Complete Step-by-Step Guide for Closing a Nidhi Company

Facing an NDH-4 rejection for your Nidhi Company can be stressful, but many promoters encounter it as a challenge. The Ministry of Corporate Affairs (MCA) sets strict compliance requirements, and if your application is rejected due to capital shortfall, governance issues, or regulatory non-compliance, continuing operations may no longer be possible.

In such cases, understanding the legal process of closing a Nidhi Company becomes crucial. From complying with the Companies Act, 2013 to filing necessary forms with the Registrar of Companies (ROC), every step must be handled carefully to avoid penalties or future liabilities.

In this article, we shall walk you through comprehensive roadmap for striking off Nidhi Company after NDH-4 rejection. We cover:-

Implications of NDH-4 rejection on NIDHI operations
Documentation and statutory compliances required for closure
Step-by-step procedure for filing closure with ROC
Alternative options you may consider before opting for complete closure
Fast track route for closing a Nidhi Company
Cost and time required for the whole process

By the end, you’ll have clarity on closing a Nidhi Companylegally and smoothly, ensuring compliance while protecting your business and personal interests.

Table of Contents

Possible Reason for Closing a Nidhi Company- Key Reasons Explained

Running a NIDHI company comes with unique challenges and regulatory requirements. While these financial cooperatives serve an important role in promoting savings and credit among members, various circumstances can lead promoters to opt for closing a Nidhi Company.

Here’re the possible reasons for closing a Nidhi Company.

NDH-4 Rejection by MCA – If MCA rejects the NDH-4 application due to low capital, insufficient members, or guideline non-compliance, continuing operations becomes legally and financially unviable.
Capital & Compliance Burden – Inability to meet minimum paid-up capital, ongoing ROC filings, and compliance with MCA often lead to voluntary closure.
Operational Issues – Low member participation, high loan defaults, and poor cash flow management affect long-term sustainability.
Competition & Growth Limits – Rising digital finance options, limited geographical reach, and stagnant membership growth make the NIDHI model less attractive.
Promoter Constraints – Personal changes, lack of professional management, or limited growth potential often drive promoters to exit.
Risk & Liability Concerns – Non-compliance exposes promoters to penalties and liabilities. Closing ensures protection of members’ interests and promoter reputation.
Market Exit Strategy – Some promoters view closure as part of a broader business strategy, allowing them to exit the financial services sector cleanly and pursue other opportunities without ongoing regulatory obligations.

Understanding these factors helps promoters take informed decisions about their company’s future. If you’re considering for closing a Nidhi Company after NDH-4 rejection, the expert team of My Legal Business LLP ensures proper compliance, safeguard members, and smooth closing of your Nidhi Company.

Essential Pre-requisites for closing a Nidhi Company

Before initiating the process of closing a Nidhi company, certain mandatory requirements must be fulfilled to ensure legal compliance and protect stakeholder interests. These prerequisites form the foundation for a smooth strike-off process.

Settle Member Deposits & Loans
Repay all member deposits – including principal, interest, and maturity benefits.
Recover or settle outstanding loans – document any write-offs through board resolutions.
Clear All Liabilities
Pay pending dues such as employee salaries, vendor payments, PF, ESI, TDS, and statutory obligations.
Ensure Regulatory & Tax Compliance
File all pending ROC filings.
Maintain audited financial statements and update statutory registers.
Closure of bank account
Reconcile and close bank accounts.

Meeting these prerequisites ensures your Nidhi company closure proceeds smoothly while maintaining compliance with Companies Act provisionsand other applicable regulations. Proper preparation at this stage prevents delays and legal complications during the formal strike-off process.

Compliance Requirements before closing a Nidhi company

Ensuring proper statutory compliance with ROC, Income Tax, and GST authorities is crucial before initiating process of closing a Nidhi company to avoid legal complications and penalties.

Category	Essential Compliance
ROC (Registrar of Companies)	File pending annual returns (Form AOC-4, MGT-7) up to closure of businessSubmit updated financial statements & board and member resolutions
Income Tax	File all pending ITRs till closure of business operations Settle outstanding tax dues, interest, or penalties

Documents required for closing a Nidhi Company

Category	Documents Required
Board & Member Approval	Certified copy of Board Resolution for closure Special Resolution passed in EGM with member consent
Financial Records	Audited financial statementsStatement of accounts showing NIL assets & liabilities
Regulatory Filings	Copies of filed annual returns (AOC-4, MGT-7)
Strike-off Documents	Indemnity Bond notarized by Directors (STK 3).STK 4 form attached in Affidavit by every all the directors Bank Account Closure Certificate

Step-by step process of closing a Nidhi Company

The Process of the Strike-off is governed by the Section 248 of the Companies Act, 2013 and rules made thereunder as well as the provisions of Companies (Nidhi) Rules, 2014.

