ACS Divesh Goyal

CS Divesh GoyalDEPOSITS UNDER NEW COMPANIES ACT ARE A CRITICAL ISSUE FOR ALL COMPANIES, MOSTY FOR PRIVATE LIMITED COMPANIES. ON EVERY ISSUE RELATED TO DEPOSITS THERE ARE MANY VIEWS.

REQUIREMENT OF DPT-4

COMPANY LAW UPDATE:

Why old loan from shareholders, relatives & other individuals be treated as deposits in DPT4?

1) Deposit for the purpose of sec 74 shall be as per new co act & deposit rules. Such definition states that loan from shareholders, relatives & other individuals who are not directors at the time of giving loan, shall be treated as deposits.

2) Again, the intention of inclusion of sec 74 to new co act is that all deposits as per old act should be identified & reported to ROC by 30th June (30th August Now) & repay by 31st March, 2015.

 3) Had the intention of the new companies Act were to use definition of deposits as per Co Act, 1956, it would have expressly stated so.

 4) Also note that Section 74 states that deposit as on commencement of this Act i.e. 1st April, 2014, it does not states deposits as on 31st March, 2014. The definition of deposits as on 1.4.2014 should be used. How can we apply definition of deposits as per Old Act on 1.4.2014.

 5) Lastly, to avoid disputes & to avoid risk of crores of penalty, it is better to recognize these as deposits, file in DPT 4 & return the loan by 31.3.2015 as per sec 74.

FAQ’S

Q 1. A question arises, if any loan is received by a Co. from shareholder or director’s relative under Co Act, 1956, should we include these as deposit in Form DPT4 or not?

Answer: Yes, include these as deposits in Form DPT4.

Q 2. How TO FILE DPT 4?

Answer: As per MCA web site,

  • Form DPT4 is an attachment Form as it is given in attachment category under download forms.
  • It will be attached with Form GNL 2 along with auditor certificate (Form for submission of documents with the Registrar).
  • Auditors report in Old format under Companies Act, 1956 will also be attached with this form.(Format is given below.)

Attachments to Form DPT-4 includes:

1. Auditor’s certificate;

2. List of depositors indicating name, address, amount deposited, repaid during the year and outstanding, interest due, paid and payable as at the close of the Financial Year and separately indicating deposits not yet matured, matured, claimed and paid and matured, claimed but not paid and matured but not claimed for payment. List of deposits matured, cheques issued but not yet cleared to be shown separately. The details required to be annexed is very much identical to the details required under to be given under Return of deposits.

Q 3. Is Loan will be treated as Loan?

Answer: YES, LOAN CAN BE TREATED AS DEPOSITS

  1. Loan is covered under definition of deposits under Company Act, 2013 read with the Companies (acceptance of deposit) Rules, 2014.
  2. Definition of the term “deposits” under Companies (acceptance of deposit) Rules, 2014, states the following:

a.) If loan is received from any other company by any co., it will not cover  deposits.

b) If loan is received by any company (both Public & Private) from directors,  it will not be covered as deposits provided director gives a declaration that loan is out of own fund(not by taking loan) .

c) However, if loan is received from shareholders or director’s relative by any co, these will be covered as deposits.

d) If loan is received from other individuals by any company (both Public    & Pvt), these will be covered as deposits.

Q 4. Intention of Ministry behind section 74?

Answer :

i) The meaning of the term “deposit” under sec 74 under Co Act, 2013 will be as per sec 2(34) of the Co Act, 2013. Hence, these will be
included as deposits in Form DPT4.

ii) The intention of introduction of sec 74 is to repay all old deposits within one year time or extended time. MCA wants that all deposits accepted have to follow new Act & New Rules.

iii) This view can also be supplemented by the fact that legislature is giving enough time i.e. 1 year time to repay the deposits existing on 1st
April, 2014 to comply with new Act & New Rules.

MY VIEWS ON SOME POINTS:

  1. If a Private Company accepted any amount from its director before 31st March, 2014. From 1st April, 2014 this amount will be treated as Deposits and Private Company require filing form- DPT-4 as per procedure given above.
  2. If Company accepted application money before 31st march 2014 then from 1st April 2014 it will treat as deposit or not have 2 Two views:
  • Ist: Company can assume this amount as deposit and have to file DPT-4 and repay upto 31st March, 2015.
  • IInd: Company can repay this amount before 15june, 2014,(with in 60+15 days from applicability of this section).
  1. Where loan/deposits were not falling in the definition of Deposits under Companies (Acceptance of Deposits) Rules, 1975 on 31.03.2014 and now the loan/deposits falls in the definition of deposits under Companies (Acceptance of Deposits) Rules, 2014:

Answer: DPT-4 requires to be file and require to repay amount upto 31st March, 2015 AND DPT-3 to be filed from 30.06.2015onwards.

