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Nidhi Company

Nidhi Company

Section 406 of Companies Act 2013 and Companies (Nidhi Companies) Rules, 2014 governs The Law and Procedure for Nidhi Company.

Nidhi Company means a company which has been incorporated as a Nidhi with the object of:

-Cultivating the habit of thrift and savings amongst its members,

– receiving deposits from, and lending to, its members only, for their mutual benefit, and which complies with rules of Chapter XXVI of Companies Rules, 2014.

Whether Nidhi Company can give Dividend?

A Nidhi shall not declare dividend exceeding 25%.

Is there any Penalty with relation to Nidhi Company

If a company contravenes any of the provisions of the rules the company and every officer of the company who is in default shall be punishable with fine which may extend to Rs.5,000/- and where the contravention is a continuing one, with a further fine which may extend to Rs.500/- for every day after the first during which the contravention continues.

Requirements for Nidhi Company

  • A Nidhi company to be incorporated under this Act shall be a Public Company;
  • It shall have a minimum paid up equity share capital of Rs.5,00,000/-;
  • No preference shares shall be issued.
  • If preference shares had already been issued by a Nidhi Company before commencement of this Act, such preference shares are to be redeemed in accordance with the terms of issue of such shares;
  • The object of the company shall be cultivating the habit of thrift and savings amongst its members, receiving deposits from and lending to its members only for their mutual benefits;
  • It shall have the words ‘Nidhi Limited’ as part of its name.


The Central Government made ‘Nidhi Rules, 2014’ for the purpose of carrying out the objectives of ‘Nidhi’ companies. Which are given under the Chapter XXVI of Companies Rules, 2014. These rules shall be applicable to-

  • Every company which had been declared as a Nidhi or Mutual Benefits under Section 620A(1)of Companies Act, 1956;
  • Every company functioning on the lines of a Nidhi company or Mutual benefit society but has either not applied for or has applied for and is awaiting notification to be a Nidhi or Mutual Benefit Society under Section 620A(1)of Companies Act, 1956;
  • Every company incorporated as a Nidhi pursuant to the provisions of Section 406of the Companies Act, 2013.


Every Nidhi shall, within a period of one year from the commencement of these rules, ensure that it has—

  • Minimum No. of Members: need to increase to 200;
  • Net owned funds: Shall be Rs.10,00,000/- or more

Where: ‘Net owned funds’ means the aggregate of paid-up equity share capital and free reserved as reduced by the accumulated and intangible assets appearing in the last audited balance sheet; AND Ratio of net owned funds to deposit shall be not more than 1:20.

Can Nidhi Company accept deposit?


  • A Nidhi shall not accept deposits exceeding 20 times of its Net Owned Assets as per last audited financial statements.
  • The fixed deposits shall be accepted for a minimum period of 6 months and a maximum period of 60 months.
  • Recurring deposits shall be accepted for a minimum period of 12 months and a maximum period of 60 months.

What are the general restrictions imposed under rule 6 of chapter xxvi the act

No Nidhi Company shall-

1. Carry on the business of Chit Fund, Hire Purchase Finance, Leasing Finance, Insurance or Acquisition of Securities issued by any body corporate;

2. Issue Preference Shares, Debentures or Any Other Debt Instrument by any name or in any form whatsoever;

3. Open any Current Account with its members;

4. Acquire another company by Purchase of securities OR Control the composition of the Board of Directors of any other company in any manner whatsoever OR Enter into any arrangement for the change of its management, unless it has passed a special resolution in its general meeting and also obtained the previous approval of the Regional Director having jurisdiction over Nidhi;

5. Carry on any business other than the business of borrowing or lending in its own name;

6. Accept Deposits from or lend to any person, other than its members;

7. Pledge any of the assets lodged by its members as security;

8. Take Deposits from or lend money to anybody corporate;

9. Enter into any Partnership Arrangement in its borrowing or lending activities;

10. Issue or cause to be issued any advertisement in any form for soliciting deposit;

11. Pay any brokerage or incentive for mobilizing deposits from members or for deployment of funds or the granting loans.

12. Membership