Non-compliant Nidhi companies: Govt advises caution

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February 26, 2021 1:15 AM

The stringent measures by government would lead to greater transparency and will be a step forward in invoking investor friendliness in the economy.

MCA further said, “Investors are advised to verify the antecedents/status of a Nidhi company especially their declaration of their status as Nidhi company by the central government before becoming its member and investing their hard-earned money in such companies."MCA further said, “Investors are advised to verify the antecedents/status of a Nidhi company especially their declaration of their status as Nidhi company by the central government before becoming its member and investing their hard-earned money in such companies."

The ministry of corporate affairs (MCA) on Thursday issued an advisory to the pubic to check the status of Nidhi companies before making an investment as many such firms are not complying with rules as a result have been found not fit to be declared as Nidhi companies.

A Nidhi company by definition is a non-banking financial company, (NBFC), created to borrow from and lend money to its members. MCA said that under the amended Companies Act, 2013 and the Nidhi Rules, 2014, firms need to get themselves updated or declared as Nidhi company by applying to the ministry in form NDH-4.

“While examining the applications in form NDH-4, it has been observed that these companies have not been complying with the provisions of the rules in toto. This has resulted in rejection of applications filed by the companies for declaration since they have not been found fit to be declared as Nidhi company,” the MCA said.

MCA further said, “Investors are advised to verify the antecedents/status of a Nidhi company especially their declaration of their status as Nidhi company by the central government before becoming its member and investing their hard-earned money in such companies.”

An official source said that Nidhi companies are incorporated with the objective of cultivating the habit of thrift and savings amongst its members, receiving deposits from, and lending to, its members only, for their mutual benefit. The stringent measures by government would lead to greater transparency and will be a step forward in invoking investor friendliness in the economy.

MCA on Thursday also inked a memorandum of understanding (MoU) with the Central Board of Indirect Taxes and Customs (CBIC) for data exchange. The MoU is in line with the vision of MCA and CBIC to harness data capabilities to ensure effective enforcement. Both organisations are going to benefit from access to each other’s databases which include details of import-export transactions and consolidated financial statements of companies registered in the country, MCA said.

The data sharing arrangement gains significance in light of development of MCA21 Version 3 which will utilise state of the art technology for enhancing ease of doing business in India and improve the regulatory enforcement and similar steps by CBIC like the launch of ADVAIT (Advanced Analytics in Indirect Taxation) a 360-degree taxpayer profiling tool. AI/ML, data analytics will play a critical role in achieving this synergy.

The MoU will facilitate sharing of data and information between MCA and CBIC on an automatic and regular basis. It will enable sharing of specific information such as details of Bill of Entry (Imports), Shipping Bill (Exports) Summary from CBIC and financial statements filed with the Registrar by corporates, returns of allotment of shares.

In addition to regular exchange of data, MCA and CBIC will also exchange with each other, on request, any information available in their respective databases, for the purpose of carrying out scrutiny, inspection, investigation and prosecution.

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