CS Divesh Goyal
From the commencement of Companies Act, 2013, Provisions regarding Prohibition on Acceptance of Deposit shall apply to Private Limited companies also along with Public Limited Company.
Companies need more and more funds for expanding their business activities due to Competitive business environment, which led them to borrow funds from banks and financial institutions. However sourcing of funds puts the Company under management & control of those financial institutions and a part from Capital and Free reserves, main source of fund is Unsecured Loans from Directors, Shareholders, their relatives and other contacts. The alternative sources of finance available for the Companies are equity and preference shares, debentures and other debt securities etc., this has induced companies to call for deposits from the public. Such deposits are unsecured debts and neither management control nor the formalities of charge on assets are putting any hindrances for availing of such amount.
First of all, these provisions / Prohibitions does not apply to a banking Company, a non – banking financial Company as well as any other class of Company as specified by the Central government.
Deposits (Section 73-76)
Definition of deposits has been changed drastically and the following amounts have been included in the definition of deposits in respect to acceptance of Deposit Rules:-
1. Loan from directors if he has not given loan out of his own funds (Borrowed Fund)
2. Loan from relatives of directors.
3. Loan from members.
4. Share application money pending allotment for more than 60 days.
5. Any amount received in the course of or for the purpose of the business, as advance and is outstanding or 365 days.
6. Secured debentures and compulsorily convertible debentures convertible within five years from the date of issue.
Now a Private Company cannot accept deposits from relatives of Directors or Shareholders as was allowed under Companies Act, 1956 unless Section 73 of the Companies Act, 2013 and Companies (Acceptance of Deposit) Rules, 2014 are complied with. Further share application money pending allotment for more than 60 days shall also be treated as deposits, if not refunded with 15 days.
As per Section 74(1)(a) and Companies (Acceptance of Deposit) Rules, 2014 every company who has accepted deposit before commencement of Companies Act, 2013 has to file a return in Form DPT-4 within 3 months from commencement of Companies Act, 2013 (i.e. upto 30th June, 2014) and further it has to be repaid within 1 year from commencement of this Act.(i.e. by 31st March, 2015)
Process of filling of Form DPT-4:
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.
Now, a Private Company may accept deposits from its members subject to fulfillment of the following conditions:
Precaution- A Private Company being subsidiary of a Public Company shall become public company and all the provisions related to public companies shall apply on such private companies. However, the provision of erstwhile Section 4(7) of the Companies Act, 1956, has been dispensed with and now not applicable w.e.f. 1 April 2014.
Practical Procedure for acceptance of Deposit by Private company
– Company MAY issue circular in DPT-1 through advertisement also.
11. File CHG-1 Within 30 days of Creation of Charge.
(Author – CS Divesh Goyal, ACS is a Company Secretary in Practice from Delhi and can be contacted at email@example.com)