Namrata Gupta

283 sections of the Companies Act 2013 have been made effective now. Private Companies have also been brought under the purview of the compliances of Companies Act 2013. Earlier private companies were allowed to take loans from relatives and shareholders which were the major sources of funds for most of the private companies apart from banks. The draft rules of the new Act had specifically exempted deposits from shareholders from the definition of deposits. However the final rules have removed the exemption and, only deposits taken from directors are exempted from the definition of deposits provided he gives a declaration that the amount he is giving is not out of borrowed funds. Going forward private companies shall have to adhere to strict norms for borrowing from any person other than directors thereby increasing the compliance costs for small private companies.

Key  Highlights

1)      A private Company and an un-eligible public company cannot accept loans or deposits from any person other than its Directors.  For accepting any loan from person other than Directors the company will have to comply with all the conditions mentioned including creation of reserve account, deposit insurance, credit rating, etc.

2)      Share application money received but not allotted shall be treated as deposit.

3)      Any money received as advance in the course of ordinary business shall be treated as deposit if goods or services are not provided within 365 days of receipt.

4)      Private Companies and an un-eligible public company will have to file a return of deposits on 30th June if they have any deposit received from person other than director.

5)      As of now if the private companies have any loan received from any person other than director then they have to file a statement with the Registrar within 3 months of the commencement of the Act i.e. 30th June 2014 in Form DPT-4.

The Companies Acceptance of Deposit rules are not applicable to:

1)      A Banking Company,

2)      A Non Banking Finance Company registered with RBI,

3)      A Housing Finance Company registered with National Housing Bank,

4)      Any other Company which the Central Government may specify.

Deposit :

Deposit includes any receipt of money by way of deposit or loan or in any other form, by a Company.

Following amount received shall not be considered Deposits under this Chapter

1)      Any amount received from Central Government /State Government/ local authority/statutory authority constituted under an Act of Parliament or State legislature /any other source whose repayment is guaranteed by Central Government or State Government.

2)      Any amount received from Foreign or international banks / multilateral financial institutions/Foreign Government owned development financial institutions / foreign export credit agencies / foreign collaborators/ foreign body corporate /foreign citizens / foreign authorities / persons resident outside India subject to the provisions of Foreign Exchange Management Act,1999.

3)      Any amount received as a loan from a Banking Institution including co-operative banks notified under Banking Regulation Act.

4)      Any amount received as a loan from Public Financial Institution /Regional Financial Institutions / Insurance Companies / Scheduled Banks.

5)      Any amount received against commercial paper or any other instruments issued in accordance with the guidelines of Reserve Bank of India.

6)      Any amount received from any other Company.

7)      Any amount received against subscription to any securities including share application money provided the securities are allotted within 60 days from the date of receipt of the application money or advance.

If the securities are not allotted within 60 days then the same should be refunded within 15 days else the same shall be treated as deposit after completion of 15 days.

8)      Any amount received from a person who at the time of receipt was a director provided the director furnishes a declaration that the amount given is not out of borrowed funds.

9)      Any amount raised by issue of bonds or debentures secured by first charge on any assets referred to in Schedule III of the Act excluding intangible assets.

10)  Any amount received from an employee of the company not exceeding his annual salary in the nature of non interest bearing security.

11)  Any amount received as a Non- interest bearing amount received or held in trust.

12)  Any amount received in the course of or the purpose of the business for the following :-

a. As advance for the supply of goods or provision of services provided such advance is appropriated against supply of goods or provision of service within 365 days from the receipt of such amount,

b. As advance received in connection with consideration for property under an 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.

If any amount received under clause (a),(b) and (d) becomes refundable due to the reasons that the company accepting money does not have necessary permission or approval to deal with the goods or services then the amount received shall be deemed to be a deposit after the expiry of 15 days from the date they become due for refund.

13)  Any amount brought in by the promoters themselves or their relatives by way of unsecured loan in pursuance of a stipulation of any lending institution on the promoters. Such exemption shall be available only till the loans of the Financial Institutions are not repaid and not thereafter.

