Nidhi company

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Fthere

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19 October 2017 What are the procedure after incorporating a nidhi company(like share issue)?.

CS Mitesh Mehta

CS Mitesh Mehta (Expert)
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23 October 2017 Provisions of Section 42 relating to Prospectus and allotment of securities shall apply to nidhi company except for explanation II, Section 42(3), Section 42(5), Section 42(7) shall not apply to Nidhi companies. Accordingly provision such as recording of names of proposed allottees prior to invitation to subscribe, restrictions on fresh offer,
restrictions on payment of subscription money through cash etc. shall not apply to Nidhi companies. Section 62 relates to further issue of share capital. Section 62 is not applicable to Nidhi companies.

Further issue preference shares, debentures or any other debt instrument by any name or in any form whatsoever is prohibited for nidhi companies.

Every Nidhi incorporated shall issue equity shares of the nominal value of not less than ten rupees each. 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:
It may be noted that a savings account holder and a recurring deposit account holder shall hold at least one equity share of rupees ten.

Membership of Nidhi:
1) A Nidhi shall not admit a body corporate or trust as a member.
2) Every Nidhi shall ensure that its membership is not reduced to less than two hundred members at any time.
3) A minor shall not be admitted as a member of Nidhi. It may be noted 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

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Fthere

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29 October 2017 could you please explain the step by step procedure after the incorporation?

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Asha Kanta Sharma

Asha Kanta Sharma

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04 August 2024 After incorporating a Nidhi company in India, which is a type of non-banking financial institution that primarily deals with borrowing and lending money among its members, there are certain procedural steps to be followed. Here’s a step-by-step outline of what typically follows incorporation:

1. **Opening Bank Account**: The Nidhi company must open a bank account in its name to carry out its financial transactions.

2. **Allotment of Shares**: After incorporation, the initial subscribers (founders) who applied for shares during incorporation need to be allotted their shares. This involves issuing share certificates to these subscribers.

3. **Membership Application**: The Nidhi company must invite members to join. Those who wish to become members need to apply for membership by filling out an application form provided by the company.

4. **Acceptance of Deposit**: Nidhi companies are allowed to accept deposits from their members under certain conditions. The terms and conditions of accepting deposits should be clearly stated and agreed upon by both parties.

5. **Issue of Share Certificates**: Whenever new shares are issued (either to initial subscribers or subsequent members), share certificates must be issued to each shareholder/member. These certificates represent ownership in the company.

6. **Compliance with Nidhi Rules**: The company must ensure ongoing compliance with the Nidhi Rules as prescribed by the Ministry of Corporate Affairs (MCA) and other relevant regulatory authorities.

7. **Maintenance of Registers**: The company must maintain various statutory registers such as Register of Members, Register of Directors, Register of Deposits, etc., as required under the Companies Act and Nidhi Rules.

8. **Filing of Annual Returns**: The company needs to file its annual returns and financial statements with the Registrar of Companies (RoC) within the prescribed time limits.

9. **Auditing**: The accounts of the Nidhi company must be audited annually by a qualified auditor as per the Companies Act.

10. **Board Meetings**: Hold regular board meetings to discuss company operations, compliance issues, financial matters, etc. Minutes of these meetings should be maintained as per statutory requirements.

11. **General Meetings**: Conduct general meetings such as Annual General Meetings (AGMs) to approve financial statements, elect directors, etc., as required under the Companies Act.

12. **Loan Disbursement**: If the Nidhi company intends to lend money to its members, it must follow the procedures outlined in its rules and ensure compliance with lending guidelines.

13. **Dividend Distribution**: If profits are made, the Nidhi company can distribute dividends to its shareholders as per the rules and provisions of the Companies Act and Nidhi Rules.

14. **Compliance with Taxation Laws**: Ensure compliance with all applicable taxation laws such as income tax, GST, etc.

It’s crucial to note that Nidhi companies are regulated by the Nidhi Rules, 2014, and must strictly adhere to these rules along with the provisions of the Companies Act, 2013. Non-compliance can lead to penalties and even dissolution of the company in extreme cases. Therefore, ongoing compliance and adherence to regulatory requirements are paramount for the smooth functioning of a Nidhi company.