Nidhi Company Compliance Overview

A Nidhi Company is a type of non-banking financial organization registered under the Companies Act, 2013.The primary motive of a Nidhi Company includes borrowing and lending money amongst its members.
Nidhi Companies are also known as Mutual Benefit Finance Company.
Every Nidhi Company is required to follow the rules and regulation prescribed under the Companies Act, 2013 and Nidhi Companies Rules, 2014.
In the case, the Nidhi Company doesn’t follow the prescribed compliances, then both the company and officers in default would be subject to punishment.

Why is it necessary to comply with the Nidhi Company Compliances?

Firstly, the Nidhi Company is registered under the Companies Act, 2013. Therefore, it becomes mandatory for every company registered under this act to follow the prescribed compliances.
Secondly, the Nidhi Company has the status of Public Limited Company. Protecting the interest of stakeholders is one of the most essential duties of the company. Hence, it’s mandatory to follow the compliances of Nidhi Company.
Furthermore, to ensure the operations of the company don’t hamper and continue without any legal complication, following the compliance is obligatory.

Nidhi Company Annual Compliances

Annual compliance of Nidhi Company, as the name suggests, needs to be filed annually. However, a few of them is supposed to be filed after a certain interval of time.
Mainly, such compliances describes the performance and status of Nidhi Company operations throughout the year
A Nidhi Company must fulfil the annual compliances as prescribed in the Nidhi Rules, 2014 and the Companies Act, 2013.

Event-based Compliances of Nidhi Company

Generally, event-based compliances are those required to file only once during the company incorporation process.
Furthermore, such compliances must also be followed when there’s any change in the company structure which are non-periodical.
Unlike the annual compliances of Nidhi Company, these compliances aren’t required to be filed at every certain interval.

Post Incorporation Compliances of Nidhi Company

Typically, after the incorporation, Nidhi Companies are required to follow two types of compliances namely:
Annual compliances, and
Event-based compliances.

Compliances to follow within 1 year of Nidhi Company Incorporation

Within 1 year of the company’s incorporation, the number of members should increase to at least 200.
The NOF (Net-owned Fund) of the Nidhi Company should become Rs. 10 lakh or more.
The ratio of NOF to the deposit shouldn’t exceed 1:20.
As per Rule 14 of the Nidhi Rules, 2014, the unencumbered deposits shouldn’t be less than 10% of the outstanding deposits.

Checklist for Annual Compliance for Nidhi Company

Below we have described the mandatory checklist for Nidhi Company compliances which every Nidhi Company should meet within the due time. Those compliances are as follows:
Form NDH 1
Every Nidhi Company has to file the form NDH-1 mandatorily within 90 days from the closure of the first or second (as applicable) financial year after the company’s incorporation. Moreover, this form should be duly certified by the practicing chartered accountant or company secretary or cost accountant. One needs to file this return along with the prescribed fees, whatever applicable.
Form NDH 2
The form NDH-2 should be filed in the case the company fails to fulfil the following compliances:
If the company fails to add at least 200 members within one year of incorporation, and;
Failure in maintaining the NOF to deposit ratio of 1:20.
The company needs to file NDH-2 with the Regional Director within 90 days form the financial year closure along with the prescribed fees.
After examining the application, the Regional Director will pass orders within 30 days of the arrival of the NDH-2 application. The application is filed to request time extension for meeting the above compliances, if the company is unable to perform the same within the prescribed time frame.
Form NDH 3
NDH-3 is a half-yearly return which needs to be filed with the ROC (Registrar of Companies). Every Nidhi Company must file this form along with the prescribed fees within thirty days from the end of each half year. Again, the form should be duly signed by the practicing chartered accountant or company secretary or cost accountant.
Maintenance of Books of Accounts
Every Nidhi Company must maintain the books of accounts on a timely basis. Books of Accounts are compulsory to maintain for the purpose of Income Tax. Every company whose gross receipts exceed Rs. 1, 50,000 in three preceding year needs to maintain the books of accounts
ADT-1, Auditor’s Appointment
According to Section 139 of the Companies Act, 2013, every company needs to intimate the ROC (Registrar of Companies) about the appointment of auditor in a prescribed format. ADT-1 is the required form to inform ROC about the auditor’s appointment.
Maintenance of Statutory Registers
As per the Companies Act, 2013, every company registered with the MCA has to maintain the statutory registers mandatorily. Further, every company must present the register before ROC within certain time limits along with the prescribed fees. In general, the statutory register is a record of the company’s directors, shareholders, and the meetings held.
Preparing Financial Statements: Whether it’s Nidhi Company or any other, preparation of Financial Statements is imperative for every entity. Financial Statements consist of Cash Flow Statement, Balance Sheet, Profit & Loss Account of the company, etc.
Director’s Report: Under the Companies Act, 2013, Director’s report is one of the mandatory compliances that every Nidhi Company needs to follow.
A Director’s report is a record of the company and its compliance with a set of accounting, financial, and corporate social responsibility standards produced by the board of directors.
Conduct Statutory Meetings
It is obligatory for every Nidhi Company to convene statutory meetings such as Board of Director’s meetings and meeting of Shareholders.
Filing Income Tax Returns
Every Nidhi Company must file the annual Income Tax Returns by 30th September of the next financial year.
Form AOC-4, Filing of Financial Returns
For every company, it’s imperative to file the financial return with the MCA (Ministry of Corporate Affairs). AOC-4 is the prescribed form for filing the financial statements of the company. Financial statements need to be filed every year within 30 days of a company’s AGM (Annual General Meeting). Moreover, the form should be certified by the Chartered Accountant in practice or the company secretary in practice.
MGT-7, Filing of ROC Annual Returns
Ministry of Corporate Affairs provides the form MGT-7 to all the companies to give their annual return details. Hence, every Nidhi Company is supposed to file MGT-7 within the due time as prescribed by the MCA.

Checklist for Event-based Compliance of Nidhi Company

Here’s the list of event-based compliances that every Nidhi Company needs to follow while any change in the organization takes place:
Any change in the Registered Office Address;
Change in the company’s name;
Appointment or resignation of a Director;
Appointment or resignation of an Auditor;
Amendments in the company’s objective;
Transfer of shares;
Change in the company’s capital structure;
Increase of Authorised Capital of the company;
Appointment of the KMP (Key Managerial Personnel).

Penalties for Non-Compliance

If a Nidhi Company fails to comply by any provision of Companies Act, 2013 and Nidhi Rules, 2014, then the following will be the penalties:
The company along with every officer in default will be guilty and would be subject to fine extending to Rs. 5000/-. If the contravention continues, the company will have to pay Rs. 50/- per day till the default continues.

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