14)  Any amount accepted by a Nidhi Company in accordance with rules made u/s 406 of the Act.

Section 76 Eligible Company

Eligible Company means:-

1)      A public Company and it has either of the following

2)      Net worth of not less than one hundred crore rupees or turnover of not less than five hundred crore rupees.

3)      It has obtained the prior consent of the company in general meeting by means of a special resolution

4)      It has filed the above resolution with the Registrar of Companies before making any invitation to the Public for accepting deposits.

Exception: An eligible company may accept deposits my means of an ordinary resolution if it is accepting deposits within the limit specified under clause (c) of sub section (1) of section 180.

Conditions for acceptance of Deposit

1)    No Company shall accept or renew 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.

Exception : A company may for the purpose of meeting its short term requirements of funds accept or renew deposits whose repayment is before six months provided they do not exceed 10% of the aggregate of the paid up share capital and free reserves of the company and they are not repayable before 3 months from the date of deposits.

2)      Deposits may be accepted in Joint names not exceeding 3.

3)      A non Eligible company Shall accept deposit only to the extent of 25% of the aggregate of paid up share capital and free reserves.

4)      A Eligible companies 1) Deposit from members shall not exceed 10% of the aggregate of paid up share capital and free reserves. 2) Deposit from others shall not exceed 25% of the aggregate of paid up share capital and free reserves (excluding deposit from members)

5)      A  Government companies shall not accept deposit more than 35% of the aggregate of paid up share capital and free reserves.

6)      Interest or Brokerage paid should not exceed the maximum rate of interest or brokerages prescribed by the RBI for acceptance of deposits by Non Banking Finance Companies.

7)      The Company shall not reserve to itself whether directly or indirectly a right to alter, to the prejudice or disadvantage of the depositor, any of the terms and conditions of the deposit, deposit trust deed and deposit insurance contract.

Validity of Circular

The circular shall be valid until the expiry of six months from the date of closure of the financial year in which it is issued or until the date on which the financial statement is laid before the company in annual general meeting. For the purpose of this rule the date of the issue of the newspaper in which the advertisement appears shall be taken as the date of the issue of the newspaper and for the issue of circular effective date shall be the date of dispatch of circular.

Guidelines for inviting deposits from members and public

Non Eligible Company

Eligible Company S. 76

Resolution The Company should pass a resolution in general meeting. The company should pass a special resolution in general meeting and file the same with Registrar.(If within limit specified u/s 180 then ordinary resolution shall suffice).
Limit The total amount of outstanding deposits along with the deposits invited should not exceed 25% of the aggregate of paid up share capital and free reserves. The total amount of outstanding deposits from members along with the deposits invited from members should not exceed 10% of the aggregate of paid up share capital and free reserves and for others it should not exceed 25% of the aggregate of paid up share capital and free reserves.
Interest / Brokerage Interest or brokerage payable shall not exceed the maximum rate of interest or brokerage prescribed by RBI Interest or brokerage payable shall not exceed the maximum rate of interest or brokerage prescribed by RBI
Tenure of deposit The deposit should not be repayable on demand or upon receiving a notice within a period of less than 6 months or more than 36 months. The deposit should not be repayable on demand or upon receiving a notice within a period of less than 6 months or more than 36 months.
Circular Circular shall be issued to its members by registered post with acknowledgement due  /speed post/electronic mode in Form DPT-1 / advertisement in Form No. 1 / publish in one English newspaper and one vernacular language newspaper having circulation in the state of registered office of the company. Circular shall be issued in Form No. DPT-1 published in one English newspaper and one vernacular language newspaper having circulation in the state of registered office of the company. It shall also upload the circular on its website.