  1. DPT-3 is applicable for companies who have deposits as on 31.03.2014 and now those deposits falls in the definition of deposit under Companies (Acceptance of Deposit) Rules, 2014.

5. However, DPT-4 is a one-time form, this being applicable for this year only (30.06.2014). In fact, the section 74 will lose its relevance after one year of the commencement of Act. It is through DPT-4, ROC will keep a track of those companies which need to repay loan/deposit before 31.03.2015.

DRAFT FORMAT OF AUDITOR CERTIFICATE

TO WHOMSOEVER IT MAY CONCERN

This is to certify that M/S XYZ PRIVATE LIMITED, having CIN No. U17110MH1996PTC104672 has accepted *deposits from relatives of the directors of the company and associate firm. Total deposits outstanding as on 1st April, 2014 amounts to Rs. 1,10,000/- received from 5 (Five) Depositors. Details of the party wise deposits are enclosed in Annexure -1.

We further certify that, as explained to us by the management, these deposits do not bear any maturity date. We were further explained that no interest is payable on the Deposits as indicated in the said Annexure.

We have verified the records maintain by the Company for these deposits and details as given in Annexure are found to be true and correct.

 FOR ABC & CO

Chartered Accountants

Firm Registration No.

ABC –Proprietor

(Membership No. )

Place: Mumbai

Date: 16.06.2014

*The company had taken these Unsecured Loans prior to 1st April 2014 and at the time of receipt these were not deposits Pursuant to Rule 2 (b) ( ix) of Companies (Acceptance of Deposits) Rules, 1975. Further the above List of Depositors does not include sums accepted from other Companies and Directors, which is not a Deposit as per Rule 2(c)(vi) and Rule 2(c)(viii) respectively of Companies (Acceptance of Deposits) Rules, 2014.

(Author can be reached at csdiveshgoyal@gmail.com)

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One response to “Deposits Under New Companies Act and requirement of Filing DPT-4”

  1. Lokesh says:

    A question arises that for DPT-4 Auditor Certificate is required as per Rule 20 but whether the auditor should be statutory auditor of the Company or any other Auditor certificate will fullfill the requirement of Auditors Certificate..

  2. Omkar says:

    there is one private limited company who accepted deposit from their auditors wife in 2012… now what will be the legal effect for such acceptance???

  3. Vaibhav Aggarwal says:

    Please remove this article as it will confuse others.
    Bcoz
    1. As per GENERAL CIRCULAR NO. 05/2015 , t is clarified that such amounts received by private companies prior to 1st April, 2014 shall not be treated as ‘deposits’ under the Companies Act, 2013 and Companies (Acceptance of Deposits) Rules, 2014 subject to the condition that relevant private company shall disclose, in the notes to its financial statement for the financial year commencing on or after 1st April, 2014 the figure of such amounts and the accounting head in which such amounts have been shown in the financial statement.
    2. Its section 2(31) of co. Act 2013 , which defines “DEPOSITS” and not section 2(34) as provided in the above article.
    3. Section 74 states deposit accepted before 1.04.2014 and not loan o/s as on 1.04.2014 as provided in the above article.

    Thanx,

    • CA Sandeep Kanoi says:

      Dear Article is of date before the issue of clarification and was based on law on on the date of publication

  4. CS RITU NAGPAL says:

    Dear Sir,

    Can you please provide us the format of auditor’s certificate for form DPT-3.we shall be highly obliged.

    Regards,
    cs Ritu Nagpal

  5. bhavana says:

    is dpt 4 also required for event dated 31.3.2015

  6. Ashutosh Aggarwal says:

    You have written above that “Deposit for the purpose of sec 74 shall be as per new co act & deposit rules. Such definition states that loan from shareholders, relatives & other individuals who are not directors at the time of giving loan, shall be treated as deposits”

    Whereas Section 74 does not mention word “LOAN” and used word “DEPOSIT” thus the loan accepted before 1st April 2014 shall not be treated deposit under sec 74 and no need to file DPT 4 for loans received before 1st April 2014.

  7. Vishal Lohia says:

    whether it is compulsory to file DPT-4 If the Private Company Has taken a loan from Proprietorship firm of director?Please reply.

  8. Vishal Lohia says:

    whether it is compulsory to file DPT-4 If the Private Company Has taken a loan from Proprietorship firm of director?

  9. Mistry Nitin J says:

    My query is if the company has not sufficient balance for repayment of deposits, then which options are to be preferred for company to resolve this matter…?

