A Nidhi Company, governed by the Companies Act, 2013, is a type of non-banking financial company designed to facilitate savings and loans among its members. Compliance for such companies involves several critical tasks. Firstly, they must appoint an auditor annually to oversee their financial records and reporting. Accurate maintenance of statutory registers is essential, covering details of members, loans, and charges.
Financial statements, including the balance sheet and profit and loss account, need to be prepared and filed annually with the Registrar of Companies (RoC). Additionally, a Director’s Report must be drafted to provide insights into the company’s financial performance and operations.
Income tax returns must be filed yearly, offering a clear picture of the company’s financial status. Nidhi Companies are also required to hold an Annual General Meeting (AGM) within six months of the financial year-end, with attendance from all directors, members, and auditors.
The annual return must be filed with the RoC within 30 days of the AGM, outlining the company’s activities and financial details. Lastly, adherence to specific regulations under the Nidhi Rules, 2014, including maintaining a minimum net owned fund and adhering to deposit and loan limits, is mandatory.
Benefits of Nidhi Company Registration
Easy Formation
- A Nidhi Company can be formed with just 7 individuals, including 3 directors, streamlining the setup process.
- The registration process is straightforward and typically takes 10-15 days to complete.
Cost-Efficient Registration
- The minimum capital required for registration is ₹5,00,000, with the flexibility to invest the capital within 2 months of registration.
No RBI Regulations
- While Nidhi Companies are categorized as Non-Banking Financial Companies (NBFCs), they do not require approval from the RBI. They are governed by the Nidhi Rules, 2014, which regulate their activities and performance.
High Level of Certainty
- Nidhi Companies focus on fostering a savings culture among their members, making them a reliable long-term investment option as members are encouraged to continue saving.
Less Level of Risk
- Nidhi Companies face minimal risk due to their operational model, which involves accepting deposits and providing loans exclusively to members. The loans are provided at low interest rates, ensuring a secure and trustworthy financial environment.
Annual Compliances for Nidhi Company
Annual compliance for Nidhi Companies involves periodic filings and reporting to ensure adherence to regulatory requirements. These filings are essential for maintaining transparency about the company’s operational status and performance throughout the year. Nidhi Companies must comply with the Companies Act, 2013, and Nidhi Rules, 2014.
List of Annual Compliance for Nidhi Company
NDH-1
Filing NDH-1 is mandatory for Nidhi Companies to report their compliance status. This form must be filed within 90 days from the end of the first or second financial year post-incorporation. It should be submitted with the prescribed fees and certified by a Chartered Accountant, Cost Accountant, or Company Secretary.
NDH-2
Form NDH-2 is used to request an extension if the company fails to meet specific compliance criteria, such as:
- Not achieving a minimum of 200 members in a financial year.
- Not maintaining a net owned fund to deposit ratio of 1:20.
This form must be submitted to the Regional Director with the applicable fees. The Regional Director reviews the application and can issue orders within 30 days.
NDH-3
Form NDH-3 is a half-yearly return that Nidhi Companies are required to file. It provides updates on the company’s compliance status and other relevant details.
Maintaining Books of Accounts
Nidhi Companies must keep accurate financial records.
Maintain Statutory Register
Statutory registers are mandatory under the Companies Act, 2013.
Convene Statutory Meetings
Regular board and shareholder meetings are required.
Preparation of Financial Statements
Prepare Profit & Loss Account, Balance Sheet, and Cash Flow Statement.
Income Tax Returns
File annual income tax returns by September 30th.
Financial Statement Returns Filing (AOC-4)
Submit Form AOC-4 with financial statements and supporting documents.
Annual Return Filing (MGT-7-ROC Annual Return)
File Form MGT-7 with the Ministry of Corporate Affairs (MCA).
Penalties
Timely compliance is crucial for Nidhi companies. Failure to meet compliance requirements can result in penalties. A company and its officials may face a fine of up to ₹5,000 for non-compliance. If the issue persists, an additional fine of ₹500 per day may be imposed. To avoid these penalties, it is advisable to seek compliance maintenance services from industry experts.