 

Statement Along with the circular a statement shall be circulated which shall contain the financial position of the company, the credit rating, the number of depositors and the amount due. Along with the circular a statement shall be circulated which shall contain the financial position of the company, the credit rating, the number of depositors and the amount due.
Registration of Circular The circular signed by majority of directors or their agents duly authorized along with the statement shall be submitted to registrar 30 days before the date of such issue. The circular signed by majority of directors or their agents duly authorized along with the statement shall be submitted to registrar 30 days before the date of such issue.
Validity of circular 6 months from the end of the financial year in which it was issued or the date on which the AGM is held whichever is earlier. 6 months from the end of the financial year in which it was issued or the date on which the AGM is held whichever is earlier.
Insurance Deposit insurance shall be taken 30 days prior to the date of issuance of the circular or renewal .Ceiling is Rs. 20000 per depositor for principal and interest Deposit insurance shall be taken 30 days prior to the date of issuance of the circular or renewal .Ceiling is Rs. 20000 per depositor for principal and interest
Security If secured deposits are invited then the company shall create a charge on its assets referred to in Schedule III excluding intangible assets which shall not be less than the amount remaining unsecured by deposit insurance. If secured deposits are invited then the company shall create a charge on its assets referred to in Schedule III excluding intangible assets which shall not be less than the amount remaining unsecured by deposit insurance.
Form Form prescribed by the company shall be submitted by the intending depositor. Form prescribed by the company shall be submitted by the intending depositor.
Declaration The form shall contain a declaration that the deposit is not made out of borrowed funds. The form shall contain a declaration that the deposit is not made out of borrowed funds.
Deposit receipt A receipt shall be furnished within 2 weeks from the date of receipt of money or realization of cheque A receipt shall be furnished within 2 weeks from the date of receipt of money or realization of cheque
Deposit repayment reserve account On or before 30th April of each year  a sum not less than 15% of the amount of deposits maturing in the current financial year and the next financial years shall be deposited in a scheduled bank in a separate account called deposit repayment reserve account which shall be free from charge or lien. On or before 30th April of each year  a sum not less than 15% of the amount of deposits maturing in the current financial year and the next financial years shall be deposited in a scheduled bank in a separate account called deposit repayment reserve account which shall be free from charge or lien.
Register A register of deposits shall be maintained at the registered office and entries shall be made within 7 days from the date of issuance of deposit receipt. A register of deposits shall be maintained at the registered office and entries shall be made within 7 days from the date of issuance of deposit receipt.
Return  of deposits A return shall be filed on or before 30th June of every year with the Registrar in Form No.DPT – 3 along with fee giving the status as on 31st March. A return shall be filed on or before 30th June of every year with the Registrar in Form No. DPT- 3 along with fee giving the status as on 31st March.
Penal Rate of Interest A penal Rate of 18% p.a. shall be payable on all overdue deposits A penal Rate of 18% p.a. shall be payable on all overdue deposits

 Transitory Provision

Where in respect of any deposit accepted by a company before the commencement of this Act, the amount of such deposit or part thereof or any interest due thereon remains unpaid on such commencement or becomes due at any time thereafter, the company shall—

1)      File with the Registrar a statement in form DPT-4 a statement of all deposits accepted by the company and sums remaining unpaid along with the interest payable thereon along with the arrangements made for such repayments.

2)      Repay within one year from such commencement or from the date on which such payments are due whichever is earlier.

More Under Company Law

Posted Under

Category : Company Law (3466)
Type : Articles (14830)
Tags : Companies Act (1934) Companies Act 2013 (1706)

48 responses to “Companies Acceptance of Deposit (Section 73 to 76 of Companies Act 2013)”

  1. Shivam Bhutra says:

    Whether Advance received from Customer being a company for more than 365 days be termed as Deposits ?

  2. Rajat Garg says:

    please specify circular in which mention intercorporate loans cannot consider as deposits ?

  3. Chandan C says:

    What in case company has accepted loans in contravention with above Sections? What adverse remark will auditor give in his audit report?

  4. Arvind says:

    If interest is credited to depositor’s account shall be treated as addition in deposits in Companies Act, 2013?

