Rules and Regulations for Opening a Branch Office of a Nidhi Company

Introduction

Opening a Branch Office of a Nidhi Company can help the company expand its reach and provide services to members in additional locations. However, a branch is not a separate legal entity or subsidiary. It operates under the same legal identity and control as the Nidhi Company.

Opening a Branch Office of a Nidhi Company is governed by Rule 10 of the Nidhi Rules, 2014. A Nidhi cannot freely establish branches without satisfying the prescribed profitability, annual filing, location, and approval requirements.

This article explains the eligibility conditions, procedure and closure requirements related to Opening a Branch Office of a Nidhi Company.

What Is a Branch Office of a Nidhi Company?

Under the Nidhi Rules, a branch means a place other than the registered office of the Nidhi Company.

A branch is an additional place from which the company carries out permitted activities with its registered members. It remains under the management and control of the registered office and does not acquire an independent legal identity.

Therefore, deposits, loans, accounts, records and other transactions handled through a branch are treated as transactions of the Nidhi Company itself.

What Is a Nidhi Company?

A Nidhi Company is a public company formed to encourage thrift and savings among its members. It accepts deposits from and provides loans only to its registered members for their mutual benefit. A company cannot use the words “Nidhi Limited” in its name unless it has been declared as a Nidhi under Section 406(1) of the Companies Act, 2013.

Rules for Opening a Branch Office of a Nidhi Company

Rule 10 of the Nidhi Rules, 2014 prescribes the conditions for Opening a Branch Office of a Nidhi Company.

1. Continuous Profit for Three Years

Opening a Branch Office of a Nidhi Company is permitted only when the company has earned net profit after tax continuously during the preceding three financial years.

Therefore, a newly incorporated Nidhi Company or a company that incurred a loss during any of those financial years cannot open a branch merely to expand its operations.

2. Maximum Three Branches Within a District

An eligible Nidhi Company may open to three branches within the district in which its registered office is situated.

While Opening a Branch Office of a Nidhi Company, the limit of three branches applies collectively to all branches operated within that district. The profitability and filing conditions must still be satisfied before any branch is opened.

3. Regional Director Approval

Prior permission from the Regional Director is required when the Nidhi Company proposes to:

• Open more than three branches within the district where its registered office is situated; or
• Open any branch outside the district where its registered office is situated.

The application must be filed in Form NDH-2 along with the prescribed fee. A branch located outside the registered-office district must remain within the same state.

4. Intimation to the Registrar of Companies

After Opening a Branch Office of a Nidhi Company, the company must inform the Registrar of Companies within 30 days from the date on which the branch is opened.

The prescribed intimation must be filed in Form NDH-2 along with the applicable fee.

5. Branch Outside the State Is Not Permitted

A Nidhi Company cannot open a branch outside the state in which its registered office is situated.

Even after obtaining permission from the Regional Director, the company cannot establish a branch in another state. The permission only permits an eligible branch outside the registered-office district but within the same state.

6. Annual Filings Must Be Updated

Opening a Branch Office of a Nidhi Company is not permitted unless the company has filed its financial statements and annual returns with the Registrar of Companies.

Before beginning the branch-opening procedure, the management should confirm that the Nidhi Company Annual Filing is complete and that no required financial statement or annual return remains pending.

7. Restriction on Unauthorised Operational Places

A Nidhi Company must conduct its operations only through its registered office and branches opened in accordance with Rule 10. Rule 10(7) was introduced as a transitional provision under the Nidhi (Amendment) Rules, 2022. It required operational places existing on 19 April 2022, other than the registered office or a legally permitted branch, to be closed within six months and their closure to be informed to the Registrar in Form NDH-2.

Procedure for Opening a Branch Office of a Nidhi Company

• The company must have earned net profit after tax continuously for the preceding three financial years.
• Its financial statements and annual returns must be filed and up to date.
• Up to three branches may be opened within the district of the registered office.
• A branch outside the district requires prior Regional Director approval and must remain within the same state.
• The company should obtain the necessary internal approval, generally through a Board resolution, before opening the proposed branch.
• Form NDH-2 must be filed with the prescribed fee wherever Regional Director approval is required.
• After meeting all legal conditions, the company may open the branch and begin permitted activities with its registered members.
• The Registrar of Companies must be informed in Form NDH-2 within 30 days of opening the branch.

Before starting the incorporation process, promoters should review the List of Documents Required for Nidhi Company Registration to avoid delays in filing.

How to Close a Branch Office of a Nidhi Company?

A Nidhi Company must follow Rule 10(6) of the Nidhi Rules, 2014 before closing any branch.

Board Approval: The Board must approve the branch closure proposal at its meeting, along with a plan explaining how existing deposits have been or will be repaid and how outstanding loans will be recovered.

Regional Director Approval: Apply in Form NDH-2 and obtain prior approval from the Regional Director at least 60 days before the proposed closure date.

Closure Advertisement: After obtaining Regional Director approval, publish an advertisement in Form NDH-5 format in a vernacular-language newspaper circulating at the place where the branch carries on business, at least 30 days before closure.

Display Notice: Display a copy of the advertisement or closure notice on the notice boards of the Nidhi and the relevant branch for at least 30 days from the advertisement publication date.

ROC Intimation: Inform the Registrar of Companies through Form NDH-2 within 30 days of closing the branch.

Operational Settlement: As a practical compliance step, properly preserve or transfer branch records and settle member deposits, loans and related accounts.

Support for Nidhi Company Branch Compliance

Ebizfiling assists Nidhi Companies with the legal requirements involved in opening or closing a branch office.

Our professionals can help with:

• Checking the three-year profitability requirement
• Reviewing pending annual ROC filings
• Preparing Board resolutions and supporting documents
• Filing Form NDH-2 with the prescribed authority

Start your Nidhi Company registration with Ebizfiling and get expert assistance with documentation, incorporation and ROC compliance.

Conclusion

Opening a Branch Office of a Nidhi Company can help the company serve its members in additional locations. However, it must first satisfy the three-year profitability condition, branch limit, annual filing requirements, location restrictions, and Regional Director approval requirements prescribed under Rule 10.

Similarly, a branch cannot be closed merely through an internal decision. Prior Regional Director approval, Form NDH-2, a Form NDH-5 advertisement, display of the closure notice and ROC intimation are required. Proper compliance can help the Nidhi Company expand or restructure its operations without avoidable regulatory issues.

Frequently Asked Questions