Nidhi Company is a type of Non-Banking Financial Company established under Section 406 of the Companies Act, 2013. The primary goal of a Nidhi Company is to cultivate the norm of thrift and saving within its members. If a Nidhi Company does not comply with the regulations, it is preferable to file for closure to avoid any penalties.
What does it mean to close down a Nidhi company?
Nidhi Company's closure is also referred to as "Company Closure" or "Strike Off". Multiple internal and external factors can cause it to close. The Nidhi Company closure process is governed by the newly notified (Removal of Names of Companies) Rules, 2016 under Section 248 of the Companies Act, 2013.
According to the Indian government, if a corporation is not conducting business or complying with regulations, it should be closed. To lawfully close down a Nidhi Company, however, you'll need the right expertise.
The Benefits of Closing Nidhi Company:
When the Nidhi Company is no longer operational or profitable, it must be closed down. The following are some of the advantages of ending this company:
- No compliance:
Nidhi Company no longer has to maintain track of its annual compliances after completing the closing procedure. Non-imposition of penalty: When a Nidhi Company in India closes down, it is exempt from paying a penalty fee, which may be imposed for unspecified reasons.
- Document maintenance:
There is no requirement to keep the legal documents after you submit the closure documents.
- Can save compliance costs:
This Company has to spend a large portion of its income on filing yearly compliances. However, closing the company at the appropriate time saves the cost of filing unnecessary compliances.
- There will be no more Directors’ default:
Every Nidhi Company is required to perform certain post-incorporation compliances, such as filing annual documents with the Registrar of Companies. Furthermore, in the event of non-compliance, the Company's Director is held liable. A Director can be relieved by applying for winding when a company is required to do the annual filing only if specified by the ROC. A director will not be obligated to do the annual filing.
Methods to Close a Nidhi Company
There is three methods of closing Nidhi company as given below:
Defunct Company:
In general, a defunct company is one that has no assets or liabilities. In fact, such a company fails to begin operations within a year of its incorporation. A Nidhi Company is considered defunct when it is unable to file the annual compliance to meet the legal requirements and does not file any returns on a yearly basis.
Voluntary Winding-up of Business:
Another way of closure is voluntary winding-up, in which all members of a Nidhi Company agree to close the company's internal and external operations. As a result, the Company dissolves itself from any external legal partnership. To voluntarily cut off the Nidhi Company, a Special Resolution must be passed by the Board of Directors.
Nidhi Company is being sold:
The final option for shutting down a business is to sell it. Despite the fact that it is quite similar to the Voluntary Winding-up, it transfers authority from existing members to new prospective buyers. The Nidhi Company's assets, belongings, and legal attachments are all passed to the new owner who purchases the company.
Required Documents for Closing Nidhi Company:
Documentation is required for every registration or closing process, and it is also required for the closure of the Nidhi Company. The required documents that an applicant must submit to close a company are listed below.
- Directors' notarized indemnity bond (STK 3).
- A professional Chartered Accountant audits the Statement of Accounts, which includes the information of the Company's assets and liabilities.
- The company's affidavit is in STK 4 form.
- The most latest financial statement.
- Special Resolution demonstrating the approval of 75% of Nidhi Company members.
- PAN Card for the company. (If applicable).
- Certificates for the Closure of Bank Accounts. (If applicable).
Procedure for Close a Nidhi Company
It takes around a month to entirely shut a Nidhi Company. If you also want to strike off your Business, follow the steps listed below.
- Filing an Application for Closure:
The very first step is to draft and submit a Closure Application to ROC through DSC.
- ROC has issued the following notice:
As a result, the ROC (Registrar of Companies) will approve your application and send you a notice.
- Finally closed:
If no one objects, the Company's name will be struck off, and it will eventually close.
Key points to consider during Nidhi Company Closure:
Things to consider during the Closing of Nidhi Company are as below:
- Clear all liabilities: Any Nidhi Company that wishes to close down must repay all of its debts and obtain a NOC (No Objection Certificate) from all of its members.
- At least 75% of members must show their approval: Because a Nidhi Company is founded for the benefit of its members, the permission of the majority of members is essential when the company is closed. To dissolve a Nidhi Company, at least 75 per cent of the Shareholders or members must agree. A Director must also be assigned the responsibility of carrying out the closing procedure.
- Prepare the application: You can now prepare the Application after receiving the members' written consent.
- It is necessary to process the Digital Signature Certificate (DSC).
- The closure Application must be written and submitted by a qualified individual.
- Each phase will necessitate the submission of every document.
Eligibility for fast Closure of Nidhi Company
The entire process usually takes 20 to 25 working days, but this can vary depending on the Government's processing time.
- If a Nidhi Company wishes to wind up on a fast track basis, it must meet the following conditions:
- Nidhi Company that applies for the Fast Track Exit must not have any assets or liabilities.
- The Company must not have begun any business operations since its incorporation or within a year of its incorporation.
Conclusion:
- Until the time of its closure, the company must have filed all of its financial documents with the ROC (Registrar of Companies).
- In the eyes of the law, running a Nidhi corporation without functional operations or failing to file timely compliance is a crime. There are numerous reasons to establish a Nidhi company in India. As a result, closing this company is the greatest option for avoiding default and costly penalties.
- To wind up your Nidhi Company, seek the advice of a reputable legal consultant, Rajput Jain & Associates. We can accelerate the legal process for you because we have handled countless Nidhi Registration and closure instances.
