Govt amends rules to make Centre's nod mandatory for Nidhi companies
Apr 20, 2022
New Delhi [India], April 20 : The Ministry of Corporate Affairs said on Wednesday Nidhi Rules, 2014 has been amended to safeguard the interests of the general public. Under the Companies Act, 2013, initially, there was no need for a company to get a declaration from the Central Government to function as a Nidhi Company, now it has been made mandatory.
To safeguard the interest of the general public, it has become imperative that before becoming its member, one must ensure declaration of a company as a Nidhi by the Central Government and towards this, a few necessary/important amendments in the Rules have been carried out which are applicable to the Companies to be incorporated after Nidhi (amendment) Rule, 2022, the Ministry of Company Affairs said in a statement.
Under the amended rules, a public company incorporated as a Nidhi with a share capital of Rs 10 lakh needs to first get itself declared as a Nidhi from the Central Government by applying in form NDH-4 with a minimum membership of 200 and NOF of Rs 20 lakh within 120 days of its incorporation.
For timely disposal, it has also been provided in amended Rules that in case no decision is conveyed by the Central Government within 45 days of the receipt of applications filed by companies in form NDH-4, approval would be deemed as granted. This would apply for such companies which shall be incorporated after Nidhi (Amendment) Rules, 2022.
Under the Companies Act, 1956, a Nidhi or Mutual Benefit Society meant a company which the Central Government declared as Nidhi or Mutual Benefit Society by notification in the official gazette. Under the Companies Act, 2013, initially there was no need for a company to get declaration from Central Government to function as a Nidhi Company. Such companies were required to only incorporate as a Nidhi and meet requirements under sub-rule (1) of rule 5 of Nidhi Rules viz., minimum membership of 200, Net Owned Fund (NoF) of Rs 10 lakh, NOF to deposit ratio of 1:20 and keeping 10 per cent unencumbered deposits in schedule commercial banks or post offices within one year of commencement of Nidhi Rules, 2014.
A committee was constituted in the Ministry of Corporate Affairs to make recommendations on the issues arising from the implementation of the Companies Act, 2013 and it was, inter-alia, felt that the earlier provisions under the Companies Act, 1956 requiring the approval of the Central Government for declaration as Nidhi were appropriate since they provided a centralised and more restrictive framework for regulation of such entities and accordingly section 406 of the Companies Act, 2013 was amended with effect from 15 August 2019 to bring back the requirement of declaration as a Nidhi by the Central Government, the Ministry of Corporate Affairs said.
Under the Companies Act, 1956, about 390 companies were declared as Nidhi companies only. During 2014-2019, more than 10,000 companies were incorporated. However, only about 2,300 companies have applied in form NDH-4 for declaration, the ministry said.
