In this Blog author discusses Definition of deposit, Limits Applicable on deposit and Various compliances and their timelines under Companies Act, 2013 read with Companies (Acceptance of Deposits) Rules, 2014.
Applicable provisions:
Chapter V The Companies (Acceptance of Deposits) Rules, 2014
Chapter V Acceptance of Deposits By Companies (Sec 73 to Sec 76 A)
| Definition of Deposits |
| Chapter V The Companies (Acceptance of Deposits) Rules, 2014
2(c) “deposit” includes any receipt of money by way of
by a company, but does not include – |
(i) any amount received from
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(ii) any amount received from
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(iii) any amount received as a loan or facility from
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(iv) any amount received as a loan or financial assistance
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(v) any amount received against issue of
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| (vi) any amount received by a company from any other company; |
(vii) any amount received and held pursuant to an offer made in accordance with the provisions of the Act towards subscription to any securities, including
so long as such amount is appropriated only against the amount due on allotment of the securities applied for; Explanation.- For the purposes of this sub-clause, it is hereby clarified that – (a) Without prejudice to any other liability or action, if the securities for which application money or advance for such securities was received cannot be allotted within sixty days from the date of receipt of the application money or advance for such securities and such application money or advance is not refunded to the subscribers within fifteen days from the date of completion of sixty days, such amount shall be treated as a deposit under these rules. [Provided that unless otherwise required under the Companies Act, 1956 (1 of 1956) or the Securities and Exchange Board of India Act, 1992 (15 of 1992) or rules or regulations made thereunder to allot any share, stock, bond, or debenture within a specified period, if a company receives any amount by way of subscriptions to any shares, stock, bonds or debentures before the 1st April,2014 and disclosed in the balance sheet for the financial year ending on or before the 3lst March,2014 against which the allotment is pending on the 3lst March,2015, the company shall, by the 1st June 2015, either return such amounts to the persons from whom these were received or allot shares, stock, bonds or debentures or comply with these rules] (b) any adjustment of the amount for any other purpose shall not be treated as refund. |
| (viii) any amount received from a person who, at the time of the receipt of the amount, was a director of the company or a relative of the director of the Private company:
Provided that the director of the company or relative of the director of the private company, as the case may be, from whom money is received, furnishes to the company at the time of giving the money, a declaration in writing to the effect that the amount is not being given out of funds acquired by him by borrowing or accepting loans or deposits from others and the company shall disclose the details of money so accepted in the Board’s report;”.] |
(ix) any amount raised by
Provided that if such bonds or debentures are secured by the charge of any assets referred to in Schedule III of the Act, excluding intangible assets, the amount of such bonds or debentures shall not exceed the market value of such assets as assessed by a registered valuer; (ixa) any amount raised by issue of non-convertible debenture not constituting a charge on the assets of the company and listed on a recognised stock exchange as per applicable regulations made by Securities and Exchange Board of India.”; |
| (x) any amount received from an employee of the company not exceeding his annual salary under a contract of employment with the company in the nature of non-interest bearing security deposit; |
| (xi) any non-interest bearing amount received and held in trust; |
| (xii) any amount received in the course of, or for the purposes of, the business of the company,-
(a) as an advance for
accounted for in any manner whatsoever provided that such advance is appropriated against supply of goods or provision of services within a period of three hundred and sixty five days from the date of acceptance of such advance: Provided that in case of any advance which is subject matter of any legal proceedings before any court of law, the said time limit of three hundred and sixty five days shall not apply: (b) as advance, accounted for in any manner whatsoever, received in connection with consideration for an immovable property under an agreement or arrangement, provided that such advance is adjusted against such property in accordance with the terms of agreement or arrangement; (c) as security deposit for the performance of the contract for supply of goods or provision of services; (d) as advance received under long term projects for supply of capital goods except those covered under item (b) above: (e) as an advance towards consideration for providing future services in the form of a warranty or maintenance contract as per written agreement or arrangement, if the period for providing such services does not exceed the period prevalent as per common business practice or five years, from the date of acceptance of such service whichever is less; (f) as an advance received and as allowed by any sectoral regulator or in accordance with directions of Central or State Government; (g) as an advance for subscription towards publication, whether in print or in electronic to be adjusted against receipt of such publications;”] Provided that if the amount received under items (a), (b) and (d) above becomes refundable (with or without interest) due to the reasons that the company accepting the money does not have necessary permission or approval, wherever required, to deal in the goods or properties or services for which the money is taken, then the amount received shall be deemed to be a deposit under these rules: Explanation.- For the purposes of this sub-clause the amount 4 &10[Omitted] shall be deemed to be deposits on the expiry of fifteen days from the date they become due for refund. |
| (xiii) any amount brought in by the promoters of the company by way of unsecured loan in pursuance of the stipulation of any lending financial institution or a bank subject to fulfilment of the following conditions, namely:-
(a) the loan is brought in pursuance of the stipulation imposed by the lending institutions on the promoters to contribute such finance; (b) the loan is provided by the promoters themselves or by their relatives or by both; and (c) the exemption under this sub-clause shall be available only till the loans of financial institution or bank are repaid and not thereafter; |
| (xiv) any amount accepted by a Nidhi company in accordance with the rules made under section 406 of the Act.
