Acceptance of Deposits by Companies

‘‘‘Depositor’’ means,

1. Any member of the company who has made a deposit with the company u/s. 73(2); or
2. Any person who has made a deposit with an eligible company u/s. 76

Eligible Companies who can accept deposit from public (Sec. 76)

1. Public Company whose Net worth is more than or equal to ₹100 crore OR
2. Public Company whose Turnover is more than or equal to ₹500 crore

Conditions

“Deposit” includes any receipt of money by way of a deposit or loan in any other form, by a company but excludes:

1. Any amount received from the Central Government or a State Government, or from any other source whose repayment is guaranteed by the Centre or State.
2. Any amount received from Foreign Governments, foreign or international banks, multilateral financial institutions subject to provisions of FEMA, 1999.
3. Any amount received as a loan or facility from any banking company or from the State Bank of India or any of its subsidiary banks.
4. Any amount received as a loan or financial assistance from Public Financial Institutions notified by the Central Government or Insurance Companies or Scheduled Banks.
5. Any amount received against issue of commercial paper or any other instruments issued in accordance with the guidelines issued by the RBI.
6. Any amount received by a company from any other company.
7. Any amount received against an offer made towards subscription to any securities, including share application money or advance towards allotment.

– Amount so received shall be considered as deposit if,

• The company fails to allot such securities within 60 days and
• Money so received is not refunded within 15 days from the end of such 60 days.

8. Any amount received from director of the company with declaration that it is not given out of borrowings or accepting loans from others.
9. Any amount raised by the issue of bonds or debentures secured by a first charge or a charge ranking paripassu up to the market value of the assets referred in Schedule III as valued by Registered Valuer.
10. Any amount received from an employee of the company not exceeding his annual salary in the nature of non – interest bearing security deposit.
11. Any non-interest bearing amount received or held in trust.
12. Any amount received in the course of, or for the purposes of, the business of the company -

– As an advance for the supply of goods or provision of services provided such advance is appropriated against supply of goods or provision of services within a period of 365 days from date of acceptance..

– As advance received in connection with consideration for property under an agreement.

– As security deposit for the performance of the contract for supply of goods or provision of services

– As advance received under long-term projects for supply of capital goods.

13. Any amount brought in by the promoters of the company by way of unsecured loan in pursuance of the stipulation of any lending financial institution or a bank.
14. Any amount accepted by a Nidhi Company in accordance with the rules made under section 406 of the Act.

• Prohibition on acceptance of deposits from public by following class of companies (Sec. 73);

Companies other than banking company and NBFC as defined in the Reserve Bank of India Act, 1934 can accept deposit after fulfilling conditions mentioned below:

Conditions for acceptance of deposits by company from its member/from Public

1. Pass Resolution in General Meeting
2. Issue a circular to its members including

– Statement showing the financial position of the company,

– Credit rating obtained,

– Total number of depositors and

– Amount due towards deposits in respect of any previous deposits accepted by the company

3. File a copy of circular with the Registrar within 30 days before the date of issue of the circular
4. The company should not accept deposit repayable on demand or

Repayable on 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

Exception to the rule

For purpose of its short-term requirements of funds, the company may accept or renew such deposits for repayment earlier than six months from the date of deposit or renewal provided:

– Such deposits shall not exceed 10% of the aggregate of the paid-up share capital and free reserves of the company, and

– Such deposits are repayable on or after 3 months from the date of such acceptance or renewal thereof.

– Eligible Companies u/s. 76 (deposit from members / public)

For deposits from Members

Existing Deposit + New Deposit <=10% of aggregate of the paid-up share capital and free reserves of the company.

For deposits from Public

Existing Deposit + New Deposit (excluding deposit from members) <= 25% of aggregate of the paid-up share capital and free reserves of the company.

5. Interest Rate and Brokerage thereon should be at maximum rate of interest or brokerage prescribed by the Reserve Bank of India for acceptance of deposits by NBFC.
6. Separate bank account (Deposit Repayment Reserve A/c) to be opened:

Deposit sum of more than or equal to 15% of deposits maturing during a financial year and the following financial year and this account shall not be used by the company for any purpose other than repayment of deposits.

7. Certifying that the company has not committed any default in the repayment of deposits and interest.
8. Provide security for due repayment of the amount of deposit or interest thereon including the creation of such charge on the property or assets of the company or

If such deposits are unsecured or partly secured then to state that such deposits are ‘unsecured deposits’ in circular, form, advertisements, invitation etc.

Section 76A

Punishment for contravention of section 73 or 76

Where a company accepts or invites any deposit in contravention of section 73 or section 76 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 section 76 or rules made thereunder or such further time as may be allowed by the Tribunal

1. 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 one crore rupees but which may extend to ten crore rupees; and
2. Every officer of the company who is in default shall be punishable with imprisonment which may extend to seven years or with fine which shall not be less than twenty-five lakh rupees but which may extend to two crore rupees, or with both:

Provided that if it is proved that the officer of the company who is in default, has contravened such provisions knowingly or willfully 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.

Private company permitted to accept deposits from its members up to 100% of aggregate of its paid-up share capital and free reserves without obtaining deposit insurance, credit rating, depositing 15% of the deposit maturing in separate bank account etc.

However, such private company will have to file details of money so raised with the Registrar of Companies (ROC).

Repayment of deposits, etc., accepted before commencement of the Companies Act, 2013 (Sec. 74);

In respect of any deposit accepted by a company before the commencement of this Companies Act, 2013 and

The amount of such deposit or part thereof or any interest due thereon remains unpaid on such commencement or becomes due at any time thereafter,

– File statement of all the deposits accepted and sums remaining unpaid on such amount with the interest payable thereon along with the arrangements made for such repayment within 3 months from such commencement or from the date on which such payments are due, with the Registrar.

and

– Repay within one year from such commencement or from the date on which such payments are due, whichever is earlier.