Author name: Abhishek Pandey

Introduction The primary object of Nidhis is to carry on the business of accepting deposits and lending money to member-borrowers only against jewels, etc., and mortgage of property. For over a century Nidhis, with the objective of cultivating the habit of thrift, generally promoted by public spirited men drawn from affluent local persons, lawyers and professionals like auditors, educationists, etc., including retired persons.  The area of operation was local – within municipalities and panchayats. Some Nidhis on account of their financial and administrative strength opened branches within the respective revenue district and even outside. The principle of mutual benefit has been incorporated to pool the savings from members and lend only to members and never have dealing with non-members.  Nidhis were not expected to engage themselves in the business of Chit Fund, hire purchase, insurance or in any other business including investments in shares or debentures. As stated these Nidhis do their business only with Members. Such Members are only individuals. Bodies Corporate or Trusts are never to be admitted as Members in these companies. In simpler terms, NIDHI companies are effectively non-banking financial companies and are engaged in the business of accepting deposits and making loans to their members. The recent failures in the NBFC sector also extended to the NIDHI companies compelling the Government to introduce strict prudential norms for such companies. The deposit taking activities of NIDHIs are governed by the RBI Act and guidelines made thereunder. The power to give exemptions to the NIDHI companies in the administration of NIDHI i.e. with the Ministry of Company Affairs. This dual control leads to confusion in the administration of the provisions of the RBI Act and the Companies Act, 1956. Since, RBI is the regulator of all the NBFC incorporated under the Companies Act, the Committee felt that NIDHI companies should also be controlled by RBI through close supervision. What does the name “Nidhi” means or naming Criteria of a Nidhi Company As per section 406 of the Companies Act, 2013, “Nidhi” or “Mutual Benefit Society” means a company, which the Central Government may by notification in the Official Gazette, declare to be a Nidhi or Mutual Benefit Society, as the case may be. Nidhi” means a company which has been incorporated as a Nidhi with the object of cultivating the habit of thrift and saving amongst its members, receiving deposits from, and lending to, its members only, for their mutual benefit, and which complies with the rules made by the central Government for regulation of such class of companies. In exercise of powers conferred under section 406 read with section 469 of the Companies Act, 2013, Central Government issued the Nidhi Rules, 2014 which came into force on the 1st day of April, 2014. Nidhi Rules, 2014 applicable to: every company which had been declared as a Nidhi or Mutual Benefit Society under sub-section (1) of Section 620A of the Companies Act, 1956;  every company functioning on the lines of a Nidhi company or Mutual Benefit Society but has either not applied for or has applied for and is awaiting notification to be a Nidhi or Mutual Benefit Society under sub- Section (1) of Section 620A of the Companies Act, 1956; and  every company incorporated as a Nidhi pursuant to the provisions of Section 406 of the Companies Act, 2013.  every company declared as Nidhi or Mutual Benefit Society under sub-section (1) of section 406 of the Companies Act, 2013. Every “Nidhi” shall have the last words ‘Nidhi Limited’ as part of its name. Eligibility for registering a Nidhi Company A Nidhi shall be a public company and shall have a minimum paid up equity share capital of Rs. 5 lakh. Nidhi company shall not issue preference shares. If preference shares had been issued by a Nidhi before the commencement of the Companies Act, 2013, such preference shares shall be redeemed in accordance with the terms of issue of such shares. No Nidhi shall have any object in its Memorandum of Association other than the object of cultivating the habit of thrift and savings amongst its members, receiving deposits from, and lending to, its members only, for their mutual benefit. Every “Nidhi” shall have the last words ‘Nidhi Limited’ as part of its name. Minimum requirements of a Nidhi Company Every Nidhi shall, before incorporation, ensure that it has- 7 members; 3 directors; No minimum Capital Requirement; No Preference Shares allowed to issue; The object of the company shall be receiving deposits from and lending to its members only for their mutual benefits. Every Nidhi shall, within a period of one year from the date of its incorporation, ensure that it has– (a) not less than 200 members; (b) Net Owned Funds of Rs. 10 lakh or more; (c) unencumbered term deposits of not less than 10% of the outstanding deposits;  (d) ratio of Net Owned Funds to deposits of not more than 1:20. It may be noted that “Net Owned Funds” means the aggregate of paid up equity share capital and free reserves as reduced by accumulated losses and intangible assets appearing in the last audited balance sheet. Further, the amount representing the proceeds of issue of preference shares shall not be included for calculating Net Owned Funds. If a Nidhi is not complying with clauses (a) or (d) of sub-rule (1) above mentioned, it shall within 30 days from the close of the first financial year, apply to the Regional Director in Form NDH-2 along with fee specified in Companies (Registration Offices and Fees) Rules, 2014 for extension of time and the Regional Director may consider the application and pass orders within thirty days of receipt of the application. Provided that, the Regional Director may extend the period upto 1 year from the date of receipt of application. Membership of a Nidhi Company A Nidhi shall not admit a body corporate or trust as a member. Every Nidhi shall ensure that its membership is not reduced to less than two hundred members at any

