Dividend Deceleration by Nidhi Company

In this article, we shall study about the provisions of declaration of divided applicable on the Nidhi Company as explicitly mentioned in the Nidhi Rules.

It is pertinent to mention that the provision of declaration of dividend of a normal public limited Company as contained in Section 123 to 127 of the Companies Act, 2013 read with Companies (Declaration and payment of Dividend) Rules, 2013 and Secretarial Standard-3 is mutandis-mutandis applicable to the Nidhi Companies as well as long as it not contrary to the conditions mentioned in Rule 18 of the Nidhi Rules, 2014 as mentioned below:

1. A Nidhi shall not declare dividend exceeding 25% or such higher amount as may be specifically approved by the Regional Director.

2. The dividend shall be declared by the Nidhi subject to the following conditions:

  • An equal amount is transferred to General Reserve
  • There has been no default in payment of matured deposits and interest, and
  • It has complied with all the rules as applicable to Nidhi Companies.

It is pertinent to note the basic intention for including these additional conditions for dividend to be declared by the Nidhi Companies is such that it involves huge public amount and thereby, attracts public interest on the part of the government.