  10. vikash jhunjhunwala says:

    LOANS FROM DIRECTORS ARE EXCLUDED FROM DEPOSITS UNDER ACT2013 AND RULES THEREIN.WHETHER DPT3 OR DPT 4 STILL REQUIRED TO BE FILED.PLEASE NEED ADVICE.

  11. Rashmikant Acharya says:

    In the Article above you have stated following matter, can you please explain the reason behind “why to consider any amount received from Director as Deposits?”

    ”If a Private Company accepted any amount from its director before 31st March, 2014. From 1st April, 2014 this amount will be treated as Deposits and Private Company require filing form- DPT-4 as per procedure given above”.

  12. Deepak Kamath says:

    If a shareholder is a company who has given a loan to a private company. So in that case will it be covered in DPT-4. Kindly clarify whether we need to enter such deposits in DPT-4 with Ministry of Corporate Affairs.

  13. Swapnil More says:

    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?

  14. Ankit says:

    Dear Mr. Goyal,

    Thanks a lot for such article !

    We would like to kind your attention at point no -04 mentioned as Also note……as on commencement of this Act,

    The wording in section 74 is Where…………before the
    commencement of this Act.

    In context of the above, you may have a different interpretation/view about the deposit accepted before the commencement of this act ?

    Thanks !

  15. M. K. Jain says:

    In the format of auditor’s certificate, you have said:
    *deposits from relatives of the directors of the company and associate firm.*
    “Will a private limited company having common director be considered as associate firm” ?
    ” Will the loan taken from a private limited company having common director be considered as simple deposit or inter-corporate deposit” ?

  16. Rajesh, Mumbai says:

    I request Tax Guru To convey and convince the lawmakers that such provisions would cause irreparable damage to fabrics of traditional family run private companies.
    I understand that Even Private limited companies have been prohibited to accept Loans from anyone except its directors. As per New Company act, It can borrow only from directors. Earlier, a private company could accept Loans from its Directors, relative of Directors and shareholders (members).
    The above provision has been enacted by earlier UPA government without application of mind and will definitely prove to be lethal and render closure of most of private limited companies. Such a Draconian provision should immediately be dropped.
    The Provisions state that all Loans (already taken) have to be repaid within a year by 31st march 2015. Isn’t it ridiculous?
    a) Is it possible to repay when money is already invested in Business, Plant and Machinery, Working Capital etc.
    b) Could government make any Bank to pay all deposits and square off all deposit accounts once in a year only?
    c) Leave aside the Bank, Can Government of India repay all loans (taken from various sources) in one year.

    THE EXPECTED RESULT: THIS PROVISION WILL CERTAINLY KILL LAKHS OF PRIVATE LIMITED COMPANIES / SMALL BUSINESSMEN AND FORCE THEM TO CLOSE THE COMPANY.

    In fact the need of the hour is that Indian government must stop taking loans from any sources and save citizens of the country to become slaves of mounting Debt on India OR make a law that Indian government should take loans from Indian Citizens only. No loan should be taken from foreign country because foreign loan are creating economic slavery as loan giving country carry upper hands and influence laws of India which results in such draconian laws which benefits them at the cost of Indian Business.
    It is a Joke that there is penalty of minimum Rs.1 crore (Max.10 crore) if company fails to repay deposits in stipulated time. It is a pity that Lawmakers do not know even basic reality that an average private company will hardly be having a capital of 1 crore. India is fed up of such redundant, outdated and impractical acts and laws which have not helped people but has proved to keep businessmen in stress.
    They (Lawmakers) did not even consider that relatives and shareholders give loans to private company because they trust them more than Banks, more than government, get better interest, and are more comfortable with them. On the other side, private companies get such loans on reputation of directors whenever required which help them to save on costs and grow business.
    I want to ask a question to Law makers: We are Directors of a company (Husband and wife). We have taken loans from our relatives and shareholders. Our relatives are my brother, Father, Mother, sister and also my wife’s relatives. They are very comfortable with their money invested in our company and have been getting their regular interest for last 20 years. Even shareholders have given us loans on our reputation. Lawmakers must understand that in Indian context, private companies are family run businesses and there are entrepreneurs who can get crores of loans without any security at very competitive rates, while they will not prefer or get even few lakhs from Banks.
    It is also unconstitutional that when my relatives want to loan to my company and our company needs money for business, how can law be made to prevent us? Even shareholders of private companies give loans on director’s reputation and do the same out of mutual relationships with directors.
    This Devil law has been enacted by earlier government without considering ground reality of India. I hope and request new government to drop it and restore earlier situation.

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