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In this edition we will be seeing about another amendment made effective on the Independence day that is the Nidhi (Amendment) Rules 2019 . Our usual Legal terms and News Bites related to notifications by MCA, SEBI, RBI, IT and GST will follow the article.

Saranya Deivasigamani,
CEO

The Nidhi (Amendment) Rules, 2019

The Central Government in its notification dated 1st July 2019 come up with the Nidhi (Amendment) Rules 2019 which are made effective from 15th August 2019.

Key Highlights of the Amendments

Definition of the term ‘Nidhi’

The Nidhi (Amendment) Rules 2019, has inserted a new sub-rule under rule 3 as sub-rule (da) to provide definition of the term ‘Nidhi’ which was not defined anywhere earlier. As per rule 3 (da), ‘Nidhi’ means a company which fulfils the rules made by the Central Government and which has been incorporated as Nidhi with the following objects:

Cultivating/educating the habit of thrift and savings among the members; and
Receiving deposits from and lending to its members only for their mutual benefits.

Rule 3A – Declaration of Nidhis

Another new rule 3A has been inserted that provides a declaration for the public company. If the public company wants to declare it as Nidhi Company, then it can make an application in Form NDH-4. The Central Government, after being satisfied that the company has met all the requirements, shall notify it as Nidhi company in the official Gazette.

The Nidhi company incorporated under the Act on or after the commencement of Nidhi Amendment Rules 2019 shall file an application in Form NDH-4 within a period of 60 days from the date of:

One year from the date of incorporation; or
The period up to which the Regional Directors have granted the extension of time.

However, in case the company doesn’t comply with the requirement of filing of Form NDH-4, then, the company shall not be allowed to file the following forms:

Form No. SH-7 – Notice to the Registrar of any alteration of the share capital
Form No. PAS-3 – Return of allotment

Rule 23A

Rule 23A stipulates the following categories of the company to file a declaration in Form NDH-4:

Category of the company referred at rule 2(b) i.e., the company functioning on the lines of Nidhi company who has either not applied for or has applied and is awaiting Nidhi status; and
Every Nidhi company incorporated under the Companies Act 2013 before the commencement of the Nidhi Amendment Rules 2019.

The above-referred companies are required to file a declaration in Form NDH-4 within later of the following dates:

One year from the date of incorporation of the Nidhi company; or
6 months from the date of commencement of the Nidhi Amendment Rules 2019.

If in case the above-referred companies fail to file the declaration in due time, the defaulting company shall not be allowed to file the following forms:

Form No. SH-7 – Notice to the Registrar of any alteration of the share capital
Form No. PAS-3 – Return of allotment.

Rule 23B

In order to update its status, every company which has been declared as Nidhi under the previous company law is also required to file the declaration in Form NDH-4. Such companies are required to file the declaration within a period of 6 months from the date of commencement of Nidhi Amendment Rules 2019.
If the company files the declaration after the above referred period, then, the company is required to pay appropriate fees as per the Companies (Registration Offices and Fees) Rules 2014.
If the company fails to file the declaration, then, the company shall not be allowed to file the following forms:
Form No. SH-7– Notice to the Registrar of any alteration of the share capital
Form No. PAS-3 – Return of allotment.

Legal Terms

Dereliction

n. 1) abandoning possession, which is sometimes used in the phrase “dereliction of duty.” It includes abandoning a ship, which then becomes a “derelict” which salvagers can board.