From whom private company can accept deposits:
A private company may, subject to the passing of a resolution in general meeting may accept deposits from its members.
It is clear that in case of private companies, deposits from public can’t be accepted in any situation.
Money accepted from directors and relatives of the directors of the company, is not considered as deposits so a private company can accept money from directors without attracting the provisions of deposits.
Provided that the director of the company or relative of the director of the private company, as the case may be, from whom money is received, furnishes to the company at the time of giving the money, a declaration in writing to the effect that the amount is not being given out of funds acquired by him by borrowing or accepting loans or deposits from others and the company shall disclose the details of money so accepted in the Board’s report;”
Limit on quantum of deposits from members:-
No limit:- 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 any body 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. ]
For other private companies, limit is monies not exceeding 100% of aggregate of the paid up capital, free reserves and securities premium account.
What compliances a private company need to follow on accepting deposits
♠ As per sub rule 1 of rule 3 of the Companies (Acceptance of Deposits) Rules, 2014 companies shall not 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 six months or more than thirty-six months from the date of acceptance or renewal of such deposit:
Provided that a company may, for the purpose of meeting any of its short-term requirements of funds, accept or renew such deposits for repayment earlier than six months from the date of deposit or renewal, as the case may be, subject to the condition that-
a) such deposits shall not exceed ten per cent. of the aggregate of the [Paid-up share capital, free Reserves and securities premium account] of the company, and
b) such deposits are repayable not earlier than three months from the date of such deposits or renewal thereof.
♠ As per sub rule 2 of rule 3 of theCompanies (Acceptance of Deposits) Rules, 2014 where depositors so desire, deposits may be accepted in joint names not exceeding three, with or without any of the clauses, namely, “Jointly”, “Either or Survivor”, “First named or Survivor”, “Anyone or Survivor”.
♠ As per sub rule 6 of rule 3 of the Companies (Acceptance of Deposits) Rules, 2014 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.
Explanation:- For the purposes of this sub-rule, it is hereby clarified that the person who is authorised, in writing, by a company to solicit deposits on its behalf and through whom deposits are actually procured shall only be entitled to the brokerage and payment of brokerage to any other person for procuring deposits shall be deemed to be in violation of these rules.
♠ As per sub rule 7 of rule 3 of the Companies (Acceptance of Deposits) Rules, 2014 the company shall not reserve to itself either directly or indirectly a right to alter, to the prejudice or disadvantage of the depositor, any of the terms and conditions of the deposit, deposit trust deed and deposit insurance contract after circular or circular in the form of advertisement is issued and deposits are accepted.
♠ As per Rule 6, for the purpose of providing security, company shall provide for security by way of a charge on its assets as referred to in Schedule III of the Act excluding intangible assets of the company for the due repayment of the amount of deposit and interest thereon.
Provided that in the case of deposits which are secured by the charge on the assets referred to in Schedule III of the Act excluding intangible assets, the amount of such deposits and the interest payable thereon shall not exceed the market value of such assets as assessed by a registered valuer.
Explanation. I – For the purposes of this sub-rule it is clarified that the company shall ensure that the total value of the security either by way of deposit insurance or by way of charge or by both on company’s assets shall not be less than the amount of deposits accepted and the interest payable thereon.
♠ As per Rule 10,
(1) No company shall accept, or renew any deposit, whether secured or unsecured, unless an application, in such form as specified by the company, is submitted by the intending depositor for the acceptance of such deposit.
(2) The form of application referred to in sub-rule (1) shall contain a declaration by the intending depositor to the effect that the deposit is not being made out of any money borrowed by him from any other person.
♠ As per Rule 11, every depositor may, at any time, nominate any person to whom his deposits shall vest in the event of his death and the provisions of section 72 shall, as far as may be, apply to the nomination made under this rule.
♠ As per Rule 12,
(1) Company shall, on the acceptance or renewal of a deposit, furnish to the depositor or his agent a receipt for the amount received by the company, within a period of twenty one days from the date of receipt of money or realisation of cheque or date of renewal.
