Section 73 to 76 of the Companies Act, 2013 read with Companies (Acceptance of Deposits) Rules, 2014 made under Chapter V of the Act regulate the invitation and acceptance of deposits. It prohibits acceptance of deposits except from the members through ordinary resolution or acceptance deposits by ‘eligible company’ being a public company, subject to conditions specified in the rules. (Eligible company is defined under the rules based on net worth and turnover).
The Act read with the Rules also deals with various aspects including prohibition of acceptance of deposits except from the members, subject to conditions, inclusive definition of deposit, eligible company, depositor etc., conditions for acceptance of deposits such as approval of shareholders in a general meeting, credit rating, provision of deposit insurance, trustees of deposit holders etc., In addition the act protect the interest of depositor through Section 37 and 245(class action suit by requisite number of depositors)of the Act.
In addition the act provides for stringent penalty for any violations in complying with the provisions of this Act, in this regard. Proviso to Section 73(1) read with rule 1(3) of Companies (Acceptance of Deposits) Rules 2014 excludes banking Companies, non-banking financial companies as defined in the Reserve Bank of India Act, 1934 and registered with Reserve Bank of India, a housing finance company registered with National Housing Bank established under the National Housing Bank Act 1987 and any other company as may be specified by the government in this regard.
|1||73 (2) read with Rule 4 of Chapter V||A Company may after obtaining shareholders’ approval in the general meeting and in compliance of the provisions as stipulated under Rule 3 of Chapter V may accept deposit from its members, subject to the following conditions:
a. issuance of a circular to all its members (by registered post with acknowledgement due or speed post or by electronic mode in Form DPT-1) including therein:
i. a statement showing the financial position of the company;
ii. the credit rating obtained;
iii. the total number of depositors and the 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 prescribed in Rule 4 of Chapter V.
♦ In addition, the Company shall issue a circular in the form of an advertisement in Form DPT-1 for the purpose in English language in an English newspaper having country wide circulation and in vernacular language in a vernacular newspaper having wide circulation in the State in which the registered office of the company is situated, and shall also place such circular on the website of the company.
♦ The Company shall deliver to the Registrar for registration a copy thereof signed by a majority of the directors of the Company as constituted at the time the Board approved the circular or circular in the form of advertisement, at least 30 days before the date of issue of circular or circular in the form of advertisement.
♦ The Company shall attach a certificate from a statutory auditor, along with the circular in Form DPT-1, confirming that the Company has not committed default in the repayment of deposits or in the payment of interest on such deposits accepted either before or after the commencement of the Act and in case a company had committed a default in the repayment of deposits accepted either before or after the commencement of the Act or in the payment of interest on such deposits, a certificate of the statutory auditor of the company shall be attached in Form DPT-1, stating that the company had made good the default and a period of five years has lapsed since the date of making good the default as the case may be.
The circular shall be valid for a period of 6 months from the date of closure of the financial year or till the date the financial statement is laid before the Company in annual general meeting, and a fresh circular or circular in the form of advertisement shall be issued, in each succeeding financial year, for inviting deposits during that financial year.
b. The Company shall deposit, on or before the 30th day of April each year, such sum which shall not be less than 20% of the amount of its deposits maturing during the following financial year and kept in a scheduled bank in a separate bank account to be called “deposit repayment reserve account”;
c. providing security, if any for the due repayment of the amount of deposit or the interest thereon including the creation of such charge on the property or assets of the company:
|2||Rule 3 of Chapter V (Terms & conditions of acceptance of deposits)||♦ No Company shall accept or renew deposit, which is repayable on demand or upon the receipt of notice within a period of less than 6 months or more than 36 months from the date of acceptance of deposit.
♦ However, a Company for meeting its short term requirement of fund, may issue deposit with repayment terms less than 6 months, upon fulfilment of the following conditions:
i. such deposits shall not exceed 10% of the aggregate of the Paid-up share capital, free Reserves and securities premium account of the company, and
ii. such deposits are repayable not earlier than three months from the date of such deposits or renewal thereof.
♦ No company, as referred under Section 73(2), shall 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 of such deposits exceeds 35% of the aggregate of the Paid-up share capital, free Reserves and securities premium account of the company.
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 five 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 anybody corporate is less than twice of its paid up share capital or fifty 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.
♦ An eligible company (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) shall not accept or renew deposit from its members, if:
i. The deposit accepted/ renewed exceeds 10% of the aggregate of the Paid-up share capital, free Reserves and securities premium account of the company;
ii. If the amount of other deposit, other than the deposit referred in point (i) above exceeds the 25% of the aggregate of Paid-up share capital, free Reserves and securities premium account of the company.
♦ No company shall invite or accept or renew any deposit in any form, carrying a rate of interest or pay brokerage thereon at a rate exceeding the maximum rate of interest or brokerage prescribed by the Reserve Bank of India for acceptance of deposits by non-banking financial companies.
♦ Every company shall obtain, at least once in a year, credit rating for deposits accepted by it and a copy of the rating shall be sent to the Registrar of Companies along with the return of deposits in Form DPT-3.
♦ The credit rating so obtained shall not be below the minimum investment grade rating or other specified credit rating for fixed deposits, from any one of the approved credit rating agencies as specified for Non-Banking Financial Companies in the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998, issued by the Reserve Bank of India, as amended from time to time.
|3||76||♦ Every eligible Company may accept deposit from public, subject to the compliance of Section 73 (2) of the Act and subject to such rules as the Central Government in consultation with RBI may prescribe.
Such a company shall be required to obtain the rating (including its net worth, liquidity and ability to pay its deposits on due date) from a recognised credit rating agency for informing the public the rating given to the Company at the time of invitation of deposits from the public which ensures adequate safety and the rating shall be obtained for every year during the tenure of deposits.
♦ Every company accepting secured deposits from the public shall within thirty days of such acceptance, create a charge on its assets (excluding intangible assets of the company for the due repayment of the amount of deposit and interest thereon) of an amount not less than the amount of deposits accepted in favour of the deposit holders and interest thereon or for an mount which shall not be less than the amount remaining unsecured by the deposit insurance
♦ The amount of deposit so accepted together with the interest payable thereon shall not in any case exceed the market value of such assets as assessed by a registered valuer.
♦ The registered valuer shall be an independent merchant banker who is registered with the Securities and Exchange Board of India or an independent chartered accountant in practice having a minimum experience of ten years.