhi Companies must follow prudential norms to ensure the security of loans.
- They may accept gold, silver, or jewelry as security for loans, provided that they adhere to the Reserve Bank of India’s guidelines regarding gold loans. Provition Are Applicable to nidhi company
What is the applicability of Nidhi Company
A Nidhi Company needs to be incorporated under the Companies Act and shall be working as a public company. It should have a minimum paid up equity share capital of five lakh rupees.
What are the limitations of Nidhi Company
Conduct the business of chit fund, leasing finance, and hire purchase. It cannot acquire securities issued by a body corporate. Issue preference shares, debentures, or any debt instrument by any name or in any form whatsoever. Open any current account with its members.
What is the minimum requirement for Nidhi Company
Minimum Shareholders or Members: A minimum of 7 members is required to initiate the registration process. Minimum Directors: You must have a minimum of 3 directors to form the company. Minimum Capital: A minimum capital of Rs. 5 lakhs is essential to kickstart your Nidhi Company.
What is the criteria for Nidhi Company loan
Nidhi Companies must acquire at least 200 members within one year of its founding. Further, within one year, they must possess ₹ 10 lac or more as deposits and the ratio of funds to deposits must not exceed 1:20. Must have a minimum equity share capital of rupees five lakhs.
How many members should Nidhi Company have
As per the provisions of the law, a minimum of seven members are required for the incorporation of a Nidhi Company. It is to be noted that out of those seven members, three of them are supposed to be company directors. Moreover, the company is supposed to have a minimum paid-up equity share of 5 lakhs
Can Nidhi companies accept deposits
One such condition is that the company must maintain and continue to maintain a net-owned fund-to-deposit ratio of 1:20 based on its last audited financial statements. This means that a Nidhi company can accept deposits up to a maximum of 20 times its net-owned fund
What is the difference between Nidhi Company and chit fund
Is Nidhi Company a chit fund? A Nidhi Company is an NBFC that can only lend money or accept deposits, whereas a Chit Fund is also a committee like a Nidhi Company but only accepts payments made in instalments over a set period of time by its members. This is the main distinction between the two
Can Nidhi give personal loan
The business of vehicle finance is also allowed only to a registered NBFC. These are all special categories and need a net worth of at least Rs. 2 crores. Personal Loan: A Nidhi Company is not allowed to give money as personal loan
Compliance Requirements
Regulatory Oversight
- Nidhi Companies are subject to regulatory oversight by the Ministry of Corporate Affairs (MCA).
- They must ensure compliance with the Nidhi Rules, 2014, and other relevant statutory requirements. Provition Are Applicable to nidhi company
Annual Filings
- Nidhi Companies are required to file annual returns (Form MGT-7) with the Registrar of Companies (ROC) within 60 days of their annual general meeting (AGM). Provition Are Applicable to nidhi company
- They must also file financial statements (Form AOC-4) that include balance sheets, profit and loss statements, and cash flow statements.
Minimum Net Owned Funds
- A Nidhi Company must maintain a minimum net-owned fund of Rs. 10 lakhs.
- The net-owned fund is a crucial measure of the company’s financial strength and includes paid-up equity share capital, free reserves, and security deposits.
Branch Operations
- Nidhi Companies are permitted to open branches after obtaining approval from the Regional Director.
- The company can open branches only if it has earned profits after tax continuously for the preceding three financial years. Provition Are Applicable to nidhi company
Prohibition of Speculative Activities
Nature of Business
- Nidhi Companies are prohibited from engaging in speculative activities or trading in shares or securities other than government or other securities.
Investment Restrictions
- Nidhi Companies should not invest their funds in unquoted shares, bonds, debentures, or mutual funds.
how auriga accounting help you to define provition in nidhi company
Auriga Accounting can assist in defining the provisions applicable to Nidhi Companies by providing a comprehensive platform for managing, tracking, and ensuring compliance with these provisions. Here’s how Auriga Accounting can help you define and manage provisions in a Nidhi Company: Provition Are Applicable to nidhi company
1. Document Management:
- Auriga Accounting serves as a central repository for storing and managing all necessary documents related to Nidhi Company provisions. It helps you organize and access documents such as the Nidhi Rules, Memorandum of Association, Articles of Association, and other relevant legal documents. Provition Are Applicable to nidhi company
2. Compliance Tracking:
- The software offers a compliance calendar that keeps track of important deadlines for adhering to Nidhi Company provisions. It sends notifications and reminders about annual filings, reserve fund contributions, and other regulatory requirements.
3. Data Validation and Accuracy:
- Auriga Accounting includes data validation checks to ensure that the information provided aligns with Nidhi Company provisions. This minimizes errors and inaccuracies when preparing annual returns and financial statements. Provition Are Applicable to nidhi company
4. Integration with Regulatory Updates:
- The software integrates with regulatory databases and updates to ensure that the provisions and compliance requirements are always up to date. It provides alerts and notifications on changes to Nidhi Rules and other relevant regulations.
5. Reporting and Analytics:
- Auriga Accounting generates reports on compliance status, annual financial performance, and adherence to Nidhi Company provisions. These reports offer insights into the company’s compliance and financial health.
6. Document Templates:
- The software provides templates for creating specific documents required to define and manage Nidhi Company provisions, such as the reserve fund policy, loan agreements, and resolutions of the board of directors.
7. Compliance Reminders and Alerts:
- Auriga Accounting sends reminders and alerts about critical provisions that need attention, such as the creation and maintenance of the reserve fund, limitations on lending, and restrictions on investment activities.
8. Online Forms and Filings:
- The software guides you through the process of filling out the required forms and documents, ensuring that they align with Nidhi Company provisions. It simplifies the submission of these forms to regulatory authorities.
9. Digital Signatures:
- Auriga Accounting facilitates the management of digital signatures for directors and key personnel, ensuring that they meet the legal requirements for signing and submitting electronic documents. Provition Are Applicable to nidhi company
10. Role-Based Access:
- The software offers role-based access controls, ensuring that only authorized personnel can access and manage sensitive compliance data related to Nidhi Company provisions.
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