New Delhi: The Union government Tuesday warned general public and other stakeholders to carry out a background check of a Nidhi company and verify other details if they are taking membership of such companies, or depositing money with them.
“Stakeholders are advised to verify the antecedents of the company functioning as a Nidhi company and ensure that the company has been declared as a Nidhi Company by the Central Government before becoming its member and depositing or investing their hard-earned money in such companies,” said the ministry of corporate affairs.
The warning was issued as 348 companies, those who has applied to the Central government for declaration as a Nidhi company under the Companies Act of 2013 and Nidhi Rules of 2014, failed to meet the requisite criteria.
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Nidhi companies are those non-banking finance companies that are not regulated by the Reserve Bank of India but by the Central government through the ministry of corporate affairs. These companies engage in the business of deposit or lending of the money among the members. Nidhi companies are easier to register and start as unlike other non-banking finance companies, they do not require a licence from the Reserve Bank.
The ministry of corporate affairs said though the companies are applying to the central government for declaration as a Nidhi company but of the 348 companies, whose forms have been scrutinised up to August 24 (Tuesday), not a single company could satisfy the criteria.
Under section 406 of the Companies Act of 2013 and Nidhi Rules of 2014, companies incorporated as Nidhi Companies need to apply to the Central Government in form NDH-4 for declaration as a Nidhi Company. “There are large number of companies which though functioning as Nidhi Company have not yet applied to the Central Government for declaration as Nidhi Company which is violation of the Companies Act of 2013 and Nidhi Rules of 2014,” said the government.
