Govt gives 1-yr time for Nidhi cos to update details

The government has given up to one-year time for Nidhi companies to update their details.

In order to make the regulatory regime for Nidhi companies, which are kind of NBFCs, more effective and also to accomplish the objectives of transparency and investor friendliness, the government amended the provisions related to Nidhi firms under the Companies Act. The rules became effective from August 15, 2019.

Under the new provisions, Nidhi companies have to apply to the central government for updation of their status or declaration as 'Nidhi Company' in 'Form NDH-4', the government said in a statement on Thursday.

With regard to the time-frame for applying for the updation, the government said companies incorporated as Nidhi before the amendment have to apply within a period of one year from the date of its incorporation or within 9 months of the amendment rules, whichever is later.

"Companies incorporated as Nidhi on or after Nidhi Amendment Rules, 2019 (August 15, 2019) have to apply within 60 days of expiry of one year from the date of incorporation or extended period," it added.

In case a company does not comply with these requirements, it will not be allowed to file Form No. SH-7 (notice to Registrar for any alteration of share capital) and Form PAS-3 (return of allotment).

In case of contravention, the company and every officer who is in default shall initially be punishable with fine which may extend to Rs 5,000 and further fines in case of continuous violations.

Further, the investors have been advised to verify the status of Nidhi company before making any investment or deposit.

Under the rules, a company is incorporated as 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.