Frequently Asked Questions on Nidhi Company

Nidhi Company Frequently Asked Questions

Q.: How does the Nidhi Company use the funds it receives?

• The Nidhi Company lends the cash to shareholders in accordance with Nidhi Rules. It lends such funds in the form of small business and financial loans.

Q.: Are Nidhi Company deposits safe and secure?

• Deposits with such firms are safe and secure since the Ministry of Corporate Affairs and the Reserve Bank of India have established laws and regulations to ensure deposit safety and security. And the Nidhi Company is required to follow the guidelines of the Central Government.

Q.: Who is eligible to become a shareholder/member of Nidhi Company?

• Any individual who is over the age of 18 according to the standard age proof can become a member of the Nidhi Companies. A valid ID and address proof are required for anybody interested in becoming a member.

Q.: Can a Minor Be a Member of a Nidhi Company?

• A minor shall not be allowed as a member in a Nidhi company, although deposits in the name of a minor may be accepted if made by a natural or legal guardian who is a member of the particular Nidhi.

Q.: Is it possible to provide loans to non-members?

• The mutual benefit concept has been to pool the funds of members and lend solely to members, never dealing with non-members.

Q.: What are the Nidhi Company’s Restrictions?

Nidhi Companies are not permitted to engage in the following activities:

• They are not permitted to establish chit funds, insurance, or other similar businesses.
• Nidhi Company is not permitted to issue securities such as preference shares, debentures, and so forth.
• They are not permitted to open any current accounts with its members.
• it cannot form a partnership to undertake lending and borrowing activity.
• 5 it is not permitted to purchase another firm.

Q.: Can Nidhi operate in business other than those listed above, such as (Chit Fund, Hire Purchase, Insurance, Investing, and so on)?

• Nidhi are not to operate in the business of Chit Fund, hire purchase, insurance, or any other business, including investments in shares or debentures.

Q.: What is the minimum number of members required in Nidhi Company?

• Within one year of the beginning of these regulations, each Nidhi should guarantee that it has at least two hundred members.

Q.: Can Nidhi Company issue Preference Shares?

• Nidhi will not issue preferred stock.

Q.: Can a person serve as a director of the NIDHI Company without owning any stock?

• The Director must be a Nidhi member. As a result, it is essential for Nidhi Company’s directors to own shares.

Q.: What is the maximum term for a director in Nidhi Company?

The Director of a Nidhi shall serve on the Board of Nidhi for a term of up to 10 years. The Director will be eligible for re-appointment only after two years of not serving as a Director.

Q.: What is the minimum nominal value of Nidhi Company’s shares?

• Each Nidhi must issue equity shares with a nominal value of at least 10 rupees.

Q.: What is the minimum ownership requirement for deposit holders?

• Each Nidhi should award at least 10 equity shares or shares worth one hundred rupees to each deposit holder.

Q.: What is the highest amount that Nidhi may accept as a deposit?

• A Nidhi shall not accept deposits exceeding twenty times of its Net Owned Funds (NOF) as per its last audited financial statements.

Q.: What is the maximum amount that a Nidhi can declare as a dividend?

• A Nidhi may not declare a dividend in excess of 25%, or such greater sum as may be explicitly allowed by the Regional Director for reasons to be stated in writing.

Q.: Is it legal for Nidhi Company to take over another company?

• Nidhi businesses are not permitted to acquire any other company by purchasing its securities. It does not even have the authority to take over another company’s management or change the composition of its management.

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