Explanation.- For the purposes of this clause, any amount.- (a) received by the company, whether in the form of instalments or otherwise, from a person with promise or offer to give returns, in cash or in kind, on completion of the period specified in the promise or offer, or earlier, accounted for in any manner whatsoever, or (b) any additional contributions, over and above the amount under item (a) above, made by the company as part of such promise or offer, shall be considered as deposits unless specifically excluded under this clause |
LIMITS
| Section 180 (1) (c) (if exceeds 100% of (PUC+FR+SP), pass Special Resolution(SR))
to borrow money, where the money to be borrowed, together with the money already borrowed by the company will exceed aggregate of its paid-up share capital and free reserves and securities premium, apart from temporary loans obtained from the company’s bankers in the ordinary course of business: Provided that the acceptance by a banking company, in the ordinary course of its business, of deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or otherwise, shall not be deemed to be a borrowing of monies by the banking company within the meaning of this clause. Explanation.—For the purposes of this clause, the expression “temporary loans” means loans repayable on demand or within six months from the date of the loan such as short-term, cash credit arrangements, the discounting of bills and the issue of other short-term loans of a seasonal character, but does not include loans raised for the purpose of financial expenditure of a capital nature; |
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| Terms and Conditions of Acceptance of Deposits by Companies (Rule -3)
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| Private Company | Eligible Company | Govt Company | |
| From Members (Sec 73) | 35% of (PUC+FR+SP)
*100% of (PUC+FR+SP) if its satisfies condition 1 *No limit if it satisfies Condition 2 |
10% of (PUC+FR+SP) *100% of (PUC+FR+SP) if Specified IFSC Public company satisfies condition 1 | 35% (including any other) |
| Any other (Sec 76) | Not allowed | 25% | 35% (including from members) |
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| Condition 1
“Provided that a Specified IFSC Public company and a private company may accept from its members monies not exceeding one hundred per cent. 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. Explanation.- For the purpose of this rule, a Specified IFSC Public company means an unlisted public company which is licensed to operate by the Reserve Bank of India or the Securities and Exchange Board of India or the Insurance Regulatory and Development Authority of India from the International Financial Services Centre located in an approved multi services Special Economic Zone set-up under the Special Economic Zones Act 2005 (28 of 2005) read with the Special Economic Zones Rules, 2006: Condition 2 Provided further that the maximum limit in respect of deposits to be accepted from members shall not apply to following classes of private companies, namely:- (i) a private company which is a start-up, for [ten years] from the date of its incorporation; (ii) a private company which fulfils all of the following conditions, namely:- (a) which is not an associate or a subsidiary company of any other company; (b) the borrowings of such a company from banks or financial institutions or any body corporate is less than twice of its paid up share capital or fiffy crore rupees, whichever is less ; and (c) such a company has not defaulted in the repayment of such borrowings subsisting at the time of accepting deposits under section 73: Provided also that all the companies accepting deposits shall file the details of monies so accepted to the Registrar in Form DpT-3. |
| Rule 2(e) “eligible company” means a public company as referred to in sub-section (1) of section 76, having
a net worth of not less than one hundred crore rupees or (100Cr.) a turnover of not less than five hundred crore rupees and (500 Cr.) which has obtained the prior consent of the company in general meeting by means of a resolution and also filed the said resolution with the Registrar of Companies before making any invitation to the Public for acceptance of deposits: Provided that an eligible company, which is accepting deposits within the limits specified under clause (c) of sub-section (1) of section 180. may deposits by means of an ordinary resolution; Term of deposits No company referred to in sub-section (2) of section 73 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 six months or more than thirty-six months from the date of acceptance or renewal of such deposit: Provided that a company may, for the purpose of meeting any of its short-term requirements of funds, accept or renew such deposits for repayment earlier than six months from the date of deposit or renewal, as the case may be, subject to the condition that- (a) such deposits shall not exceed ten per cent. of the aggregate of the Paid-up share capital, free Reserves and securities premium account] of the company, and (b) such deposits are repayable not earlier than three months from the date of such deposits or renewal thereof. |
76A. Punishment for contravention of section 73 or section 76.
