Net Owned Funds – Rule 3 of Nidhi Rules, 2014

Meaning

Rule 3 of Nidhi Rules, 2014 define the term “Net Owned Funds” as an aggregate of paid up equity share capital and free reserves as reduced by accumulated losses and intangible assets appearing in the last audited Balance sheet.

Provided that the amount representing the proceeds of the issue of preference shares shall not be included in calculating Net Owned Funds.

Let us analyze this definition:

Net Owned Fund, in other words, is the total money invested into the business after adjusting any losses (if any). We can formulate a formula from the above definition for calculating the Net Owned Funds:

Example: ABC Nidhi Limited wants to calculate the Net Owned Fund for the Year 2016. The important Figures are as follows:

• Opening value of Shareholder Funds (Equity plus free reserves) = 100 lacs
• Accumulates Losses = 32 lacs
• Book value of Intangibles = 7 lacs
• Profit for the year = 30 lacs

Calculate the Net Owned Funds?

Ans: The Calculation of Net Owned Fund is as follows:

Note: Shareholder funds are the combination of Paid up equity share capital and free reserves.

There is also an extended part of this definition which talks about that proceed of preference share capital shall not include in the Net Owned Funds. This part is actually not possible because the Nidhi Rules specifically prohibits the company from issuing any preference share capital. This part is covered under Rule 6 of Nidhi Rules, 2014 about General Restriction on Nidhi Companies (Nidhi Ltd).

In case, of any doubt, you may contact us.