Centre sets time-frame for Nidhi companies to apply for status updation
12 March 2020
The central government has announced the time-frame for Nidhi companies to apply to the central government for updation of their status/ declaration as Nidhi company.
The amended provisions of the Companies Act (Section 406) and amended Nidhi rules require that the Nidhi companies have to apply to the central government for updation of their status/ declaration as Nidhi Company in Form NDH-4.
Accordingly, companies incorporated as Nidhi before Nidhi Amendment Rules, 2019, ie, 15 August 2019 have to apply within a period of one year from the date of its incorporation or within 9 months of the Nidhi Amendment Rules, ie, 15 August 2019 whichever is later.
Companies incorporated as Nidhi on or after Nidhi Amendment Rules, 2019, ie, 15 August 2019 have to apply within 60 days of expiry of one year from the date of incorporation or extended period (as granted by concerned regional director).
In case a company does not comply with these requirements, it shall not be allowed to file Form No SH–7 and Form PAS–3.
Such companies are required to ensure strict adherence to provision of Companies Act, 1956/2013 and Nidhi Rules, 2014 as amended. In case of contravention of the provisions of these rules, the company and every official of the company who is in default shall initially be punishable with fine which may extend to Rs5,000 and further fine in case of continuous violations.
Further, the government has advised investors to verify the status of Nidhi company from the notification issued by the central government in official gazette before making any investment or deposit.
Under Nidhi Rules, 2014, Nidhi is a company which has been incorporated as a Nidhi with the object of cultivating the habit of thrift and saving amongst its members, receiving deposits from, and lending to, its members only, for their mutual benefit.
The status updation of Nidhi companies, according to an official release, is being done to make regulatory regime for Nidhi companies more effective and also to accomplish the objectives of transparency and investor friendliness in corporate environment of the country.