In the previous blog we have briefly discussed about the Nidhi Company, in this we are discussing about the 10 facts which cannot be done by Nidhi Company like a NBFC.
To understand this first of all we have understand the difference between the Nidhi Company and NBFC. So, below first of all we will understand the difference between the same;
Difference between Nidhi Company vs NBFC:-
| Difference | Nidhi Company | NBFC |
| Type of Company | It is public limited company in terms of Companies Act, 2013 | It can be both Private Company as well as Public Company |
| Administrative Body | It comes under the Ministry of Corporate Affairs, GOI. | It comes under Ministry of Corporate Affairs, GOI and Reserve Bank of India. |
| Compliance | It has less compliance then NBFC | It is having more compliance then Nidhi Company because it has to follow the norms made by the RBI also. |
| No of members | It has to make 200 members within one year of Incorporation. | No such requirement |
| Capital Requirement | It has to bring its paid up capital of Rs 10,00,000/- within one year of incorporation | To start NBFC Rs. 2 Crore as paid up capital. |
| Public Issue (IPO) | Not allow | Can bring |
| Deposits | It can accepts the deposits without the approval of RBI | Pre-approval is required to accepts deposits from public |
| Object | The main objective is to cultivate the habit of savings among its members and,
To receive or lend deposits to its members for their mutual benefit. It deals with its members only. |
engaged in the business of loans & advances, and acquisition of shares/ stocks or other securities issued by government or local authority, leasing, hire-purchase, insurance business, but do not include those financial institution whose principal business is related to agricultural activity, industrial activity, sale or purchase of any goods or services other than securities and sale/purchase/construction of immovable property. |
| Type of Loans | It can give only secured loans | It can give all type of loans whether secured or unsecured |
| Area of operation | It can give loans and accepts deposits from its members only | It can do business with general public as well as its members. No such prohibition. |
| Branches | It is not allowed to open the branches other then its registered office for a period of three years from registration. | No such prohibition. Can do business in all India by any number of branches. |
| Issue preference shares and debentures | Not allowed | Allowed |
| Inter Corporate Deposits | Not allowed to accept | Allowed |
| Column 1 Value 15 | Column 2 Value 15 | Column 3 Value 15 |
Now I have hoped that you have understood the difference between the Nidhi Company and NBFC. Now it will be easier for me to explain the 10 things which the Nidhi cannot do as NBFC. May be the points will be similar as above because some difference will be the items not allowed for Nidhi which can be done by NBFC.
10 THINGS WHICH THE NIDHI CANNOT DO AS NBFC
1. Public Issue (IPO)
Nidhi Company is not allowed to bring IPO because it is formed for cultivating habit of savings among the members of company. So, the company cannot raise funds from general public for its business expansion. Whereas, in NBFC no such prohibition because the core area of business operation of NBFC is lend money to general public
2. Current Account
Nidhi Company is incorporated for mutual benefit of its members so it cannot open current account of its members. Whereas in NBFC no such prohibition is there
3. Commission or brokerage
A Nidhi company cannot give commission or brokerage to its agent or members for bringing members who will take loans or make deposits with the company because all the activities are done among the members of company. On the other hands NBFC is not bound for the same because finance is the main business object of company.
4. Acceptance of Inter-Corporate Deposits
A Nidhi Cannot accepts the Inter Corporate Deposits in terms of section 186 of Companies Act 2013 because Nidhi can to activity with its members only because a corporate cannot be member of Nidhi Company as it is restricted under Companies Act, 2013.
5. Issue of preference Share Capital and Debentures
A Nidhi cannot issue preference shares and debenture to any person because it is prohibited under the rule 4,5,6 and 10 of Nidhi Rules, 2014 framed under the Companies Act, 2013.
6. Opening of Branches other than its registered Office
A Nidhi cannot open its branch other than its registered office for a period of 3 years form the date of its registration. On the other hands no such prohibition on NBFC because the core business of NBFC is to lending money.
7. To give unsecured loans
A Nidhi Company cannot give unsecured loans to its members because it is prohibited under rule 15 of Nidhi Rules, 2014.
8. Chit Funds Activity
It is not allowed to do activity like chit fund because In India, Chit Funds are registered under the NBFC & Chit Funds Act, 1982 and need extra licenses to operate. Whereas Nidhi Company Formation comes under the ambit of the Companies Act, directives from RBI to its governance are issued.
9. Loans to general public
A Nidhi Company cannot give loan to other than its members as it has been clearly defined in section 406 of Companies Act 2013 and Nidhi Rules 2014.
10. Acquisition of over the board of other company
A Nidhi Company cannot acquire another company and control the composition of a board of directors of the company like an NBFC.
DISCLAIMER:
The article is based and prepared on the basis of relevant provisions and notification issued by MCA and as per the information existing at the time of the preparation. This is only a knowledge sharing initiative. It is neither a professional advice nor recommendation.
Leave A Comment