Modi Government amends rules governing Nidhi companies; declaration now mandatory for companies before starting to accept deposits

To protect the interests of the public, the government has amended rules governing Nidhi companies whereby its prior declaration will be mandatory for certain entities before they start accepting deposits.

Now, public companies desirous to function as Nidhis must obtain prior declaration from the central government before accepting deposits, the corporate affairs ministry said in a release on Wednesday.

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"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," it said.

A public company incorporated as a Nidhi with a share capital of Rs 10 lakh should first get itself declared as a Nidhi by applying in form NDH-4 with a minimum membership of 200 and a Net Owned Fund (NOF) of Rs 20 lakh within 120 days of its incorporation.

Further, promoters and directors of the company concerned have to meet the criteria of fit and proper person as laid down in the rules.

"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," the release said.

Nidhi companies are non-banking finance entities that are into lending and borrowing with their members.