Under the Companies Act 2013, a company is registered under section 406, referred to as a Nidhi company. There are a few factors that need to be considered here, including a five-lakh rupee equity share requirement.
We are a company whose main objective is to accept deposits from members and lend cash to them most efficiently toward jewels, etc., and loaning of property. For about a century, Nidhis, an organization with the purpose of cultivating thrift, has been promoted primarily by using public-spirited individuals like wealthy neighborhood neighbors, lawyers, accountants, educators, etc., who are usually retired. The operation took place in the neighborhood – within the municipalities and panchayats.
In some cases, Nidhis opened branches outside their respective sales districts or even in the corresponding sales district because of their administrative and monetary power. According to mutual benefit, each individual’s financial savings should be pooled and loans provided most effectively to individuals. Non-individuals should not be dealt with under any circumstances. It was now not expected that Nidhis would be involved in Chit Fund, rent purchase, or insurance businesses, or in any other business involving stocks or debentures. Accordingly, those Nidhis achieve the greatest results through Members. Effective individuals are those who belong to such Nidhis. Neither corporations nor trusts may become members.
Aspects of the regulations of the aforementioned company
A Nidhi complies with the rules prescribed by the Central Government for the regulation of such class of companies under section 406 of the Companies Act, 2013. It receives deposits from, and lends to, its members only, for their mutual benefit, and has been incorporated as a Nidhi with the object of cultivating thrift and savings amongst its members.
Section 406 of the Companies Act, 2013 read with section 469 of the Nidhi Rules, 2014, was issued by the government to exercise powers conferred under these sections on the 1st day of April, 2014. What are the Nidhi Rules, 2014 for?
- Under Section 620A of the Companies Act, 1956, every company was declared as a Nidhi Society or Mutual Benefit Society.
- Under sub-section (1) of Section 620A of the Companies Act, 1956, every company operating on the lines of a Nidhi company or Mutual Benefit Society that has not applied for or has applied but is awaiting notification of its status as such.
- The provisions of Section 406 of the Act require that every company be incorporated as a Nidhi.
Rules of Nidhi Company
Mutual benefit societies include Nidhi Companies. The members are the only ones who have access to their dealings (lending and receiving money), and membership is limited to individuals. Members of a Nidhi Company contribute the majority of its income. In addition, the primary goal of Nidhi Corporations is to cultivate the habit of saving and thrift among their members. The following are the requirements for establishing a Nidhi Company:
- At least Rs 5 lakhs should be paid up in share capital.
- For a Nidhi Business to be incorporated, the company’s name must include Nidhi Limited.
- A Nidhi Company must have a minimum of seven members. The directors of the company must make up three of these members.
- Preference shares may not be issued by Nidhi Companies.
Here, we have discussed Nidhi company’s aspects and why it is popular in India among different kinds of companies.