Exemptions and relaxations to Nidhi companies

Nature of Exemption

Impact of the Exemption

Section 20, sub-section 2 shall apply to the modification that in the case of Nidhi, the document may be served only on members who hold shares of more than one thousand rupees in face value or more than one percent of the total paid-up share capital of the Nidhis whichever is less.

For other shareholders, document may be served by a public notice in newspaper circulated in the district where the Registered Office of the Nidhi is situated; and publication of same on the notice board of the Nidhi.

This provision grants a relief to the Nidhi Companies from sending documents, notices etc. to every member of the company by providing that for small shareholders (i.e. those holding shares of one thousand rupees or less in face value or one percent or less of the total paid-up share capital of the Nidhis whichever is less), documents can be served by a public notice in newspaper circulated in the district where the Registered Office of the Nidhi is situated; and publication of same on the notice board of the Nidhi.

Nature of Exemption

Impact of the Exemption

Section 42 except sub-section (1), explanation (II) to sub-section (2), sub-section (4), (6), (8), (9) and 10 shall not apply

Few procedural requirements in relation to private placement like maintenance of record of private placement; restriction on receipt of subscription money in cash etc. has been relaxed for Nidhi Companies.

Nature of Exemption

Impact of the Exemption

Section 62 shall not apply

The restrictions of Section 62 relating to further allotment of shares only by means of Rights Issue, Employee Stock Option or Preferential Allotment will not apply to Nidhi Companies. This means that Nidhi Companies can make further allotment of their shares without having to comply with requirements of Section 62.

Nature of Exemption

Impact of the Exemption

Section 67(1) shall not apply, when shares are purchased by the company from a member on his ceasing to be a depositor or borrower and it shall not be considered as reduction of capital under section 66 of the Companies Act, 2013

Section 67(1) restricts a company from buying its own shares unless reduction of capital is carried out as per provisions of the Act. This restriction is relaxed for a Nidhi Company when shares are purchased by the company from a member on his ceasing to be a depositor or borrower.

Nature of Exemption

Impact of the Exemption

Section 123, sub-section (5) shall apply, subject to the modification that any dividend payable in cash may be paid by crediting the same to the account of the member, if the dividend is not claimed within 30 days from the date of declaration of the dividend.

Section 123(5) contains a restriction that dividend can only be paid to the member or to his order or banker and can be paid in cash only. For Nidhi Companies, this provision provides an alternative that if the dividend is not claimed by a member within 30 days from the date of declaration, then the same may be paid by crediting it to the account of the member.

Nature of Exemption

Impact of the Exemption

Sub-section (1) of Section 136 shall apply, subject to the modification that, in the case of members who do not individually or jointly hold shares of more than one thousand rupees in face value or more than one per cent. of the total paid-up share capital whichever is less, it shall be sufficient compliance with the provisions of the section if an intimation is sent by public notice in newspaper circulated in the district in which the Registered Office of the Nidhi is situated stating the date, time and venue of Annual General Meeting and the financial statement with its enclosures can be inspected at the registered office of the company, and the financial statement with enclosures are affixed in the Notice Board of the company and a member is entitled to vote either in person or through proxy

This provision provides a relief to the Nidhi Companies that instead of sending financial statements to all individual shareholders, for all those shareholders who do not individually or jointly hold shares of more than Rs. 1000/- in face value or more than 1% of the total paid-up share capital whichever is less, the company can make newspaper announcement stating matters as mentioned in the left hand column.

Nature of Exemption

Impact of the Exemption

Section 160, in sub-section (1), for the words "one lakh rupees", the words "ten thousand

rupees" shall be substituted.

The amount of deposit to be taken by a company from a person proposed to be appointed as director in an AGM (other than retiring director) has been reduced from Rs. 1,00,000/- to Rs. 10,000/- for a Nidhi Company.

Nature of Exemption

Impact of the Exemption

Section 185 Shall not apply, provided the loan is given to a director or his relative in their capacity as members and such transaction is disclosed in the annual accounts by a note.

The restriction under Section 185 from giving loan to directors and other interested entities has been relaxed for Nidhi Companies, provided the loan is given to a director or his relative in their capacity as members and such transaction is disclosed in the annual accounts by a note.

Nature of Exemption

Impact of the Exemption

Second proviso to subsection (1) of section 197 shall apply with the modification that the remuneration of a director who is neither managing director nor wholetime director or manager for performing special services to the Nidhis specified in the articles of association may be paid by way of monthly payment subject to the approval of the company in general meeting and also to the provisions of section 197 :

Provided that no approval of the company in general meeting shall be required where,-

(a) a Nidhi does not have a managing director or a whole-time director or a manager;

(b) the remuneration payable during a financial year to all the directors of the Nidhi does not exceed ten per cent of the net profits of such Nidhi or fifteen lakh rupees, whichever is less; and

(c) a remuneration payable under clause (b) is approved by a special resolution passed in this behalf by the Nidhi.

This provisions grants relief to Nidhi Companies for payment of remuneration to directors other than managing director, wholetime director or manager for performing special services and for seeking approval of members in specified cases as mentioned in the left hand column.

Nature of Exemption

Impact of the Exemption

Section 403 Shall apply, with the modification that the filing fees in respect of every return of allotment under sub-section (9) of section 42 shall be calculated at the rate of one rupee for every one hundred rupees or parts thereof on the face value of the shares included in the return but shall not exceed the amount of normal filing fee payable.

Filing fees to be paid to ROC for filing return of allotment has been reduced.