Member of Nidhi company act as guarantor for other member?

Harish choursiya (Student cs professional ) (249 Points)
Replied 17 May 2020

As per my understanding for getting loan from the Nidhi company to members subject to in compliance of rule 15 of Co(nidhis) rules

Which says about the collateral security must be provide by the members who proposed to get loan. Following are the security

1.Fixed deposit, national saving certificate

2.Govermant securities and insurance policies

Conclusion - in your query the loan taken by one and collateral security provided by another members for the same loan sanction by Nidhi as such this transaction may not be possible.

However, the rule 15 doesn't restrict any such arrangements of two different person involve in single transaction rather this mandate to provide only security for the repayment or securing the repayment dues.

So as per my view this can be happened bhut require proper documentation and approval for the lender (Nidhi Co.)

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Kumar (Partner) (149 Points)
Replied 17 May 2020

Thank you Sir,

Please clear -

1. Is there any way to link member 'X' deposit to member 'Y' Loan. Where risk of that amount will be only on member X not on Nidhi?

2. A member of Nidhi company holding 10 shares (Rs 100) Can deposit 1 or 2 lakh Rupees? If yes, will He be owner of that amount of share in Nidhi? Means Amount of Deposit by member in account will increase his share? Nidhi will issue share certificate for every future deposits? OR one can join with only 10 share and extra amount will be in account as normal Bank.

3. 10 lakh capital of Nidhi will be in Bank always or it can be used for lending?

Thank you again for help.

A member of Nidhi company holding 10 shares (Rs 100) Can deposit 1 or 2 lakh Rupees? If yes, will He be owner of that amount of share in Nidhi? Means Amount of Deposit by member in account will increase his share? Nidhi will issue share certificate for all future deposits?

Read more at: https://www.caclubindia.com/forum/nidhi-company-member-amp-share-547868.asp

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Harish choursiya (Student cs professional ) (249 Points)
Replied 17 May 2020

The following views are based on my limited understanding of the provisions

1.First and foremost point is all depends on the terms and condition of loan agreement because in this transaction company enter into contract with member Y not the member X.

In practical scenario the letter of undertaking or LC if issued by the member X banker to the company on behalf of X for the REPAYMENT or securing repayment then it may be done.

However your contention is well accepted but we can not forget the rules and terms on which Co. exercise the granting the loan.

2.for the share certificate to each deposit holder shall be issued by the Co. And there is no minimum and maximum cap on the amount of deposit from members and accordingly company will issue the share certificate to holder of deposit.

OR one can join with minimum 10 share or (100) in aggregate

3 . for the maintenance of capital of minimum of rupee 10 Lac it should be consider as net owned funds which include paid up capital as mention in rule 9 read with Rule 3(1)(d).

Co. needa to Maintain minimum 10loc.

Note- your query for the point 2 after OR for the

Extra amount..... genuinely I'm unable to get that can you further express in detail manner.

Hope so my view will add more clarity.

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Kumar (Partner) (149 Points)
Replied 17 May 2020

Point 2: I want that other members will open account with 10 Equity shares 10 rupees each total 100 rupees, after that they will deposit money in form of FD, saving account, for this they will get interest on that amount NOT EQUITY SHARES IN COMPANY, is it possible?

IS IT POSSIBLE TO TAKE FIXED DEPOSITS FROM MEMBERS WITHOUT GIVING EQUITY SHARES (other than compulsory for membership?

Note: I have budget of 10 lakh and want to start finance business. In our area many local lender doing this business unofficially without any registration, but there is risk on money. I want to start a Company where Local lender will use our service by being member of company with minimal Share. Here Y borrower and X lender both know each other, I want to attach the risk by any agreement on X lender, he will be responsible for his borrower.

Is there option of any other type of incorporation for this type of business?

Thanks a lot.

Harish choursiya (Student cs professional ) (249 Points)
Replied 18 May 2020

In this query, I understand that you are keen to enter into an arrangements or a platform at which you (owner of nidhi).

Following condition needs to adhere

1.Rule 5 -

having minimum 200 members

net owned funds minimum 10 Lac.

2.Rule 6-

acceptance of deposit only from members and lend to members only

3.Rule 11

Upper cap of acceptance of deposit by Nidhi shall not exceed twenty times to net owned funds

Note This above mention condition is just for providing a little bit information. There are other conditions also need to comply as mention in Nidhi rules.

Now for your query, I understand that all the depositor need to deposit their money to the account of the Company in cash, rather to deposit in Form of Fixed deposit in their own account. For this transaction company needs to acknowledge this deposit by way of issuing share certificate.

Now company(lender)give or grant loan to other members according to your situation member Y(borrower) have to provide security for securing the loan prepayment as per rule 15.

Now the funds of members used to give loan to members(borrower) so the company will be liable to secure the members money not the X (the guarantor of loan)

I suppose that if the borrower is trustworthy and known to all other members for credibility of borrower for repayment of loan then this transaction or arrangement can be possible but before entering into this type of transaction proper documentation and approval needs to be done.

Hope so my view add some clarity.

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