Introduction

A Nidhi Company, by its very nature, is formed to encourage thrift and savings among its members and to provide loans to them. Since it operates on a mutual benefit principle, the law requires that deposit holders also have some stake in the company. This is achieved through the rules on share capital and allotment, as prescribed under Rule 7 of the Nidhi Rules, 2014.

Understanding these provisions is essential for both promoters and members because they define the minimum shareholding requirements, prohibit additional service charges, and ensure that members have a direct ownership connection with the company.

Fully Paid-Up Equity Shares

The rule makes it clear that every Nidhi must issue only fully paid-up equity shares of a nominal value of not less than ₹10 each. This requirement ensures that members hold genuine equity in the company rather than partly paid-up shares that might later create complications regarding unpaid calls.

The only exception to this requirement is for certain companies covered under sub-rules (a) and (b) of Rule 2, such as those already declared as Nidhis under earlier law or existing mutual benefit societies.

No Service Charges for Issue of Shares

Another important safeguard is the prohibition on levying service charges for the issue of shares. This prevents exploitation of members by charging them additional amounts for what should be a straightforward allotment process. The share value itself is sufficient, and no hidden costs or charges can be imposed.

Minimum Shareholding for Deposit Holders

Rule 7 further provides that every Nidhi must allot to each deposit holder a minimum number of shares. The general requirement is that each deposit holder must hold at least 10 equity shares or shares equivalent to ₹100.

This provision ties the depositor’s interest with ownership in the company, ensuring that depositors are not just outsiders lending money but are stakeholders with voting rights and ownership participation.

Relaxation for Savings and Recurring Deposit Account Holders

Recognising that savings account holders and recurring deposit holders may be small savers, the rules provide a relaxation. Such members are required to hold only one equity share of ₹10. This makes it easier for small depositors to participate in the Nidhi without being burdened with higher shareholding requirements.

Why These Rules Matter

The rules on share capital and allotment are not just formalities — they reflect the underlying philosophy of Nidhi Companies:

• By mandating minimum shareholding, the law ensures that depositors and members have ownership interest in the company.
• By requiring fully paid-up shares, it guarantees that no liability remains unpaid, safeguarding the financial structure of the company.
• By prohibiting service charges, it prevents hidden costs and protects members from unfair practices.

In short, these provisions strengthen the mutual benefit principle by directly linking depositor and shareholder status.

Key Points at a Glance

• Nidhis can issue only fully paid-up equity shares of at least ₹10 each.
• No service charge can be levied for issue of shares.
• Every deposit holder must hold at least 10 shares or ₹100 worth of shares.
• Savings and recurring deposit holders need to hold only one share of ₹10.

Conclusion

Rule 7 of the Nidhi Rules, 2014 ensures that all depositors in a Nidhi Company also become part-owners by holding shares. This reinforces the cooperative character of Nidhis, protects members from unfair charges, and ensures that even small savers can participate with minimal requirements.

For promoters and directors, compliance with these provisions is not optional but mandatory. For members, it guarantees transparency and fairness in their relationship with the company.