Rule 3B explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Rule 3B is the route for every company incorporated as a Nidhi on or after 19 April 2022. It asks for Form NDH-4 within one hundred twenty days of incorporation, sets two entry conditions, and requires every promoter and director to pass a fit and proper test. This article reads rule 3B as inserted by G.S.R. 301(E) dated 19 April 2022 and as amended up to G.S.R. 413(E) dated 16 July 2024; later amendments should be checked.
A public company that wants to be a Nidhi must apply in Form NDH-4 within one hundred twenty days of its incorporation, with not less than two hundred members and Net Owned Funds of twenty lakh rupees or more. All promoters and directors must file a fit and proper person declaration, tested against nine disqualifications. The Central Government conveys its decision within forty five days; silence is "deemed as approved", yet the declaration still comes by Gazette notification. The company may commence business only after approval.
Who rule 3B is for
Rule 3B applies "on and after commencement of Nidhi (Amendment) Rules, 2022", that is, 19 April 2022. Sub-rule (7) says the rule "shall not be applicable to a public company incorporated under the Act before the date of commencement" of those Rules. Such older companies follow rule 3A, rule 5 or rules 23A and 23B; rule 3A's sixth proviso and rule 5(5) in turn exclude companies incorporated as Nidhi from 19 April 2022. If you are setting up a new public company that will be a Nidhi, the general route is described in our service page on public limited company registration, and the Nidhi layer sits on top.
| Company | Rule that applies |
|---|---|
| Declared under the 1956 Act | Rule 23B |
| Functioning as Nidhi, or incorporated before 15 August 2019 | Rule 23A with rule 3A |
| Incorporated 15 August 2019 to 18 April 2022 | Rule 3A and rule 5 |
| Incorporated on or after 19 April 2022 | Rule 3B |
Rule 3B(1): the application and two conditions
A public company desirous to be declared a Nidhi "shall apply, in Form NDH-4, within a period of one hundred twenty days of its incorporation for declaration as Nidhi, if it fulfils the following conditions":
- (I) it has not less than two hundred members; and
- (II) it has Net Owned Funds of twenty lakh rupees or more.
Net Owned Funds is defined in rule 3(1)(d); see our article on rule 3. Rule 3B states the period as one hundred twenty days "of its incorporation". We do not compute a calendar date; the count starts from the date of incorporation.
Rule 3B(2): fit and proper declaration
The company "shall also attach, alongwith Form NDH-4, the declaration with regard to fulfilment of fit and proper person criteria, as per this sub-rule, by all the promoters and directors of the company." The declaration comes from each promoter and each director, not from the company alone.
Rule 3B(3): what makes a person fit and proper
Two things are taken into account:
(a) the "integrity, honesty, ethical behaviour, reputation, fairness and character of the person"; and
(b) the person not incurring any of nine disqualifications.
| Item | Disqualification as printed |
|---|---|
| (i) | A criminal complaint or information under section 154 of the Code of Criminal Procedure, 1973 has been filed by a person authorised by the Central Government against the person and is pending |
| (ii) | A charge sheet has been filed by any enforcement agency in matters concerning economic offences and is pending |
| (iii) | An order of restraint, prohibition or debarment passed by any regulatory authority or enforcement agency in any matter concerning company law, securities laws or financial markets is in force |
| (iv) | An order of conviction passed by a court for any offence involving moral turpitude |
| (v) | The person has been declared insolvent and not been discharged |
| (vi) | The person has been found to be of unsound mind by a court of competent jurisdiction and the finding is in force |
| (vii) | The person has been categorised as a willful defaulter |
| (viii) | The person has been declared a fugitive economic offender |
| (ix) | The person is a director in five or more companies incorporated or declared as Nidhi, or a promoter of three or more companies incorporated or declared as Nidhi |
Item (i) refers to the Code of Criminal Procedure, 1973 as printed. Readers should check the current criminal procedure law; this article names no replacement.
Rule 3B(4): forty five days and deemed approval
"The Central Government, shall examine the application filed in Form NDH-4 and convey its decision within a period of forty five days to the company." The proviso adds that if a decision is not taken within the period "of receipt of such application, the same shall be deemed as approved."
Rule 3B(5): Gazette notification and two provisos
"On being satisfied that the company meets the requirements under sub-rules (2) and (3), the Central Government, shall notify in the Official Gazette, declaring it as a Nidhi or Mutual Benefit Society, as the case may be."
Rule 3B(4) speaks of deemed approval after forty five days; rule 3B(5) still speaks of a notification in the Official Gazette. We state both as printed and do not reconcile them.
The two provisos:
- First proviso. The decision of the Central Government approving the application "shall be filed by the company with the Registrar alongwith Form 20A required under section 10A of the Act." See our posts on section 10A and Form INC-20A.
- Second proviso. The company "shall commence its business only once the decision of the Central Government approving its application is obtained from the Central Government pursuant to the declaration given under rule 12 of the Companies (Incorporation) Rules, 2014." That rule is named only; its text is outside the Nidhi Rules.
Rule 3B(6) and (7)
(6) If a company does not comply with sub-rule (1), it "shall not be allowed to file Form No. SH-7 (Notice to Registrar of any alteration of share capital) and Form PAS-3 (Return of allotment)." See our posts on Form SH-7 and Form PAS-3.
(7) The rule does not apply to a public company incorporated before 19 April 2022. For those companies, see our articles on rule 3A and rules 23A and 23B.
A working example
Priya Savings Nidhi Limited is incorporated on a given day in 2023 as a public company. Within one hundred twenty days it must file Form NDH-4 with a declaration from each promoter and director. Suppose one director already sits on the boards of five other companies incorporated or declared as Nidhi: that director is caught by item (ix) and the company would need to change its board. The company must not start business until approval is obtained.
Need help with a Nidhi application?
A new Nidhi needs the incorporation, the 120-day clock, the fit and proper declarations and the membership and Net Owned Funds position to line up. Our public limited company registration team can plan the incorporation so that the Form NDH-4 papers are ready inside the period.
Key takeaways
- Rule 3B governs companies incorporated as Nidhi on or after 19 April 2022.
- File Form NDH-4 within one hundred twenty days of incorporation; the company needs not less than two hundred members and Net Owned Funds of twenty lakh rupees.
- Every promoter and director gives a fit and proper declaration; nine disqualifications apply.
- Decision within forty five days; no decision means "deemed as approved", but the rule also speaks of Gazette notification.
- Approval is filed with the Registrar with Form 20A, and business starts only after approval.
- Non-compliance with sub-rule (1) bars Form SH-7 and Form PAS-3.
Read next
- Rule 3A: declaration and the Form NDH-4 deadline
- Rule 4: public company, Rs 10 lakh capital and the name
- Section 406 of the Companies Act, 2013: Nidhi companies
- Nidhi company registration under section 406: guide
Disclaimer: Based on the Nidhi Rules, 2014 as notified (G.S.R. 258(E), 31 March 2014) and as amended by G.S.R. 467(E) of 2019, G.S.R. 81(E) and 114(E) of 2020, G.S.R. 301(E) of 2022, G.S.R. 35(E) of 2023 and G.S.R. 413(E) of 2024, as consulted on 3 October 2026. Later amendments, fees, forms and the Companies Act, 2013 provisions referred to should be checked. This article is general information, not legal advice; check the official text before acting.