Introduction A producer company can be defined as a legally recognized body of farmers/agriculturists with the aim to improve the standard of their living and ensure a good status of their available support, incomes and profitability. Under Companies Act 1956, a Producer Company can be formed by 10 individuals or 2 institutions or by a combination of both having their business objective stated as under. Objects of Producer Company In terms of Section 581B (1) of the Companies Act, 1956, the objects of a producer company registered under this Act may be all or any of the following matters: production, harvesting, procurement, grading, pooling, handling, marketing, selling, export of primary produce of the members or import of goods or services for their benefit. processing including preserving, drying, distilling, brewing, vinting, canning and packaging of the produce of its members. manufacturing, sale or supply of machinery, equipment or consumables mainly to its members. providing education on the mutual assistance principles to its members and others. rendering technical services, consultancy services, training, research and development and all other activities for the promotion of the interests of its members. generation, transmission and distribution of power, revitalisation of land and water resources, their use, conservation and communications relatable to primary produce. insurance of producers or their primary produce. promoting techniques of mutuality and mutual assistance. welfare measures or facilities for the benefit of the members as may be decided by the Board. any other activity, ancillary or incidental to any of the activities referred to in clauses (a) to (i) above or other activities which may promote the principles of mutuality and mutual assistance amongst the members in any other manner. financing of procurement, processing, marketing or other activities specified in clauses (a) to (j) above, which include extending of credit facilities or any other financial services to its members. Further, under Section 581B(2) it has also been clarified that every producer company shall deal primarily with the produce of its active members for carrying out any of its objects specified above. Some criterias of a Producer Company The name of the company should end with “Producer Company Limited”. Only persons engaged in an activity connected with, or related to, primary produce can participate in the ownership. The members have necessarily to be primary producers. Termed as “Companies with Limited Liability” and the liability of the members will be limited to the amount, if any, unpaid on the shares. On registration, the producer company shall become as if it is a Private Limited Company for the purpose of application of law and administration of the company However, it shall comply with the specific provisions of part IXA. The limit of maximum number of members is not applicable to these Companies. Minimum and Maximum requirements of a Producer Company Any 10 or more individuals, each of them being a producer or, Any 2 or more Producer institutions, or A combination of 10 or more individuals and producer institutions Every Producer company shall have at least 5 and maximum of 15 directors having tenure of at least 1 year to a maximum of 5 years. A minimum capital of Rs. 5 lakh is required to incorporate a producer company. It can never be converted into a public company however it can be converted into a multi-state co-operative society. Documents/Details Required for Incorporation of a Producer Company DIR -2 – Declaration from first Directors along with Copy of proof of identity and residential address. Passport size photo of the directors. NOC from the owner of the property. Proof of office address. Copy of utility bills (not older than 3 months). In case directors not having DIN, their identity proof and address proof. PAN & TAN and any other document if required. Preparation of MOA & AOA in INC-33 and INC-34. Steps for incorporation Applicants have to signup/login into their account on MCA Website Click on New Application and a window will open Choose the “Type of company” as Producer company, “Class of company” as Producer company limited, “Category”, “Sub-category”, “Main division”, “Description of main division” and “Name” as required and desired Submit the application. If the registrar if is satisfied that all the requirements of the Act have been complied with he shall, within 30 days of the receipt of documents required for registration, issue a certificate of incorporation. Share Capital Share capital of a Producer Company shall consist of equity shares only. Members’ equity cannot be publicly traded but only transferred Voting Only of individuals, then voting rights shall be based on a single vote for every member. Only of producer institutions, then voting rights on the basis of their participation. Combination of both the individuals and producer institutions then voting rights shall be based on a single vote for every member. Annual General Meeting First AGM shall be conducted within 90 days from the date of incorporation. The Registrar may permit extension of the time for holding Annual General Meeting (not being the first annual general meeting) by a period not exceeding 3 months. The Producer Company shall in each year hold an Annual General Meeting and not more than 15 months shall elapse between the date of one Annual General Meeting to the next. The AGM shall be called by issuing at least 14 days notice. The proceedings of every AGM along with Directors’ Report, the audited Balance Sheet and Profit & Loss Account shall be filed with the Registrar within 60 days of AGM. Members’ Benefits Members will initially receive only such value for the produce or products pooled and supplied as the directors may determine. The withheld amount may be disbursed later either in cash or in kind or by allotment of equity shares. Members will be eligible to receive bonus shares. An interesting provision is for the distribution of patronage bonus(akin to dividend) after the annual accounts is approved — patronage bonus means payment out of surplus income to members in proportion to their respective patronage (not shareholding). Audit Producer Companies shall carry out an