Ministry of Corporate Affairs (“MCA”) vide Notification dated July 1, 2019, appointed that Section 406 of the Companies Act, 2013 shall come into force from August 15, 2019. Nidhi company is created for borrowing and lending money between members. Some prerequisites for a Nidhi company are incorporation as public limited company with minimum 200 members, net owned funds to deposits ratio not to be more than 1:20, etc. Further, MCA vide Notification dated July 1, 2019, has notified the Nidhi (Amendment) Rules, 2019 which amends the Nidhi Rules, 2014 effective from August 15, 2019. The brief changes are as shown below:
| Rule No | Existing | Amendment effective from August 15, 2019 |
| 2(d) | Applicability of the rules to company incorporated as Nidhi under Section 406 of Companies Act, 2013 or those under Section 620A of Companies Act, 1956 | New rule inserted for applicability to every company declared as Nidhi or Mutual Benefit Society under Section 406(1) of Companies Act, 2013 |
| 3(da) | Not applicable | New rule inserted to define a “Nidhi” which involves a company which accepts deposits from its members and lends to only its members for mutual benefit |
| 3A | Not applicable | New rule inserted prescribing the procedure for the Central Government to notify a public company as a Nidhi, pursuant to any application made inform NDH-4 and also mandating companies to comply with filing of Form NDH-4 within time limits prescribed, failing which, such companies are disallowed from filing any notice of alteration of capital in Form SH-7 or return of allotment in Form PAS-3 |
| 4 | A public company could be a ‘Nidhi’ only if incorporated as a Nidhi | Omission of parts of the rule that required prior incorporation as Nidhi, |
| 5 (1) | Minimum requirements for every Nidhi was to be adhered within one year from commence of the Nidhi Rules, 2014 | Now the requirements are to be adhered within one (1) year from the date of Nidhi’s incorporation |
| 5(3) | Extension of time could be provided by Regional Director in case a Nidhi files an application in Form NDH-2 to comply with the requirements of minimum 200 members and for maintaining ratio of 1:20 for net owned funds to deposits | The time period of extension which can be granted by a Regional Director is now limited to up to one year, through insertion of a proviso |
| 5(4) | Nidhi which failed to comply with minimum requirements were prohibited to accept deposits beyond second financial year, unless it complied | Even if such Nidhi complied with the requirements beyond second financial year, prohibition to accept deposits continues till a fresh declaration is obtained under Section 406(1) of New Act |
| 7(1) | Nidhi were to issue either fully paid up or partially paid-up equity shares of the nominal value | Nidhi is prohibited from issue of partly paid up equity shares |
| 12 | The application form for a deposit should contain a statement that a depositor could approach RoC over non-payment of deposit | The statement is changed so that a depositor can approach only a bench of National Company Law Tribunal. Further new rule is inserted mandating the mention of the date of declaration or notification as Nidhi in the application for deposit. |
| 23 | The Regional Director was empowered to enforce compliance | Regional Director is replaced with the Central Government to enforce compliance. Further two new rules 23A and 23B are inserted to mandate existing Nidhi to get fresh declaration as Nidhi after commencement of the Nidhi (Amendment) Rules, 2019 |
| Form NDH-4 | Not applicable | Insertion of new form for filing application for declaration as Nidhi Company and for updation of status by Nidhis |
Source: http://www.mca.gov.in/Ministry/pdf/NidhiRules_01072019.pdf
