Incorporation Compliance
The incorporation compliance for a Nidhi company involves registering the company with the Registrar of Companies (ROC). The promoter must file the following documents:
- Memorandum of Association (MoA)
- Articles of Association (AoA)
- Form INC-32 (SPICe) – Simplified Proforma for Incorporating Company Electronically
-
Statutory Compliance
A Nidhi company must adhere to the following statutory compliance requirements:
- Annual General Meeting (AGM) – Every Nidhi company must conduct an AGM within six months from the end of the financial year.
- Annual Return Filing – A Nidhi company has to file its annual return with the ROC in Form MGT-7.
- Income Tax Returns – A Nidhi company must file its income tax returns in ITR-6.
- TDS Returns – A Nidhi company is required to file quarterly TDS returns in Form 24Q.
Accounting and Bookkeeping Compliance
A Nidhi company must maintain proper accounting and bookkeeping records. The following compliances are related to accounting and bookkeeping:
- Maintenance of Books of Accounts – A Nidhi company must maintain proper books of accounts as per the Companies Act, 2013.
- Financial Statements – The company must prepare and submit financial statements such as the Balance Sheet, Profit and Loss Account, and Cash Flow Statement.
- Audit Compliance – A Nidhi company must get its accounts audited by a Chartered Accountant at the end of every financial year.
Regulatory Compliance
Apart from MCA compliances, Nidhi companies have to comply with the following regulatory requirements:
- Reserve Bank of India (RBI) Guidelines – Nidhi companies must comply with the RBI guidelines related to lending and borrowing activities, membership criteria, and minimum net-owned funds.
- KYC Compliance – The company must comply with the Know Your Customer (KYC) guidelines to verify the identity of its members.
Borrowing and Lending Compliance
Nidhi companies are primarily engaged in borrowing and lending activities among their members. However, they have to follow certain guidelines and restrictions related to these activities. The key borrowing and lending compliances are:
- Loan Limit – A Nidhi company can lend to its members only up to a certain limit, which is usually fixed based on the net owned funds of the company.
- Interest Rate – The interest rate charged on loans cannot exceed the prescribed limit set by the RBI.
- Security – The company must ensure that the loan is secured against appropriate collateral as per the RBI guidelines.
Membership Compliance
Nidhi companies can only accept membership from individuals who fulfill the eligibility criteria. The membership compliances are:
- Minimum Membership – The company must have a minimum of 200 members within a year of incorporation.
- Maximum Membership – The number of members cannot exceed 15 times the net owned funds of the company.
- Eligibility Criteria – The company must ensure that the members fulfill the eligibility criteria, such as being a resident of India, not being a minor, and not being declared insolvent.
Reporting Compliance
Nidhi companies must report various transactions and activities to the regulatory authorities. The key reporting compliances are:
- RBI Reporting – The company must report its borrowing and lending activities to the RBI periodically.
- MCA Reporting – The company must report changes in its registered office, directors, share capital, and other significant events to the MCA through the appropriate forms.
- Income Tax Reporting – The company must report its income and tax liabilities to the Income Tax Department through its annual income tax return.
Conclusion
Compliance is an ongoing process, and Nidhi companies must ensure that they are constantly monitoring their operations and complying with the relevant regulations. Failing to comply with these regulations can lead to severe consequences, such as penalties, fines, and even the cancellation of registration. Therefore, it is essential to be aware of all the compliances and take appropriate measures to comply with them.
Other Related Blogs: Section 144B Income Tax Act
Frequently Asked Questions
Q.What is a Nidhi company, and what are its compliances?
A Nidhi company is a type of NBFC that primarily deals with borrowing and lending activities among its members. Nidhi companies have to comply with various statutory, regulatory, and operational compliances, such as annual general meetings, annual return filing, income tax returns, TDS returns, accounting and bookkeeping compliance, RBI guidelines, KYC compliance, borrowing and lending compliance, membership compliance, and reporting compliance.
Q.What are the consequences of non-compliance with Nidhi company compliances?
Non-compliance with Nidhi company compliances can lead to heavy penalties, fines, legal proceedings, and even the cancellation of the company’s registration. It can also impact the reputation of the company and affect its ability to conduct its business operations effectively.
Q.Can Nidhi companies lend money to non-members?
No, Nidhi companies can only lend money to their members and not to non-members. The company has to ensure that the loans are secured against appropriate collateral, and the interest rate charged on the loans cannot exceed the prescribed limit set by the RBI.
Q.What is the minimum number of members required to form a Nidhi company?
The minimum number of members required to form a Nidhi company is 7. However, the company must have a minimum of 200 members within a year of its incorporation.
Q.Can a Nidhi company change its registered office address?
Yes, a Nidhi company can change its registered office address. However, it has to follow the procedure laid down by the MCA and file the appropriate forms to notify the authorities of the change in the registered office address.
Q.Does a Nidhi company have to maintain proper accounting and bookkeeping records?
Yes, a Nidhi company has to maintain proper accounting and bookkeeping records as per the Companies Act, 2013. The company must also prepare and submit financial statements such as the Balance Sheet, Profit and Loss Account, and Cash Flow Statement. Additionally, the company must get its accounts audited by a Chartered Accountant at the end of every financial year.
Q.Can a Nidhi company accept membership from minors?
No, a Nidhi company cannot accept membership from minors. The company must ensure that its members fulfill the eligibility criteria, such as being a resident of India, not being a minor, and not being declared insolvent.
