Article explains Provisions related to Acceptance of Deposit and Prohibition on Acceptance of Deposits from Public under Section 73, 76 and 76A of Companies Act, 2013 read with Companies (Acceptance of Deposits) Rules, 2014. Article further explains about Acceptance of Deposit from Public by Certain Companies (Eligible Company), Acceptance of deposit from Members, Return of Deposit to be filed with registrar, Appointment of Trustee and Punishment in case of Contravention of provision of this chapter.
|Prohibition of Acceptance of Deposits from Public|
|1||Deposits from Public
|As per Section 73(1) of the Companies Act, 2013, No Company shall-
b. Invite, or
Deposits from the public except in such manner as may be prescribed.
*Note Refer Section 76
|2||Exception to section 73(1)||Not applicable on-
a. Banking Company;
b. NBFC registered with RBI;
c. Such other Company as may specify by CG after consultation with CG.
|Acceptance of deposit from Members|
|3||Special Resolution Section 73(2)||Company shall required to pass resolution in the GM for accepting deposit from members|
|4||Terms and Conditions Section 73(2)||The company shall follow the terms and conditions as prescribed in Rule 3 of the Companies (Acceptance of Deposits) Rules, 2014 and other following conditions-
1. A Circular shall be issue to members; along with
2. A Statement showing-
a. financial position of the Company,
b. Credit rating;
c. No. of depositors;
d. amount due for any previous deposit accepted by co.
3. Validity of Circular Issued in form of advertisement
a. valid until the expiry of six months from the date of closure of the financial year in which it is issued or
b. until the date on which the financial statement is laid before the company in annual general meeting or
c. where the annual general meeting for any year has not been held, the latest day on which that meeting should have been held,
whichever is earlier
4. Deposit Repayment Reserve
Deposits, on or before 30th Day of April each year, a sum which shall not be less than 20% of the amount of its deposits maturing during the following financial year and kept in Deposit Repayment Reserves
5. Deposit shall be secured
Company shall 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
6. If Security not provided
the deposits shall be termed as “unsecured deposits” and shall be so quoted in every circular, form, advertisement or in any document related to invitation or acceptance of deposits
|5||Particulars and Form of Circulars and advertisement
Rule 4 of Companies (Acceptance of Deposits) Rules, 2014
|1. Circular shall be in DPT-1
2. Mode of sending Circular to members shall be-
a. Registered post;
b. Speed post; or
3. An advertisement of the circular shall be made in –
a. Vernacular Language in vernacular newspaper, and
b. English language in English newspaper, having wide circulation in the state in which the registered office of the Company is situated.
4. A certificate from the statutory auditor of the company shall also be attached with the DPT-1, stating that the company has complied with all the requirements of the Act, regarding deposit and had not make any default in repayment of deposits in any previous deposit accepted by the company or in payment of interest thereof, and if any default made by the company the certificate shall also stating that the default has been made good by the company.
5. Filling of copy of circular with registrar
Company shall not allow to any other person to issue on its behalf any circular or advertisement of circular inviting deposits unless such circular or advertisement is issue on the authority and in the name of the BOD of the Company.
6. Circular/ advertisement shall not be issued by or on behalf of the Company unless not less than 30 days before the date of issue, there has been delivered a copy of circular or circular in form of advertisement as approved by the majority of the directors, to the Registrar for its registration
|6||Application to NCLT in case of default by the Company Section 73(4)||In case of default has made by the company in repayment of deposit or interest thereof then a depositor may apply to the NCLT for seeking order to direct the company to repay his deposit along with interest, for any loss or damage incurred by him as a result of nonpayment and for other order as NCLT may deem fit|
|7||Use of DRR Section 73(5)||The DRR shall not be used by the Company other than repayment of deposit|
|Acceptance of Deposit from Public by Certain Companies (Eligible Company)|
|8||Section 76(1)||1. This Section overrides the Section 73.
2. A Public Company having-
a. Net worth of Rs. Not less than 100 Cr. or
b. Turnover of Rs. Not less than 500 Cr.
may accept deposit from the public other than its members subject to the compliance with same requirement as mentioned in the section 73(2).
3. Some additional requirements shall be complied by the eligible company-
a. Eligible Company inviting deposit by issue of circular and advertisement shall also place such circular on the website of the Company.
|9||1st Proviso to Section 76(1)||Rating from Credit rating Agency
Eligible Company shall 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 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
|10||2nd Proviso to Section 76(2) and rule 6 of Companies (Acceptance of Deposit) Rules, 2014||Creation of Charge
1. Eligible Company Accepting deposit from the public shall within 30 days of its acceptance, create a charge on its assets of an amount not less than the deposit amount.
2. Intangible assets of the company shall be excluded from the definition of assets for the purpose of creation of security;
3. The amount of such deposits and the interest payable thereon shall not exceed the market value of such assets as assessed by a registered value.