Step-1: – Conducting Board and General Meeting

Obtain Approvals & Resolutions
Board resolutionto authorize closure.
Member approval –at least 75% of members must approve closure in an EGM.
Ensure no pending legal proceedings or regulatory actions exist

Step-2: – Filing MGT-14

Form MGT-14 must be filed with the Registrar of Companies within 30 days of passing the special resolution for closure.
This filing ensures that the board and member approvals are officially recorded in MCA records, making it a mandatory compliance step in the strike-off process.

Step-3: – Filing STK-2 Form along with necessary annexures

Form STK-2 is the prescribed application form under Section 248 of the Companies Act, 2013 for voluntarily striking off the name of a company, including a NIDHI Company, from the Register of Companies. It is filed with C-PACe, Manesar once all liabilities are cleared and the company has obtained member approval for closure.

Attachments Required with Form STK-2

Certified copy of the Board Resolution approving strike-off.
Copy of the Special Resolution passed by members (MGT-14 filing proof).
Statement of Accounts showing NIL assets and liabilities, certified by a Chartered Accountant.
Affidavit by all directors confirming accuracy of information (Form STK-4).
Indemnity Bond signed by all directors (Form STK-3).
Identity and address proof of all directors.

Step: 4: -Final Strike off

ROC reviews the application and publishes a public notice.
If no discrepancy is found, the ROC issues notice in STK-6.
If no objection is received in 30 days, then final order of removal of name is issued in STK-7.
Company legally ceases to exist, and confirmation is issued by ROC

The Eligibility Criteria for Fast Track route: – Closing a Nidhi Company

The company has not carried out business operations since incorporation or has become inoperative since last 2 year.
All member deposits have been repaid in full along with interest, and no dues remain.
There are no outstanding loans, creditors, or statutory liabilities (PF, GST, Income Tax, etc.).
The company has obtained consent of members through a special resolution.
Financial statements and returns are up to date till the date of business operations.
No ongoing investigation, legal proceeding, or regulatory inquiry is pending against the company.

Estimated Time Required for closing a Nidhi Company

The timeline varies by closure method: Fast Track Exit (FTE) takes 60-90 days, voluntary winding up ranges from 6-12 months. The duration largely depends on asset liquidation complexity and stakeholder cooperation.

Conclusion

Closing a Nidhi company after an NDH-4 rejection or due to operational challenges is never an easy decision, but with proper planning and compliance, it can be executed smoothly while protecting all stakeholders’ interests. The key to successful closure lies in understanding your options, meeting all regulatory requirements, and choosing the most appropriate winding-up method for your specific circumstances.

Whether you opt for voluntary liquidation, seek court intervention, or explore alternative restructuring options, ensuring complete compliance with ROC, income tax, and GST requirements is non-negotiable. Taking shortcuts in the closure process can lead to legal complications, director liability, and prolonged regulatory issues that could affect your future business endeavours.

Before making your final decision, consider consulting with our expert team of My Legal business LLP, having specialisation in Nidhi regulations. We plan and execute closure process that not only protects your members and creditors but also preserves your reputation in the financial sector, keeping doors open for future opportunities.

Frequently Asked Questions(FAQs)

Q1: What happens to member deposits if the company closes before completing the full repayment cycle?

A: All member deposits have to be repaid in full along with the interest accrued before the closure process can move forward. If the company does not have enough funds, its assets must be sold or liquidated to ensure members receive their money back.

Q2: Can ongoing legal disputes prevent Nidhi company closure?

A: Yes. Any pending legal disputes must be addressed before the company can be closed. You may need to settle matters with the other parties, transfer the cases to the liquidator, or obtain court approval to continue with closure while litigation is still in progress. If disputes remain unresolved, they can cause significant delays in the closure process.

Q3: -Can a new Nidhi company be formed with same name immediately?

A: -No, the struck off company name remains blocked for 20 years and cannot be used by directors or associates.

Q4: Can a struck off Nidhi company be restored?

A: –Yes, within 20 years through:

Court restoration: Through NCLT

Q5: -What happens if objections are raised?

A: –If objections are raised, the ROC examines them and gives the company a chance to respond. Valid objections may lead to rejection of the application, requiring the company to resolve issues and reapply. Alternatively, the company may proceed with formal winding up.

Q6: -Is RBI approval mandatory for Nidhi company strike off?

A: – No, The Nidhi companies are regulated by MCA, and no RBI rules apply to them.

Q7:- Do creditors need to give consent for strike off?

A: – Yes. If there are creditors, their written consent is mandatory before applying.

Q8:- Who signs the strike off application?

A: -The application in Form STK-2 must be digitally signed by a director and certified by a practicing professional (CA/CS/CMA).