  5. nagarajan V says:

    This is very useful and informative. Please continue to post such good analysis on company law.
    Nagarajan

  6. deepak goel says:

    weather the company can accept the deposits from HUF of which director is karta

  7. s.kumar says:

    If a company accepts deposits and does not repay to the deposit holders, can it be an offence under The Tamil Nadu Protection of Interests of Depositors (in Financial Establishments) Act 1997.

  8. sanya says:

    What would be the procedure to register a Non holding NBFC?

  9. srikar says:

    can a pvt company borrow loans from director.if so what are the procedures to be followed

  10. Jaivardhan says:

    If a director have given borrowed money as loan to a private company, can the company repay the loan to director by the end of next financial year or it is to be done by 31st march 2015 under companies act 2013.
    Please comment on the time limit and also on the ways the company can repay the loans to director if it does not have that much profits.

  11. Priya T says:

    My query is –

    in case if i(a small private limited company) have given loans in form of deposits to related parties during the year then this acceptance & deposits rules are applicable or not. in case not then is there any other provisions of Companies 2013 applicable to given situation?

  12. Rakesh says:

    Sir, Kindly confirm me any amount received by Company from Director(Prop)in firm and HUF is treated as Deposit under the Act or not.

  13. sonal says:

    Please answer the below question…

    Company is incorporated in a companies act 1956. Capital structure of Company is as below:
    Equity share capital : 12500000
    Reserves : 5000000
    Balance of deposit as on 31/3/2013 : 2000000

    Refer section 74 of companies act 2013 & advise the company for compliance of deposit rules .

  14. K.S.BURANDE says:

    sir,
    my query is related with fd advertisement as per new Act.why the company should waste their gap of 30 days for acceptence of new or renewed deposits
    after filing the text with ROC. In old Act the word was “WITHIN” and in new act it is “NOT LESS THAN” is it not an harrashment.pl clarify.

  15. Jay Soni says:

    My query is,
    Default subsite with respect to repayment of deposit,why prohibition will operate in respect of any default made under sec 73 to 76??

  16. deepak says:

    Plss share the format for declaration by first directors for acceptance of deposits for attachment in Form INC 7

  17. kv kumar says:

    further to my query.

    the loan from director to small pvt ltd co is non interest bearing.

    kinldy clarify the points

  18. kv kumar says:

    This question is reg new company act- reg loan given by director who is also the share holder of a small private limited company.

    Is such loan allowed & is there any limit a director can give loan to a pvt ltd small company as on 31 march 2014 & later.

    hope this is not treated as deposit .

  19. Manisha says:

    Please confirm whether any amount received (i.e ECB) by an Indian company(subsidiary company from foreign body which is a Holding company with 75% stake in India Company, comes under the ambit of “DEPOSITS” as per section 2(31) alongwith Companies Acceptance Deposits Rules’2014 and accordingly limitation on amount of deposit shall be restricted to 25% of share capital+ accumulated reserves as applicable in case of members pursuant to section 73(2) of Companies Act’2013 is applicable to the said transaction… Even though a specific exemption from Deposit is given in Rule 2(c)(ii) wrt amount recd from foreign body 
    “any amount received from foreign Governments, foreign or international banks, multilateral financial institutions (including, but not limited to, International Finance Corporation, Asian Development Bank, Commonwealth Development Corporation and International Bank for Industrial and Financial Reconstruction), foreign Governments owned development financial institutions, foreign export credit agencies, foreign collaborators, foreign bodies corporate and foreign citizens, foreign authorities or persons resident outside India subject to the provisions of Foreign Exchange Management Act, 1999 (42 of 1999) and rules and regulations made there under;

  20. gazal khandelwal says:

    Any amount received as a Non- interest bearing amount received or held in trust. What is the meaning of trust under this ??