| 76A. Where a company accepts or invites or allows or causes any other person to accept or invite on its behalf any deposit in contravention of the manner or the conditions prescribed under section 73 or section 76 or rules made thereunder or if a company fails to repay the deposit or part thereof or any interest due thereon within the time specified under section 73 or section 76 or rules made thereunder or such further time as may be allowed by the Tribunal under section 73,—
(a) the company shall, in addition to the payment of the amount of deposit or part thereof and the interest due, be punishable with fine which shall not be less than one crore rupees or twice the amount of deposit accepted by the company, whichever is lower rupees but which may extend to ten crore rupees; and (b) every officer of the company who is in default shall be punishable with imprisonment which may extend to seven years and with fine which shall not be less than twenty-five lakh rupees but which may extend to two crore rupees: Provided that if it is proved that the officer of the company who is in default, has contravened such provisions knowingly or wilfully with the intention to deceive the company or its shareholders or depositors or creditors or tax authorities, he shall be liable for action under section 447. |
Compliances for accepting deposits (sec 73 and 76):
Not applicable on
Condition 3 A private company (A) which accepts from its members monies not exceeding one hundred per cent. of aggregate of the paid up share capital, free reserves and securities premium account; or (B) which is a start-up, for five years from the date of its incorporation; or (C) which fulfils all of the following conditions, namely: – (a) which is not an associate or a subsidiary company of any other company; (b) if the borrowings of such a company from banks or financial institutions or any body corporate is less than twice of its paid up share capital or fifty crore rupees, whichever is lower; and (c) such a company has not defaulted in the repayment of such borrowings subsisting at the time of accepting deposits under this section: |
If a company satisfies the condition 3 shall comply with sec 73(2)(f) only.
If a company does not satisfy the condition 3 shall comply with the following provision:
| Compliance | Form | |
| Issue of Circular (Sec 73 (2) (a), 73 (2) (b) and Rule 4) | DPT-1 with certificate of the statutory auditor |
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| Maintenance of Liquid Assets and Creation of Deposit Repayment Reserve Account. (Sec 73 (2) (c) and Rule 13) |
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| not committed any default in the repayment of deposits (sec 73(2) (e)) |
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| provide for security by way of a charge on its assets (sec 73(2)(f), rule 6) |
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| trust deed (Rule 7) | DPT-2 |
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| Appointment of Trustee for Depositors (Rule 7) |
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| Form of Application for Deposits (Rule 10) |
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| Furnishing of Deposit Receipts to Depositors. Rule 12 |
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| Registers of Deposits |
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| credit rating (rule 3 (8) (a) |
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| interest or pay brokerage thereon |
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| Annual Compliance of deposits | DPT-3 |
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Author Bio
Hello Ma’am
I have a partnership firm and would like to raise funds for business development and promotion and regular capital, as we are only 6 months old company and need working capital and funding. Can I issue Fixed Deposits to select individuals – if yes, what are the limits on deposit amount and interest ? If No, what are the other ways of raising fund, WITHOUT approaching NBFC and banks, because we can only pay annual interest on such debt funds and monthly EMIs. Appreciate any help.
Thanks
Dwijaraja Gore
SimpliSource Global. Bangalore
9900118904
dwijarajgore@gmail.com