4. The security for deposits as specified in sub-rule (1) shall be created in favour of a trustee for the depositors on:
a. specific movable property of the company, or
b. specific immovable property of the company wherever situated, or any interest therein.
|Common terms and Conditions for acceptance of Deposit by Company Rule 3 of Companies (Acceptance of Deposits) Rules 2014|
|11||Period of Acceptance of Deposit Rule 3(1)(a)||Minimum Period: 6 Months
Maximum Period: 36 Months
Period starts from the date of acceptance, renewal of deposit.
|12||Exception to Rule 3(1)(a)||For the purpose of meeting any of its short term requirements of Funds, a company may accept or renew the deposit earlier than six months from the date of acceptance or renewal, subject to the following conditions-
a. Not exceeding the 10% of its paid up share capital and free reserve and
b. due date of repayable not more than 3 Months from the date of such deposit or renewal;
|13||Rule 3(2)||Depositors if they wants, deposits may be accepted in joint names.|
|14||Maximum Limits on acceptance/renew of deposits for Company referred in Section 73(2) Rule 3(3)||Companies accepting deposits from its members-
The amount of such deposits together with amount of other deposits outstanding as on the date of acceptance or renewal of such deposits exceeds 35% of paid up share capital and free reserve.
|15||1st Proviso to Rule 3(3)||1. In case of specified IFSC public and a private company may accept from its members monies not exceeding 100% paid up share capital, free reserve and securities premium account,
2. Such company shall file the details of monies so accepted to the Registrar in Form DPT-3.
|16||2nd Proviso to Rule 3(4)||Maximum limit in respect of deposits to be accepted from members shall not apply to following classes of private companies, namely-
a. a private company which is a start-up, for five years from the date of its incorporation;
b. a private company which fulfils all of the following conditions, namely
i. which is not an associate or a subsidiary company of any other company;
ii. 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 50 Cr. rupees, whichever is less and
iii. such a company has not defaulted in the repayment of such borrowings subsisting at the time of accepting deposits under section 73
|17||Maximum Limits on acceptance/renew of deposits for eligible Company Rule 3(4)||1. Deposit from Member- 10% of aggregate of Paid-up share capital, Free reserve and securities premium account.
2. Deposit from Public- 25% of aggregate of Paid-up share capital, Free reserve and securities premium account.
|18||Maximum Limits on acceptance/renew of deposits for Government Company Rule 3(5)||Not more 35% of the paid-up share capital, free reserve and securities premium account.|
|19||Rate of Interest||Company referred in Section 73(2) or any eligible company shall invite or accept or renew any deposit in any form, carrying a rate of interest or pay brokerage thereon at a exceeding the maximum rate of interest or brokerage prescribed by RBI for acceptance of deposit by NBFC.|
|Return of Deposit to be filed with registrar|
|20||Rule 16||Every company to which such Rules apply, shall filed with the Registrar the return of deposit in form DPT-3, on or before the 30th Day of June of every year and furnish the details of information contained therein as on 31st day of march of that year duly audited by the auditor of the Company,
As per MCA Circular dated 22nd January 2019 it is hereby clarified that DPT-3 shall be used for filing
a. return of deposit or
b. Particulars of transactions not considered as deposits, or
for every company other than Government company.
|Appointment of Trustee|
|21||Rule 7||1. The appointment of Trustee shall be mandatory for every company in case of deposits,
2. Written consent shall be obtained from the trustee for depositors before their appointment and a statement shall appear in the circular or circular in the form of advertisement with reasonable prominence to the effect that the trustees for depositors have given their consent to the company to be so appointed.
3. Trust deed shall be in form of DPT-2
4. Qualifications of Deposit Trustee-
No person including a company that is in the business of providing trusteeship services shall be appointed as a trustee for the depositors, if the proposed trustee –
(a) is a director, key managerial personnel or any other officer or an employee of the company or of its holding, subsidiary or associate company or a depositor in the company;
(b) is indebted to the company, or its subsidiary or its holding or associate company or a subsidiary of such holding company;
(c) has any material pecuniary relationship with the company;
(d) has entered into any guarantee arrangement in respect of principal debts secured by the deposits or interest thereon;
(e) is related to any person specified in clause (a) above.
|Punishment in case of Contravention of provision of this chapter|
|22||Section 76A||(a) company – l not be less than one crore rupees or twice the amount of deposit accepted by the company, whichever is lower but which may extend to ten crore rupees; and
(b) every officer of the company who is in default shall be punishable with imprisonment which may extend to seven years and with fine which shall not be less than twenty-five lakh rupees but which may extend to two crore rupees,
Provided that if it is proved that the officer of the company who is in default, has contravened such provisions knowingly or wilfully 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.