The government has amended the rules governing Nidhi companies to protect the interests of common people. In a statement issued on Wednesday, the Ministry of Corporate Affairs said that listed companies desirous of acting as funds will now have to obtain pre-approval from the central government before accepting deposits.
The government has taken this step keeping in view the interests of small investors as there have been many such cases in which such companies have disappeared overnight after taking money from people. A statement issued by the government said, in order to protect the interest of the general public, it is imperative that the declaration as a Nidhi Company is obtained from the Central Government before becoming its member. Further, a firm constituted as a Nidhi company with a share capital of Rs.10 lakhs will have to apply through Form NDH-4 with a minimum membership of 200 to declare itself as ‘Nidhi’.
Chapparfad Returns: Adani Power is showing power for a month, Wilmar is proving to be a multibagger, investors are rich from Green
The Net Owned Fund (NOF) of such companies should be Rs 20 lakh within 120 days of formation. At the same time, in the new rules, the promoters and directors of the company will have to meet the criteria of suitable person prescribed in the rules. The Ministry stated that if the Central Government does not take any decision within 45 days of the receipt of the applications filed by the companies in the form of NDH-4 for timely disposal, the sanction shall be deemed to have been approved. It may be noted that the guidelines for NBFCs and banks by RBI do not apply to Nidhi Company.
What is Nidhi Company
Nidhi Finance Company is a non-banking financial company (NBFC). But its functions and rules are somewhat different from NBFC. Nidhi companies are financial institutions made up of a few members. All its joining members can do financial transactions. And at the time of need, you can also take a loan from the Nidhi company. Interest is also available on depositing money in the fund which is slightly higher than that of the bank. Both the depositor of money in the fund and the borrower from the Nidhi company are the members of the fund. Deposits or borrowings cannot be made without being linked to the fund.
How Nidhi Company Works
Nidhi company work is like a bank. For example, before doing financial transactions with the bank, there is a need to open an account in the bank. Similarly, for financial transactions from Nidhi Company, membership has to be taken from Nidhi Company. After subscribing, money can be deposited and withdrawn in it and can also take loan if needed. However, Nidhi Company differs from banks in the sense that it cannot provide facilities like cheques, drafts, ATM cards, etc. to its members.
It is necessary to comply with these conditions