After the notification of Nidhi Amendment Rules, 2022, many Nidhi Companies incorporated after the Rules are facing challenges to file Form INC 20A for commencement of business due to the roadblock in the Rules for net owned funds. Briefly discussed the issue in the below para’s;
Share Capital: - Nidhi Company to be incorporated under the Companies Act, 2013 shall be a public company and shall have a minimum paid up equity share capital of ten lakh rupees.
NDH 4: - Further Nidhi shall apply, in Form NDH-4, within a period of one hundred twenty (120) days of its incorporation for declaration as Nidhi, after complying with following conditions: -
It has not less than two hundred (200) members; and
it has Net Owned Funds of twenty lakh (20 Lakhs) rupees or more.
Approval: - Then Central Government shall examine the form and convey its decision within a period of 45 days, if no decision is communicated within 45 days, then the same shall be deemed as approved.
Notify: - Once NDH 4 approved by Central Government, same shall be notified in Official Gazette, declaring at as a Nidhi or Mutual Benefit Society.
Commencement of Business: - After getting the approval from the central government, Nidhi Company shall file with the Registrar in Form INC 20A for commencement of business.
Further Increase of Share Capital: - Is allowed only after filing Form INC 20A with the Registrar.
Analysis: - Going by the provision of the Nidhi Amendment Rules, if a company starts with a Capital of Rs. 10 Lakhs, then the company may not be allowed to commence the Nidhi Business. Since the one of the pre-conditions for filing NDH 4 is Net owned fund should be 20 Lakhs. Without commencing the business, company may not bridge the gap of 10 Lakhs through its reserves, nor they allowed to raise the capital.
Conclusion: - To conclude though the rule says minimum Share Capital is Rs. 10 Lakhs for incorporating Nidhi Company, however due to the roadblock with other provisions of the Rules, it’s always advisable to read the minimum capital as Rs. 20 Lakhs . And always remember to keep the Authorized Capital higher than minimum required capital, while incorporating a Nidhi Company.
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