Notifications issued under sections 620A and 637A of Companies Act, 1956, relating to nidhis/'mutual benefit societies, explained - Companies Law - CIRCULAR NO. 1/98

Subject:- Notifications issued under sections 620A and 637A of Companies Act, 1956, relating to nidhis/'mutual benefit societies, explained CIRCULAR NO. 1/98 [F. NO. 1/3/98-CL-V], DATED 18-3-1998, ISSUED BY THE DEPARTMENT OF COMPANY AFFAIRS 1. As the ROCs are aware, those companies which have been declared to be nidhis or mutual benefit societies, as the case may be, by this Department by notification in the Gazette of India in terms of section 620A of the Companies Act, 1956 have, inter alia, the following characteristics : u One of the main objectives of the company would be to enable the members to save money, to invest their savings and to secure loans at favourable rates of interest. u The shares of such companies are not offered to the public for subscription but allotted to those who desire to take advantage of the benefits offered for deposition or borrowing money. u These companies have transactions only with the members and not with the public. 2. This Department have issued recently two notifications relating to these companies as under: Sl. No. Gazette Extraordinary Issued under section No. Date 1. GSR 84(E) 23rd February, 98 620A 2. GSR 85(E) 23rd February, 98 637A 3. Notification No. GSR 84(E), dated 23rd February, 1998. 3.1 This notification amends Schedule III of this Department's notification No. GSR 978, dated 28th May, 1963. It introduces a new proviso below the existing entry relating to section 309(4). 3.2 This relates to managerial remuneration. These companies have now been exempted from obtaining Central Government's approval for the managerial remuneration payable by them provided they satisfy certain conditions prescribed by the said notification. 4. Notification No. GSR 85(3) dated 23rd February, 1998. 4.1 This notification makes some amendments to this Department's earlier notification No. GSR 603(E) dated 20th October, 1997# [which had been circulated to all the offices vide this Department's letter No. 3/9/97- CL-V dated 17th November, 1997 - Circular No. 4/97]. 4.2 This notification dated 20th October, 1997 restricted these companies from giving loans or advances to any one borrower exceeding Rs. 7.5 lakhs or 1 per cent of total deposits, whichever is less. By the present notification dated 23rd February, 1998 this restriction has been modified. Now four different slabs ranging from Rs. 2 lakh to Rs. 15 lakh (based on the deposits of the company) have been prescribed as ceiling limits.