RoC Penalizes Nidhi Firms For Violations

Since the beginning of February, RoCs of Uttarakhand, Chennai, Patna and Coimbatore have issued ten orders against nidhi firms or their auditors. In some cases, the same entity was penalized for violating the rules over a few years, the orders showed.

A nidhi is a non-banking finance company, operating under section 406 of the Companies Act, and their core business involves borrowing and lending among members, with no third-party intervention.

The Centre is serious about ensuring compliance by these entities given that public funds are involved. The violations include non-compliance of the accounting standards, failing to update changes in the registered offices and non-disclosure of allotment of securities.

In August 2021, the ministry had said that a large number of firms are operating without applying for a licence from the Centre to operate as a nidhi, in violation of the companies Act and Nidhi rules of 2014.

“Since 2014, the Centre has not given a single approval for fresh applications from nidhi companies. It takes violations by the entities seriously and RoCs take strong action where non-compliance is detected," an official said.

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The government also advised the stakeholders then to verify the antecedents of entities functioning as nidhi companies and ensure that they have been declared as nidhi company by the Central government before becoming their member and depositing or investing money in such companies.