CS Mohd. Irfan Ansari
Governing Laws:
Sections 73 to 76 read with the Companies (Acceptance of Deposits) Rules, 2014 regulate the invitation, acceptance and repayment of deposits by Companies.
This provision does not apply to a banking Company and NBFC.
Important definitions:
| Deposit: | Pursuant to Section 2 (31) “deposit” includes any receipt of money by way of deposit or loan or in any other form by a Company, but does not include such categories of amount as may be prescribed in Rule 2(c). Further the definition of Deposit must be read with Rule 2(c) of Companies (Acceptance of Deposits) Rules, 2014. |
| Depositor: |
Pursuant to Rule 2 (c) of Companies (Acceptance of Deposits) Rules, 2014 Depositor means: 1) any member of the Company who has made a deposit with the Company in accordance with sub-Section (2) of Section 73 of the Act, or 2). any person who has made a deposit with a public Company in accordance with Section 76 of the Act. |
| Eligible Company | Pursuant to Rule 2 (d) of Companies (Acceptance of Deposits) Rules, 2014 “Eligible Company” means a public Company as referred to in sub Section (1) of Section 76, having a net worth =>Rs. 100 Crore or a turnover => Rs. 500 Crore |
Terms and Conditions of Acceptance of Deposits by Companies
Eligible Company or Non-Eligible Company cannot accept or renew Deposit for a period exceeding 36 Months and less than 6 Months. Means Deposit period must be between 6 months to 36 Months.
But, in special case (meeting any of its short-term requirements of funds) Company may issue Deposit for a period below 6 months, provided:
- Such Deposit must not exceed 10% of PSC+FR of the Company.
- Such period must not be less then 3 Months.
Limit of Deposit:
Non-Eligible Company:
- From Members:- 25%of PSC+FR (including O/s Deposit and proposed deposit)
Eligible Company:
- From Members: 10% of PSC+FR (including O/s Deposit and proposed deposit)
- From Public: 25%of PSC+FR (including O/s Deposit and proposed deposit)
Important:- Thelimit of 10% and 25% are separate and identical.
Government Company:
- From Public: 35%of PSC+FR (including O/s Deposit and proposed deposit)
Important: It means Public Company below above threshold cannot accept Deposit from Public
Rate of Interest or Brokerage:
Not higher thenas prescribed by RBI.
Terms and Condition of Issue:
The Company cannot reserve any clause which enables to alter or modify the terms & condition of issue of Deposit after Circular or Advertisement is issued and Deposit is accepted.
Form and Particulars of Advertisements or Circulars:
Every Company (Non-Eligible Company) intending to invite deposit from its members shall issue a circular to all its members by registered post with acknowledgement due or speed post or by electronic mode in Form DPT-1
Plus
The circular may be published in English language in an English newspaper and in vernacular language in a vernacular newspaper having wide circulation.
Every Eligible Company intending to invite deposits shall issue a circular in the form of an advertisement in Form DPT-1 in English language in an English newspaper and in vernacular language in a vernacular newspaper having wide circulation.
The above Circular or Advertisement shall be issued under the authority of Board of Directors of Company.
The Circular or Advertisement shall be issued only after 30 days of filing of Circular/Advertisement with RoC.
Validity of Circular/Advertisement:
The circular/advertisement is valid for 6 Months from the close of FY or Date of AGM whichever is earlier.
Important: It means fresh Circular of Advertisement need to be issued in each succeeding F.Y
Issue Date and Effective Date:
The Circular issue date shall be taken as effective date of Circular. Date of the issue of newspaper in which the advertisement appears shall be taken as the date of issue of the advertisement.
Deposit Insurance:
Every Company (Eligible and Non-Eligible Company) need to take one insurance called Deposit Insurance atleast 30 days before issue of Circular/advertisement.
It means Circular/Advertisement shall be issued after 30 days of taking Deposit Insurance and filing the Circular with RoC as mentioned earlier.
Amount of Deposit Insurance:
- In case the amount of Deposit+Interest is upto Rs. 20,000, then Deposit Insurance amount shall be the extent of amount of Deposit+Interest.
- In case amount of Deposit+Interest is more then 20,000, then the amount of Deposit Insurance shall be atleast Rs. 20,000 per Depositor.
The premium on such insurance shall be purely borne by Company.
In case of Default in compliance of Deposit Insurance:
- Rectify the default or Enter into fresh Deposit Insurance Contract within 30 days.
- If not complied with above = Within 15 days, Company need to pay amount of cover mentioned in Deposit Insurance Plus Interest.
- If not paid as mentioned above then, penal interest of 15% shall be charged and shall this shall be treated as having defaulted under this provision and liable to be punished in accordance with the provisions of section 74 of the Act.
Creation of Security
Every Company (Eligible and Non-Eligible) shall create security by way of Charge on Assets, except intangible assets, for the due repayment of Deposit+Interest.
The amount of security shall be atleast equivalent to the amount uncovered by Deposit Insurance.
The value of Assets subject to charge shall be values by Registered Valuer.
The security for deposits shall be created in favour of a trustee for the depositors on:
- Specific movable property of the company, or
- Specific immovable property of the company or any interest therein.
Appointment of Trustee for Depositors:
Every Company (Eligible Company & Non-Eligible Company) shall appoint Deposit Trustee(s) before issue of Circular/Advertisement.
Important:
Before issue of Circular/Advertisement 3 things need to be done
- Filing of Circular/Advertisement with RoC, after 30 days of filing Company can issue Circular/Advertisement.
- Taking Deposit Insurance, after 30 days of this Company can issue Circular/Advertisement.
- Appointment of Deposit Trustee(s) and execute deposit trust deed in Form DPT-2 after 7 days of this Company can issue Circular/Advertisement.
