Process of Closure of Nidhi Companies in India

According to Companies Act, 2013 a Nidhi company is registered as a non banking finance Sector Company to provide benefit to its members. The main purpose of Nidhi Company is to borrow and lend money between its members. A Nidhi registered company can also be called as a Mutual fund and Benefit funds.  However, if a Nidhi Company fails to comply with the provisions or compliances of Companies Act, 2013 or any other law applicable on it, then it’s better to file for closure procedure to avoid any penalties. The Government of India also suggests that if a company is not carrying on any of its business activities, then it is better to shut it down. Closing of Nidhi Company is also known as Strike off.

Possible Reason for the Closure of Nidhi Companies

A Nidhi company may be closed due to many reasons which can include any internal or External factors. It is recommended by government that if company is not functional and profitable, then it should be plan to get wound up. It is to avoid spending any unnecessary money on compliances and audit related filings on yearly basis to stay legal. Hence to avoid this, many non functioning Nidhi companies are advised to apply for a proper closure to ease out from all the legal responsibilities.

Advantages of Closing Nidhi Company

Few of the advantages which a Nidhi Company may avail on its closure are as follows:

• Productive Use of Resources: If the chosen business is not running and generating profits then resources can be utilized into productive use.
• No imposition of Penalties:  Saves and protects from the Non compliance penalties.
• No Record Keeping Required: After submitting the closure documents, there is no requirement for keeping and maintaining the legal documents.
• No further Director’s Default: After Nidhi Company Registration, company has to mandatorily perform certain compliances. If in case, company fails in filing the annual documents to ROC, company along with its director are held liable for such non – compliance. However, once the company is into its winding process, annual filing is not necessary until and unless ROC specify. Hence, directors can take a sigh of relief if the company is in winding up process.
• Tax free: Closing a company will prevent from unnecessary Income Tax demands.
• Save Cost of yearly Compliance: It helps to save you every year compliance cost.

Documents for Closure of Nidhi Company

Following documents needs to submit by applicant for closure of its Nidhi Company:

• Mandatory Documents
  • Statement of Accounts including assets and liabilities of the company duly audited.
  • Special Resolution obtained by the members with consent of 75% Members
  • Indemnity Bond notarized by the directors (STK-3)
  • Latest Bank Statement
  • Affidavit in form STK 4 by every company.
• Optional Documents (If Applicable)
  • PAN card of the company.
  • Bank Account Closure Certificates

Pre Requirements for closure of Nidhi company

• Consent of atleast 75% of the shareholder or member by passing a special resolution
• Company must dispose of its assets and pay all the dues of its members and creditors and must obtain an NOC (No-Objection Certificate) from them.
• Prepare the Application after getting writing consent from members.
• closing bank accounts, Company Closure request should be filled.
• If company is registered with any government department, then it must NOC (No objection Certificate) from it.
• Digital Signature Certificate should be processed
• Only a qualified person must draft and submit the closure application.
• Every document shall be submitted in each phase.

Process for the Closure of Nidhi Company

Follow the steps listed below, if you wish to strike off your Nidhi Business

• Step 1: Draft a closure application and submit it to Registrar of Companies (ROC) by signing it through  Digital Signature Certificate (DSC)
• Step 2: ROC shall approve application for closure of  company .
• Step 3: ROC after granting approval to your application, shall send a notice regarding the same.
• Step 4: If no other person files for any objection to ROC, the company name is striked off and the company is finally closed.

Note : The whole process usually takes 20-25 working days, however it may also differ depending upon the processing time of different state government.

Methods to Close Nidhi Company

There are 3 methods of closing of a Nidhi Company which are as follows:

• Defunct Company: In general, a defunct refers to company with nil assets and liabilities. Basically, such a company fails to commence its operation within a year of its Incorporation. A Nidhi company is considered to be a defunct when it cannot file the annual compliance to meet the legal needs and do not make any returns on the yearly basis.

• Winding Up Voluntarily: Another mode of closing a company is voluntary winding up which refers to a situation where member or the shareholder of the company mutually decides to close external and internal operations of the company, along with legal partnership that a company have. This Process requires Special Resolution to be passed in the Board Meeting of the Company

• Selling of Nidhi Company: The alternative to close Nidhi Company is to sell it off. The complete ownership and control is transferred to the new prospective buyers. All the properties and undertakings will transfer to the person who purchases the Nidhi Company.

Eligibility Criteria for Fast Closure of Nidhi Companies

• The Company applying under FTE (Fast Track Exit) Should  not posses any asset and liability.
• The company should not have started any business operation since incorporation or minimum 1 year is required is to be passed since last business operation or action.
• The company has appropriately filled all the financials to the Registrar of Companies, till the time of its closure.

Takeaway

Running a Nidhi company without functioning operations or not filing timely compliance is a matter of an offence in the eyes of law. Thus, Closing of Nidhi Company is the best choice to be made to avoid being in default and pay hefty penalties.Take the guidance of a reputed legal consultant, Legal Window to wind-up your Nidhi Company. Being experts in handling several Nidhi Registration and closure cases, we can streamline the legal procedure for you.