  21. Dr Sajid Afzal says:

    Sir one out of 5 directors cum shareholders of our pvt company is a NRI. He has given loan to the company . My question is whether company can retain his money as deposit. If so how long. What about company keeping other directors (resident indian)loan.

  22. shagun says:

    This query is about interpretation of Rule 20 of Companies (Acceptance of Deposits) Rules, 2014. Queries: * Under companies act 2013, deposit includes any receipt of money by way of deposit or loan or in any other form by a company, however read with Rule 2(1)(c) of Companies (acceptance of Deposits) Rules, 2014, deposits do not include ‘Any non-interest bearing amount received or held in trust’ Should non interest bearing loan from non-directors be included in term ‘deposits’. and accordingly wil DTP 4 have to be filed ?

  23. shagun says:

    This query is about interpretation of Rule 20 of Companies (Acceptance of Deposits) Rules, 2014.
    Query: Under companies act 2013, deposit includes any receipt of money by way of deposit or loan or in any other form by a company, however read with Rule 2(1)(c) of Companies (acceptance of Deposits) Rules, 2014, deposits do not include ‘Any non-interest bearing amount received or held in trust’ Should non interest bearing loan from non-directors be included in term ‘deposits’. and accordingly wil DTP 4 have to be filed ?

  24. Jimin Shah says:

    Good Article

  25. POONAM says:

    My query is-

    Regarding Nidhi Company-

    Is a Nidhi company exempt if it has given loan to any other non Nidhi Company or Is it exempt only when it has accepted loans??

  26. abhijit puglia says:

    WHAT ARE THE CRITERIA OF FILING dpt -3???. WHICH COMPANY FOR IS IT APPLICABLE??

  27. BINU ALEX says:

    Whether advance for supply of goods received from holding company/ government companies / government departments , etc. in the ordinary course of business , will be deemed as Deposit in case the same pending for more than 365 days. The context is relevant in certain industries where lead period is more than a year and about 30 to 40% would be given as advance on getting order and schedule of supply may be one year after the order. Request for views.

  28. Bhavesh Jain says:

    Whether loan from firm in which director is a partner to be considered as deposits ?

  29. Vivek says:

    Deposits can be received from the Director of the Company…?

  30. darshan says:

    I have made a fixed deposit with Ansal Api for period of one year. The maturity date was 5 January, 2014. Still not got my money. Can anyone tell me as per new company act latest when can I get back my money? Or suggest me the best way to get my money, please. Thanks!

  31. R A Tiwari says:

    If shown as fees received for services, it will attract service tax and will be treated as Income. Not advisable proposition.

  32. Chinmay Joshi says:

    If an pvt. co. accepts fees towards the services to be provided in future and such service is not provided for more than 365 days (for whatever reasons), then will the fees accepted by the pvt. co. be considered as deposit??

  33. Adil says:

    Deposit:
    11) “Any amount received as a Non- interest bearing amount received or held in trust.”
    As per the above point, can an existing Interest bearing Deposit in a Private Limited Company be converted into Non-interest bearing amount and be exempt from refunding the Deposits?

  34. Adil says:

    Please refer to Point 11. under Deposits menitoned above.
    11) Any amount received as a Non- interest bearing amount received or held in trust.For a Private Limited Company, is it possible to convert the existing Interest bearing Deposits to Non Interest bearing

  35. Jay Vardhan says:

    Dear Sir,

    Suppose money payable to Advance for goods or services or share application money received has breached the time frame for allotment or rendering services then as an auditor what shall be our duty? Where to report? Due in next fiscal year we have to file Form DPT – 3 for those

  36. roopali says:

    In new act we cant accept deposits but the companies which have already taken before commencement of act wat they should do……..procedure?????

  37. Radhakrishna says:

    Sec.73(1) says NBFC is not prohibited from accepting deposits from public. and rules says ” No Deposit rule is applicable to NBFC”

    Can NBFC accept the loan from it’s members / Directors / their relatives ????
    If NBFC accepts such loans, will they be treated as Deposits ?

