Deposits | Implication, exemption & penal Provision | Companies Act, 2013

Deposits, its implication, exemption & penal Provision Under Companies Act, 2013

Deposits refer to accepting of loans and advances by a company from its member or from public subject to certain terms and condition which are required to be fulfilled as per the Companies Act, 2013.

  Deposit Excludes: – 

1. Any amount received from Central or State governments or local authority or statutory Authorities or any foreign government or Multinationals, etc.

2. Any amount received as loan from any banking company or any Public Financial Institutions.

3. Any amount received against issue of commercial paper or other instruments.

4. Any amount received for allotment of shares pursuant to such allotment within 60 days of receiving money.

5. Any amount received from Director of a private company provided he has not acquired such amount by way of loans or deposits from others.

 6. All such amount specified under section 2(1)(c) of the Companies Act, 2013.

APPLICABLE PROVISONS: –

• Deposits under the Companies Act, 2013 are governed under the provision of section 73 to section 76 with effect to 1^st April, 2014. Prior to that it was governed as per section 58A of Companies Act, 1956.
• In respect of Deposit accepted under the previous Companies Act those shall be registered within 3 months of commencement of the Act i.e., 01/04/2014 in form DPT-4 and shall be repaid within 3 years from commencement of the act or on expiry of period of deposit, whichever is earlier.
• The time can be further extended on an application made to the Tribunal by the Company.

ACCEPTANCE OF DEPOSITS: – 

No company and no eligible company shall accept or renew any deposit, whether secured or unsecured, which is repayable on demand or upon receiving a notice within a period of less than 6 months or more than 36 months from the date of acceptance or renewal of such deposit. However, a company can accept deposit for purpose of meeting short term requirements for less than 6 months by following such conditions:

• Such deposits shall not exceed 10% of the aggregate of the Paid-up share capital, free Reserves and securities premium account of the company.
• Such depositsare repayable not earlier than three months from the date of such deposits or renewal thereof.

LIMIT ON ACCEPTANCE OF DEPOSITS: –

No company shall accept or renew any deposit from its members exceeding 35% of the aggregate of the Paid-up share capital, free Reserves and securities premium account of the company.

Exemption provided to Private companies: – 

1. Private company may accept from its members monies not exceeding 100% of aggregate of the paid up share capital, free reserves and securities premium account and such company shall file the details of monies so accepted to the Registrar in Form DPT-3.

2. Certain Private companies can accept deposit from members exceeding 100% subject to following conditions:

• The private company is a start-up, for 10 years from the date of its incorporation.
• The private company is not an associate or a subsidiary company of any other company.
• The borrowings of such a company from banks or financial institutions or anybody corporate is less than twice of its paid-up share capital or 50 crore rupees, whichever is less.
• Such a company has not defaulted in the repayment of such borrowings subsisting at the time of accepting deposits.

TERMS AND CONDITIONS FOR ACCEPTANCE OF DEPOSITS: –

A company may accept deposits from its members or public subject to certain terms and conditions: –

• Issue of Circular inviting depositors containing financial position of company along with credit rating obtained by the company in regard to its capacity to repay the deposits within the time as prescribed in the circular.
• Circular as approved in the general meeting shall be filed with the registrar in Form DPT-1.
• Maintaining a Deposit repayment reserve on or before 30^th April of each year in a Separate bank account and such reserve shall be utilized only for purpose of repayment of Deposits.
• In case of Secured deposit maintaining Charge on asset against the amount received as Deposits by the company.
• Certifying that company has not made any default in repayment of Deposit previously and not less than 5 years have passed in case of any default.
• No eligible company shall accept deposit which is repayable within 6 months or after period of 36 months from date of acceptance of such deposit except company which are less than 10% of aggregate of Paid-up share capital, Free reserve or Securities premium reserve can be accepted if repayment period is not less than 3 months.
• No Company shall accept deposit exceeding 35% of aggregate of (Paid-up+ Free reserve+ Securities Premium Reserve) except Private Companies and IFSC public companies.
• No “Eligible Company” shall accept deposits from its members in excess of 10% of aggregate of (Paid-up+ Free reserve+ Securities Premium Reserve) and in case of other Deposits the Maximum limit shall be 25%.
• A return of Deposit in Form DPT-3 shall be filed every year by the company.

CIRCULAR FOR INVITING DEPOSITS: –

Circular on behalf of the Company shall be issued by its Board of Directors to all its members via registered post or electronically as per DPT-1 and shall publish it in an English daily newspaper and in newspaper of the Vernacular language of the state in which the company has its Registered Office along with that shall place it on the website of the company.

ACCEPTANCE OF DEPOSITS BY A PUBLIC COMPANY: – 

A public Company shall accept deposit if it has net worth of not less than Rs.100 Crore and turnover of not less than Rs. 500 Crore as prescribed in the Act and on compliance of Terms and Conditions mentioned above and such companies shall be required to obtain a Credit rating from a Recognized Credit rating Agencies along with Creating a Charge on its assets equal to the amount of Deposit Accepted. 

PENAL PROVISIONS: – 

Where a company fails to repay the deposit or part thereof or any interest thereon under, the depositor concerned may apply to the Tribunal for an order directing the company to pay the sum due or for any loss or damage incurred by him as a result of such non-payment and for such other orders as the Tribunal may deem fit. Every company shall pay a penal rate of interest of 18% per annum for the overdue period in case of deposits, whether secured or unsecured, matured and claimed but remaining unpaid.

Frequently Asked Questions: – 

Q.1 What are the Eligible Companies?

A public company having a net worth of not less than one hundred crore rupees or a turnover of not less than five hundred crore rupees and which has obtained the prior consent of the company in general meeting by means of a special resolution and also filed the said resolution with the Registrar of Companies before making any invitation to the Public for acceptance of deposits. 

Q.2 What are the maximum limit for accepting deposits for Private Company?

Private Companies can accept up to 100% of aggregate of its paid-up+ free reserve+ Securities Premium Reserve as deposits.

These private companies mentioned below shall not be liable to any limit:

1. A private start-up up to 5 years from incorporation

2. A Pvt. Co. which is not a subsidiary or associate of any company.

3. A Pvt. Co. having borrowings less than twice of paid-up or Rs.50 Cr., whichever less.

4. A Pvt. Co. which hasn’t Defaulted in repayment of any deposit.

Q.3 What are the limits on amount of deposit that can be accepted by Eligible Companies?

No eligible company shall accept or renew: –

• any deposit from its members, if the amount of such deposit together with the amount of deposits outstanding as on the date of acceptance or renewal of such deposits from members exceeds 10% of the aggregate of the Paid-up share capital, free Reserves and securities premium account of the company.
• any other deposit, if the amount of such deposit together with the amount of such other deposits exceeds 25% of aggregate of the Paid-up share capital, free Reserves and securities premium account of the company.

Q.4 What is the penalty for contravention of the provisions of the Act?

If any company or any eligible company inviting deposits or any other person contravenes any provision of these rules for which no punishment is provided in the Act, the company and every officer of the company who is in default shall be punishable with fine which may extend to five thousand rupees and where the contravention is a continuing one, with a further fine which may extend to five hundred rupees for every day after the first day during which the contravention continues.

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This article is written Team Anupama Tripathi & Associates for the purpose of Education & Comment for more you can connect us at: # 8800839633 or csanupamatripathi121@gmail.com