MCA advises investors to verify status of Nidhi companies before investment

Corporate Affairs Ministry (MCA) has sounded a note of caution to investors looking to invest or investing their hard earned money in Nidhi companies. Investors are advised to verify the antecedents/status of a Nidhi company before becoming a member and investing in such companies, the MCA has said in an official release.

In particular, the investors need to verify the declaration of their status as a Nidhi Company by the Central government, it added.

Under the amended Companies Act 2013 and the Nidhi Rules 2014, companies need to get themselves updated (those companies which were earlier declared as Nidhi company under the Companies Act 1956) or declared as Nidhi company (those companies which were incorporated as Nidhi company after April 1, 2014) by applying to the MCA in form NDH-4.

While examining the applications in form NDH-4, it has been observed by the Central Government 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 release added.