This step has been taken in the backdrop of significant increase in the number of Nidhi companies in the recent years.
This step has been taken in the backdrop of significant increase in the number of Nidhi companies in the recent years.
In order to protect the public interest and prevent possible illegal fundraising activities, the government has amended the rules governing Nidhi companies, making its prior declaration mandatory for a certain class of such companies to commence operations. Will be
The move by the Ministry of Corporate Affairs comes in the backdrop of a significant increase in the number of Nidhi companies in recent years and incidents of defrauding the public by fraudulent money-collection activities.
Now, public companies desirous of acting as Nidhi will have to obtain prior declaration from the central government before accepting deposits, the ministry said in a release on Wednesday.
About 390 companies were declared as Nidhi companies under the Companies Act, 1956. However, their numbers have increased since the enactment of the Companies Act, 2013 in April 2014.
“During 2014-2019, more than ten thousand companies were incorporated. However, only about 2,300 companies have applied for declaration as NDH-4. From scrutiny of NDH-4 form it is seen that the companies are not complying with the applicable provisions of the Act and the Fund Rules, 2014 (amended),” the release said.
According to the ministry, in order to protect the interest of the general public, it has become imperative that before becoming its member, a company should be ensured to be declared as a fund by the central government.
A public company incorporated as a fund with a share capital of ₹10 lakh first by applying in Form NDH-4 with a minimum membership of ₹200 and within ₹120 lakh as a Net Owned Fund (NOF) should be declared as a fund. the day of its joining.
In addition, the promoters and directors of the company concerned will have to fulfill the criteria of ‘fit and proper person’ as prescribed in the rules.
“For timely disposal, the amended rules also provide that if no decision is given by the Central Government within 45 days of the receipt of applications filed by companies in Form NDH-4, the approval shall be deemed to have been granted. Will go
“This will be applicable to such companies which are incorporated after the Nidhi (Amendment) Rules, 2022,” the release said.
Nidhi companies are non-banking financial institutions engaged in lending and lending transactions with their members.
Following amendments to the Companies Act, 2013 and consequent changes in rules, with effect from August 15, 2019, companies incorporated as Nidhi were required to apply to the government as NDH-4 for declaration within 14 months of incorporation. This requirement was applicable to entities incorporated after the coming into force of the Nidhi (Amendment) Rules from August 15, 2019. The time period for incorporation of such companies as Nidhi after 2014 but before August 15, 2019 was 9 months.