(2) The receipt referred to in sub-rule (1) shall be signed by an officer of the company duly authorised by the Board in this behalf and shall state the date of deposit, the name and address of the depositor, the amount received by the company as deposit, the rate of interest payable thereon and the date on which the deposit is repayable.
As per sub rule 1 of Rule 14, company accepting deposits shall maintain at its registered office one or more separate registers for deposits accepted or renewed, in which there shall be entered separately in the case of each depositor the specified particulars.
Sub rule 2 of this rule says that the entries specified in sub-rule (1) shall be made within seven days from the date of issuance of the receipt duly authenticated by a director or secretary of the company or by any other officer authorised by the Board for this purpose.
Sub rule (3) says that the register referred to in sub-rule (1) shall be preserved in good order for a period of not less than eight years from the financial year in which the latest entry is made in the register.
♠ As per Rule 15 Where a company makes a repayment of deposits, on the request of the depositor, after the expiry of a period of six months from the date of such deposit but before the expiry of the period for which such deposit was accepted, the rate of interest payable on such deposit shall be reduced by one per cent. from the rate which the company would have paid had the deposit been accepted for the period for which such deposit had actually run and the company shall not pay interest at any rate higher than the rate so reduced :
Provided that nothing contained in this rule shall apply to the repayment of any deposit before the expiry of the period for which such deposit was accepted by the company, if such repayment is made solely for the purpose of—
(a) complying with the provisions of rule 3; or
(b) providing war risk or other related benefits to the personnel of the naval, military or air forces or to their families, on an application made by the associations or societies formed by such personnel, during the period of emergency declared under article 352 of the Constitution :
Provided further that where a company referred to in under sub-section (2) of section 73 or any eligible company permits a depositor to renew his deposit, before the expiry of the period for which such deposit was accepted by the company, for availing of a higher rate of interest, the company shall pay interest to such depositor at the higher rate if such deposit is renewed in accordance with the other provisions of these rules and for a period longer than the unexpired period of the deposit.
Explanation: For the purposes of this rule, where the period for which the deposit had run contains any part of a year, then, if such part is less than six months, it shall be excluded and if such part is six months or more, it shall be reckoned as one year.
♠ As per rule 16, every company which accept deposits from its members shall on or before the 30th day of June, of every year, file with the Registrar, a return in Form DPT-3 along with the fee as provided in Companies (Registration Offices and Fees) Rules, 2014 and furnish the information contained therein as on the 31st day of March of that year duly audited by the auditor of the company.
♠ As per Rule 16A, every private company shall disclose in its financial statement, by way of notes, about the money received from the directors, or relatives of directors.
Punishment for contravention:-
As per sub section 4 of section 73, where a company fails to repay the deposit or part thereof or any interest thereon under sub-section (3), the depositor concerned may apply to the Tribunal for an order directing the company to pay the sum due or for any loss or damage incurred by him as a result of such non-payment and for such other orders as the Tribunal may deem fit.
Section 76A says that where a company accepts or invites or allows or causes any other person to accept or invite on its behalf any deposit in contravention of the manner or the conditions prescribed under section 73 or rules made thereunder or if a company fails to repay the deposit or part thereof or any interest due thereon within the time specified under section 73 or rules made thereunder or such further time as may be allowed by the Tribunal under section 73,—
(a) the company shall, in addition to the payment of the amount of deposit or part thereof and the interest due, be punishable with fine which shall not be less than 2[one crore rupees or twice the amount of deposit accepted by the company, whichever is lower] rupees 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.]
♠ As per Rule 17, every company shall pay a penal rate of interest of eighteen per cent. per annum for the overdue period in case of deposits, whether secured or unsecured, matured and claimed but remaining unpaid.
♠ As per Rule 21, if company inviting deposits or any other person contravenes any provision of these rules for which no punishment is provided in the Act, the company and every officer of the company who is in default shall be punishable with fine which may extend to five thousand rupees and where the contravention is a continuing one, with a further fine which may extend to five hundred rupees for every day after the first day during which the contravention continues.