Provisions of chapter V of Companies Act, 2013 i.e. section 73 to 76 is applicable to all classes of companies except the following
Explanation- These classes of companies mainly engaged in the business of financing by taking deposits from one person & lending to the others and these classes of companies are governed by a special strict act such as banking act, so it will be like double compliances for the them if the provision of this chapter would be applicable on them. So that’s why that’s why these companies are exempted for the preview of this chapter.
Definition of Deposits [Rule 2]
Definition of “Deposits” – As per Section 2(31) of companies act 2013 ‘Deposit’ includes
Section 2(31) of companies act 2013, should be read with rule 2(c ) of Companies ( Acceptance of Deposits ) Rule, 2014, which specifies some amount received by companies which shall not be treated as deposits
Conditions of Section 73 (2) (a) to (e)
a) Issue a circular to it Members including a statement showing
b) Filling with registrar
c) 15% or more amounts of deposits maturing during current year and in the following financial year, kept in a separate bank account in a scheduled bank, the bank account will be called as ‘Deposit Repayment reserve Account.’
d) Providing deposit insurance as stated in Rule 5.
e) Certifying that the company has not committed any default in repayment of deposit and interest thereon.
Note- Every company irrespective of its form whether Public private or eligible company who is intending to invite deposits must have to comply with the provision of section 73(2) (a) to (e) otherwise company shall be in default and penalty under section 74(3) will be imposed.
Eligible company – As per section 76 of the act a public company which is
Only a public company can accept deposits from publics subjected to certain conditions.
Terms & conditions for acceptance of deposit by companies [Rule 3]
A company cannot accept the following deposit
Exception- For the short term requirement of Funds Company may accept deposits less than 6 months but more than 3 months. The amount so accepted should not be more than 10% of net worth of the company.
2. Joint Depositor
Deposits may be accepted in joint name but not more than 3 joint depositors.
3. Limits of amounts companies can accept as deposits ( sub rule 3,4 & 5)
|Particulars||Pvt Companies||Public Companies||Eligible Companies|
|Sources||From Directors & Us||From Directors & Members||From Directors & Members & Public|
|Director||No Limit, declaration required||No Limit, declaration required||No Limit, declaration required|
|Members||25% of Paid up capital & free reserves. Compliance of section 73(2)||25% of Paid up capital & free reserves. Compliance of section 73(2)||10% of Paid up capital & free reserves. Compliance of section 73(2) & 76|
|Public||Not allowed||Not allowed||25% of Paid up capital & free reserves. Compliance of section 73(2)
Govt. companies 35%
4. Ceiling on rate of Interest & Brokerage
Interest rate on deposits & Brokerage shall not exceed the maximum rate on which a NBFC can pay on their deposits.
Form of Advertisement & Circular [Rule 4 ]
Companies Other than Eligible companies
Such kind of companies intending to invite deposits from it members must issue a circular in form of an advertisement
In form No DPT-1.
Circular must also be published in
Having its wide range of circulation in the state in which the registered office of the company is situated.
For Eligible companies
For eligible companies everything will be the same as above it is to be noted that
Further conditions for both kind of companies
Deposit Insurance [Rule 5 ]
Every company inviting deposits must enter into a contract for providing insurance to the depositors.
Insurance contact must specify that if company makes any default in payment of principal amount or interest thereof then the insurer will be liable to repay the amount to the depositors.
Insurance contract must not be less than Rs. 20000,
Security [Rule 6 ]
After acceptance of deposit, every company within 30 days from such acceptance must provide a security either by way of Charge or by way of Mortgage. The amount of security must not be less than the amount of Unsecured Deposits.
Trustee [Rule 7,8 & 9 ]
Companies accepting deposits must appoint one or more trustees at least 7 days before issuing of circular.
Written consent of the trustee must be obtained & trust deed must also be executed in form DPT-2.
Functions of trustee
Nominee Powers & Duties [Rule 11 ] & section 72
Every depositor has a right to nominate a person to whom the amount of deposit, powers & duties of the depositor will be received on the death of the depositor. The rule 11 shall be read with section 72 of this act.
Receipt of Deposit [Rule 12]
A receipt of acceptance of the deposit from the depositor must be issued, by the officer of the company duly authorized by board, within 21 days of such receipt.
Receipt must contain the following
Maintenance of Liquid Assets [Rule 13]
For the purpose of this rule following conditions must be complied
Register of Depositors [ Rule 14]
Every company accepts deposit must prepare a register in which the following particulars of depositor must be recorded
Premature Payment [Rule 15]
Following conditions are there for premature deposit
Return of Deposit [Rule 16 ]
Penal interest [Rule 17]
If company makes default in repayment of principal amount of deposits or interest thereof then the company shall be liable to pay Penalty Interest @18% for the overdue period on the overdue amount.
Punishment for contravention Rule [Rule 21] section 74(3)
If a company violates the provision of this chapter or Rules made there under then the company shall be repay the amount of deposits and interest thereon along with the penalty of Rs. 1 Cr. This may extend to 10 Cr.
Every officer of the company who is in default shall be punishable with –
(I hope this article will be useful for you. Suggestion and queries from reader are invited on the below contact details. If you find any error or omission in this please let me know so that I can provide error free articles in future. This article is prepared by taking reference of Companies act, 2013, Companies (acceptance of Deposit) Rule 2014, official web site of Ministry of Corporate affairs mca.gov.in. Special thanks to CA Sanjay Agrawal Sir who inspired me for writing this article. I can be reached via email on [email protected])