Deposits means when a company are generally acquiring funds from the members or the public in the form of  loan or any other form as may be prescribed, but does not include certain classes of transactions. Companies aim to secure finance by different cost-effective methods to suit their financial requirements. The legal definition of deposit are provided under Section 2 (31) of Companies Act and Rule 2(1)(v) Definition Of Deposit.

Applicable provisions: Sections 73 to 76 of the Companies Act, 2013 read with The Companies (Acceptance of Deposits) Rule, 2014.

Applicability: Company can accept deposits from members and public after complying, the provisions, which are mentioned under this Chapter i.e. “Acceptance of Deposits by Companies” However, following companies does not cover under the chapter:

1. Banking Company

2. Non Banking Financial Companies as per the RBI Act 1934

3. Any other company notified by the Central Government in consultation with the RBI.

What is Eligible Company: Eligible Company, means a Public Company having Net Worth of not less than 100Cr or more or a Turnover of not less than 500Cr or more 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 and where applicable, with the Reserve Bank of India 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 section 180(1)(c) may accept deposits by means of an ordinary resolution.

Time period : No 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:

Provided that a company can accept, renew such deposit for repayment earlier than 6 months subject to the conditions that:

  • Such deposit, shall not exceed 10% of the aggregate of [Paid-up share capital, free Reserves and securities premium account] of the company,
  • Such deposits are not repayable earlier than 3 months from the date of acceptance or renewal.

MAXIMUM AMOUNT OF DEPOSIT AVAIL”

Serial No. Particulars Maximum Limit
1 Eligible Company shall accept or renew deposit from the members 10% Paid-up share capital, free Reserves and securities premium account of the company
2 Eligible Company shall accept or renew deposit from the other than members 25% Paid-up share capital, free Reserves and securities premium account of the company
3 Any Company as per sec 73(2) accept or renew any deposit from its members if the amount of such deposits together with the amount of other deposits outstanding as on the date of acceptance or renewal 35% of Paid-up share capital, free Reserves and securities premium account
4 Specified IFSC Public company and a private company may accept from its members 100% of aggregate of the paid up share capital, free reserves and securities premium account
5 Government Company from members can accept or renew deposit 35% of Paid-up share capital, free Reserves and securities premium account
6
  • Private company which is a start-up,
  • Private company which is not an associate or a subsidiary company of any other company
  • Borrowings of such a company from banks or financial institutions or anybody corporate is less than twice of its paid up share capital or 50Cr rupees, whichever is less ; and
  • such a company has not defaulted in the repayment of such borrowings subsisting at the time of accepting deposits under section 73:
No Limit

THE PROCEDURE TO ACCEPT DEPOSITS:-

STEPS PARTICULARS
1 Convening Board Meeting for the purpose of :

1. Consider and approve the business to propose and accept deposits from members

2. Fixing the date, time and Venue of Extra Ordinary General Meeting

3 Convene general meeting and pass Special resolution for acceptance of deposits.
4 Comply with the Rules prescribed in consultation with RBI and terms and conditions mutually agreed by the company and deposit holders either for acceptance or for repayment of deposits.
5 Every company shall issue circular to the members by registered post with acknowledgement due or speed post or by electronic mode in Form DPT-1 which includes therein a statement showing:

  • Financial position of the company,
  • Credit rating obtained,
  • Total number of depositors
  • Amount due towards deposits in respect of any previous deposits accepted by the company and
  • Such other particulars in such form and in such manner as may be prescribed;
6 The circular may be published in English language in an English newspaper and in vernacular language in a vernacular newspaper having wide circulation in the State in which the registered office of the company is situated.
7 File the copy of aforesaid circular in the Form DPT-1 along with such statement with the Registrar within thirty days before the date of issue of circular.
8 In case, company does not secure the deposit or partially deposit, than the deposit shall termed as Unsecured Deposit and shall be quoted on every circular, form advertisement or in any document related to invitation or acceptance of deposits.
9 A company inviting secured deposits shall provide for security by way of a charge on its assets for the due repayment of the amount of deposit and interest thereon. The company shall submit Form CHG-1 with Registrar for assets other than intangible assets and of the amount of deposit and interest thereon. Secured deposits including interest thereon can in no case exceed the market value of the charged assets assessed by the registered valuer.
10 After the expiry of 30 days of filing Form DPT-1, the circular in Form DPT-1 along with application form is sent to all members by registered post with acknowledgement due/speed post/electronic mail.
11 Collect duly signed application form along with money from the members.
12 Issue receipts of deposits within 21 days of the receipts of money/realisation of cheque.
13 Maintain register of deposits at its registered office in the Form DPT 3.
14 Pay interest as per the rate proposed on agreed terms.

Deposit Repayment Reserve: Deposit such sum which shall not be less than 20% of the amount of its deposits maturing during the financial year and the financial year next following and keeping it in a separate bank account called deposit repayment reserve account. The deposit repayment reserve account referred to in clause (c) of sub-section (2) shall not be used by the company for any purpose other than repayment of deposits.

Deposit Under Companies Act, 2013

Return of Deposit: Submit return of deposits in Form DPT-3 on or before 30th June each year for information as on 31st March of respective year.

Forms required in Deposit:

DPT1 Circular or circular in the form of advertisement inviting deposits
DPT 2 Deposit Trust deed
DPT 3 Return of deposits
DPT 4 Statement regarding deposits existing on the commencement of the Act

Penal Provisions:

Company Rs. 1 Cr or Twice the amount of deposit (Whichever is lower) but which may extend to Rs. 10 Crore rupees
Officer in default Imprisonment: 7 years and Fine: Rs. 25 Lakhs which may extend to Rs. 2 Crore
Provided that if it is proved that the officer of the company who is in default, has contravened such provisions knowingly or willfully 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.

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Disclaimer: –The above mentioned article has been based on relevant provisions of Companies Act, 2013. Under no circumstance, the author shall not liable for any direct, indirect, special or incidental damage resulting from, arising out of or in connection with the use of the information.

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