Check Nidhi companies’ antecedents before investing money; 348 entities failed to meet criteria: MCA

The government on Tuesday again urged investors to check the antecedents of Nidhi companies before putting in their money, as at least 348 entities have failed to meet the criteria to be declared as Nidhi companies. This is the second time in six months that the corporate affairs ministry has come out with an advisory as there are a large number of companies, which, though functioning as Nidhi companies, have not applied for such a status under the relevant rules.

The ministry, in a release on Tuesday, said 348 companies failed to meet requisite criteria for declaration as Nidhi companies under the Companies Act, 2013, and Nidhi Rules 2014.

Nidhi companies are non-banking finance entities that are into lending and borrowing with their members.

Under Section 406 of the Companies Act, 2013, and amended Nidhi Rules, companies incorporated as Nidhi need to apply to the ministry in form ‘NDH-4’ for declaration as Nidhi entities.

“It has been observed that companies have been applying to the central government for declaration as Nidhi under the CA, 2013, but of the 348 number of forms scrutinised up to August 24, 2021, not a single company could satisfy the requisite criteria for it to be declared as a Nidhi company by the central government,” the release said.

Stakeholders are advised to verify the antecedents of the company functioning as a Nidhi company and ensure that it has been declared as a Nidhi company by the central government before becoming its member and depositing/ investing their hard-earned money in such companies, according to the release.

On February 25 this year, the ministry had asked investors to check the antecedents of Nidhi companies before putting in their money amid instances of such entities not complying with the rules.