Disqualification of Deposit Trustee is provided in Sub-Rule 3 of Rule 7 of Companies (Acceptance of Deposits) Rules, 2014.
Tenure of Deposit Trustee: The term shall be mentioned in Deposit Trust Deed (Form DPT-2). Deposit Trustee cannot be removed before after issue of Circular and before his tenure unless resolved by all Directors. Means unanimous Board Resolution.
Meeting of Depositors:
In two events Trustee for Depositors shall call for Meeting:
- On requisition of 10% of Depositors O/s.
- On default which affects the interest of Depositors.
Form of application for deposits:
The application shall be in such form as may be prescribed by the Company and a Declaration is taken from the Depositor that deposit is not being made out of any money borrowed by him from any other person.
Power to nominate: Depositor may nominate any person at any time.
Issue of Deposit Receipts To Depositors:
Within 21 days of receipt of money or realization of cheque.
Maintenance of Liquid Assets & Creation of Deposit Repayment Reserve A/c
Every Company (Eligible & Non-Eligible) shall create DRR by crediting atleast 15% of the amount of Deposit maturing in the CFY and next F.Y by the end of 30.04.xx (30th April).
The Deposit Repayment Reserve A/c shall be in scheduled Bank and utilization is restricted to repayment of Deposit.
The DRR balance shall not fall below 15% of Deposit maturing in until the end of the current financial year and the next financial year.
Premature Repayment of Deposits:
Company can do so after a period of 6 months, but interest rate shall be reduced by 1% from the rate at which it is issued. Means minimum period of Deposit shall be 6 Months, except as provided in Rule 3. (For meeting short-term fund requirement)
Return of deposits to be filed with the Registrar:
Every Company need to file return in Form DPT-3 before 30th June, containing information till 31st March, duly audited by the Auditor of the Company.
Penal rate of interest:
18% for the overdue period in case of deposits matured and claimed but remaining unpaid.
Punishment for contravention:
Any Company or Person contravenes any provision of these rules for which no punishment is provided in the Act= Company and officer in default= Fine Rs. 5000.
Continuing Default=Rs. 500 for every day
Secretarial Practice
1. Board to decide the acceptance of deposit and authorize for issue of notice for holding general meeting for obtaining approval of the shareholder (Special Resolution) (Filing with RoC).
2. Hold the General Meeting and obtain approval of the shareholder by means of a Special Resolution.
3. File the said resolution with RoC as the applicable.
4. Hold Board meeting and obtain the approval of the draft Circular/Form of Advertisement from the Board and ensure that the draft Circular/Form of Advertisement must be signed by majority of the directors of the Company.
The Board should also take a note of the following:
– Name of the authorized person, who will solicit deposits on behalf of the Company and rate of brokerage for the services.
– Authorize nominated officer for furnishing deposit receipts.
– Compliance of provision of Deposit insurance.
– Compliance of provision of Creation of security deposit for secured deposit.
– Compliance of provision of Deposit Trustee.
5. Deliver a copy of Circular/Form of Advertisement approved by the Board with the Registrar of Companies for registration.
6. Before issue of Circular/Form of Advertisement, appoint one or more Deposit trustees for creating security for the Secured deposits if any;
7. Execute a Deposit trust deed in Form DPT-2 at least 7 days before issuing the circular or circular in the form of advertisement.
8. Enter into a contract providing for deposit insurance at least 30 days before the issue of circular or advertisement with Insurance Company.
9. Obtain the rating (including its net worth, liquidity and ability to pay its deposits on due date) from a recognized credit rating agency for informing the public the rating given to the Company.
10. Issue Circular/Form of advertisement after 30 days from the date of delivery of a copy of Circular/Form of Advertisement with the ROC.
11. The Circular can be issued to members by registered post with acknowledgement due or speed post or by electronic mode or publish the circular in the form of an advertisement in prescribed form (English and Vernacular).
12. Upload a copy of the circular on the Company’s website, if any.
13. Ensure that no alternation in the term and conditions of deposit/deposit insurance/deposit trust deed shall be allowed after advertisement/circular is issued and deposits are accepted.
14. Issue deposit receipt in the prescribed format and under the signature of officer duly authorized by Board, within a period of 21 days from the date of receipt of money or realization of cheques.
15. Make entries in the register (information to be entered as per rules) within seven days from the date of issuance of the deposit receipt and such entries shall be authenticated by a director or secretary of the Company or by any other officer authorized by the Board.
16. File deposit return in prescribed by furnishing information contained therein as on 31st day of March duly audited by auditors before 30th June every year.
(Author is A Company Secretary from Visakhapatnam (Andhra Pradesh).
please provide the format for deposit receipt to be issued to members after accepting the deposit from them.
If company is going for unsecured deposit. Do they need to appoint deposit trustee?
Would Like to know about the deposit defintionn as stated above regard with the line which is- any non interest bearing held in trust will not be covered in deposits definition
what is the meaning of trust is tha line ?
Hi,
I have a query regarding Explanation to Rule 19 of Companies (Acceptance of Deposits) Rules, 2014.
Rule 19 – Applicability of sections 73 and 74 to eligible companies.
Explanation to Rule 19 – 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 and if company continues to repay such deposits with interest due on due dates, it is sufficient compliance of section 74(1)(b) of the 2013 Act.
Whether this provision is applicable only to eligible public companies mentioned under section 76(1) read with rule 2(1)(e) of Companies (Acceptance of Deposits) Rules, 2014?
Or whether it extends to public companies who have accepted deposits from members?
Does this mean that private companies are any how required to repay the deposits by 31-03-2015?
Very nicely simplified the entire provisions. Pretty useful. Thanks