  38. OP Agrawal says:

    VIDISHA

    LOAN FROM NBFC IS NOT COVERD UNDER DEPOSITS AS IT FROM CORPORATE NOT FROM INDIVIDULS

  39. R A TIWARI says:

    WHETHER INTEREST FREE LOANS SHALL BE OUT OF AMBIT OF ACCEPTANCE OF DEPOSIT RULES?

  40. VIDISHA says:

    DEAR ALL,

    IF ANY AMOUNT ACCEPTED FROM NBFC IS ALSO COVERED UNDER THE PURVIEW OF SECTION 73 AND 74 OF COMPANIES ACT, 2013 OR NOT?

  41. VIDISHA says:

    DEAR ALL,

    IF ANY AMOUNT ACCEPTED FROM NBFC IS ALSO COVERED UNDER THE PURVIEW OF SECTION 73 AND 74 OF COMPANIES ACT, 2013.

  42. P.K.Goyal says:

    Dear Asish,

    Rules 19 says:

    Pursuant to provisions of sub-section (2) of section 76 of the Act, the
    provisions of sections 73 and 74 shall, mutatis mutandis, apply to
    acceptance of deposits from public by eligible companies.

    As seen above, provisions of Rules 19 is not restricted to only Eligible Companies” but also covers section 73 (acceptance of deposits from members) and section 74 (repayments of deposits taken before the commencement of the Act) as the Section 76(2)of the Act says “The provisions of this Chapter shall, mutatis mutandis, apply to the acceptance of deposits from public under this section.” so the explanation to Rules 19 covers all types of deposits outstanding as on 31.03.2014

    P.K. Goyal, Co. Secretary at KDDL Limited

  43. ashish says:

    I have a query on deposit rules

    explanation given under Rule 19 is applicable to eligible company. whether un eligible company have to repay whole deposit within one year ie upto 31.03.2015.

  44. deepak says:

    now it is very difficult for pvt company to have unsecured loan from relatives and shareholders. The new company act 2013 have killed the option of arranging short term requirement of firms, Now it is not beneficial to do the business in company and instead LLP or partnership is better route,
    The proble is how to regularise existing unsecured loan , there is no solution in site. Can any one suggest any way out to regularise existing unsecured loan from members and relatives.

  45. Rahul W. says:

    The limit given for a non eligible company to accept deposits is
    ”The total amount of outstanding deposits along with the deposits invited should not exceed 25% of the aggregate of paid up share capital and free reserves”.

    But do unsecured loans from directors are covered for this limit?

  46. P.K.Goyal says:

    If the deposits are to be paid within one year, then why the explanation has been inserted in rule 19 given below:

    19. Applicability of sections 73 and 74 to eligible companies.-Pursuant to provisions of sub-section (2) of section 76 of the Act, the
    provisions of sections 73 and 74 shall, mutatis mutandis, apply to acceptance of deposits from public by eligible companies.

    Explanation.- For the purposes of this rule, it is hereby clarified that in case of a company which had accepted or invited public deposits under the relevant provisions of the Companies Act, 1956 and rules made under that Act (hereinafter known as “Earlier Deposits”) and has been repaying such deposits and interest thereon in accordance with such provisions, the provisions of clause (b) of sub-section (1) of section 74 of the Act shall be deemed to have been complied with if the company complies with requirements under the Act and these rules and continues to repay such deposits and interest due thereon on due dates for the remaining period of such deposit in accordance with the terms and conditions and period of such Earlier Deposits and in compliance with the requirements under the Act and these rules;

    According to me, the Outstanding deposits are re-payable as per Terms of the Deposits accepted under the Co’s Act, 1956 if the Company files with ROC Form NPT 4 for complying with the current provisions & rules of Co’s Act,2013 – and fresh deposits are to be accepted according to New Act and Rules

  47. g ramakrishnan says:

    FDR TO BE GIVEN WITHIN 21 DAYS AND NOT AS STATED( 14 DAYS)-rule 12

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