Topic: Acceptance of Deposits Prepared by:

by CS Tushar Pahade
Subject: Company Law Ms. Riddhi Verma
`
Contact 9881844466 or Visit cstusharpahade.com for more details on Video Lectures of CA & CS

Acceptance of Deposits by Companies

What is deposit? Who is Depositor? Eligible Company Prohibition on acceptance of

deposits from Public
Section 2(31) of the
Companies Act, 2013
defines deposit as
Rule 2(1)(d) under Chapter
under “Deposit” Rule 2(1)(e) of Rules made under Chapter Section 73(1) states that, no company
XV defines depositor as
includes any receipt of V defines eligible company as under : shall invite, accept or renew deposits
under ‘Depositor’ means-
means
money by way of under this Act from the public except in a
deposit or loan or in 1. any member of the B) having a net worth of not less than 100 manner provided under Chapter V.
any other form by a company who has made crore rupees
company. C) turnover of not less than 500 crore A) Exceptions
a deposit with the
rupees
company in accordance Section 73(1) prohibition, does not apply
D) which has obtained the prior consent of
with section 73(2) of the to
the company in general meeting
Act, or
E) and also filed the said resolution with  a banking company; and
2. Any person who has
the ROC  non- banking financial company as
made a deposit with a
F) and where applicable, with the RBI defined in the Reserve Bank of
public company in
before making any invitation to the India Act, 1934; and
accordance with section
Public for acceptance of Deposits.
76 of the Act To such other company as the Central
G) Every co. obtain credit rating ones in a
year and such copy of rating file to ROC Government may, after consultation with
in Form DPT-3
DPT the Reserve Bank of India, specify in this
behalf.

In case of defaulting company

company-Permanent
Permanent ban from raising deposits to be reduced to a period of 5 years from the date of making default good
(As amended by Companies (Amendment) Act, 2017)
 Topic: Acceptance of Deposits Prepared by:
by CS Tushar Pahade
Subject: Company Law Ms. Riddhi Verma
`
Contact 9881844466 or Visit cstusharpahade.com for more details on Video Lectures of CA & CS

What is not a Deposit?

RULE 2(1)(c) of Companies (Acceptance of Deposits) Rules, 2014)

1. Any amount received from the CG/SG/LASG/LA or statutory authority under an Act of Parliament including receipt of any amount whose payment is guaranteed by Government.
2. Any amount received from foreign:-
 Governments,
 international
ational banks,
 financial institutions, agencies
 Body Corporate
 Citizens
3. Any amount received as a loan or facility from any banking company including co-operative
operative banks.
4. Any amount received as a loan or financial assistance from Public Financial Institutions, Insurance companies.
5. Any amount received against issue of commercial paper or any other instrument issued in accordance with the guidelines issued by the RBI
6. Any amount received by a company from any other company;
company
7. Any amount received from a person who, at the time of the receipt of the amount, was a director of the company or a relative of the director of a private company.
8. Any amount received from an employee not exceeding his annual salary, under a contract of employment with the company in the nature of non-interest
non bearing security
deposit;
9. Any non-interest
interest bearing amount received or held in trust
10. Any amount received in the course of or for the purposes of the business of the company as an advance
11. Any amount received by the company from AIF, Domestic Venture Capital Funds, Infrastructure Investment Trust and Mutual Funds registered with SEBI
12. Any amount of Rs.25 lacs or more received by a start up company,
company, by way of convertible note (convertible into equity or repayable within 5 years from date of issue) in a single
tranche, from a person.
13. Any amount received by the company under CIS in compliance with regulations framed by SEBI.
14. Any amount received by way of subscription in respect of a chit under Chit Fund Act.
15. Any amount accepted by Nidhi Company.
16. Any amount brought in by promoters of the company by way of unsecured loan in pursuance of stipulation of any lending financial institution or bank
17. Any amount raised by the issue of bonds or debentures secured by first charge or compulsorily convertible
convertible into shares of the company within 10 years.
 Topic: Acceptance of Deposits Prepared by:
by CS Tushar Pahade
Subject: Company Law Ms. Riddhi Verma
`
Contact 9881844466 or Visit cstusharpahade.com for more details on Video Lectures of CA & CS

General Provisions & Procedure of Acceptance for Deposit

General provisions for deposits

Procedure of Acceptance for Deposit
Every company to which Companies (Acceptance of Deposits) Rules, 2014
Keeping the procedures of acceptance of deposits in view, companies can be segregated in to three types’
apply, shall on or before the 30th day of June, of every year, file with the
viz. Private Company, Public company (other than eligible company) and eligible company. There are
Registrar, a return in Form DPT-3.
3. [Rule 16]
several procedural differences
differences among these companies, which are discussed below.
Quantum of deposits
Category of co. Private Co. Public Co. Public Co. (eligible Co. under sec. 76 of
Types of Co. Member Public (other than companies act.)
Private Company 100% of aggregate of Prohibited eligible)
paid up share Source of From directors and members From directors, members and general public
capital, free reserves deposit
and securities Resolution The company should pass a It is allowed to be taken subject to the limit of 25%
premium resolution at the general meeting. of the paid up share capital and free reserves.
Other Public 35% of aggregate of Prohibited However in case of govt. co., who is eligible, is
Company paid up share allowed to be taken subject to the limit
mit of 35% of
capital, free reserves the paid up share capital and free reserves.
and securities Circular Circular shall be issued to its In addition to Form DPT-1 same as pvt. co.
premium members by registered red post with The eligible company in vernacular newspaper
Eligible Company Up to 10 % of Upto 25 % of Acknowledgement due or by circulation in the state of companies has to file a
aggregate of the papaid aggregate of the paid electronic mode in Form DPT-1. copy of text of advertisement signed by a majority
up share capital, up share capital, free Circular shall be published at least of directors with the Registrar before 30 days of
free reserves and reserves and once in a leading English and publication. They y shall upload the same on their
securities premium securities premium vernacular newspaper having wide website, if any.
Govt. Company Upto 35 % of circulation in the State in which the
- aggregate of the paid registered office of the company is
up share capital and situated.
free reserves Display Optional Mandatory, if any
circular on
website
 Topic: Acceptance of Deposits Prepared by:
by CS Tushar Pahade
Subject: Company Law Ms. Riddhi Verma
`
Contact 9881844466 or Visit cstusharpahade.com for more details on Video Lectures of CA & CS

Points of Similarity

Category of Private Public Company Eligible company

Company Company (other than eligible) u/s/ 76 of the Act

Tenure of deposits The deposit shall not be repayable on demand or upon receiving a notice within a period of less than 6 months and more than 36 months. However, To meet the short
requirements of fund, such companies can accept or renew deposits for a period of less than six months but not less than three months and such deposits should not
exceed ten per cent of aggregate of paid up capital and free reserves
reserves of the company.
Statement Along with the circular a statement shall be circulated which shall contain the financial position of the company, the credit rating, the number of depositors and the
amount due.

Registration of circular The circular signed by majority of directors or their agents duly authorized along with the statement shall be submitted to registrar
r 30 days before the date of such issue.

Validity of circular 6 months from the end of the financial year in which it was issued or the date on which the AGM is held whichever is earlier.

Deposit insurance Condition of deposit insurance for public deposits has been removed permanently. (Amended as per Companies (Amendment) Act, 2017)
2

Conditions for deposits taken It is allowed to be taken without any limit. However, director has to furnish declaration at the time of money being given to the company that the amount is not being
from directors given out of funds acquired by him by borrowing or accepting loans or deposits
deposit from others.

Security If secured deposits are invited then the company shall create a charge on its assets referred to in Schedule III excluding intangible assets which shall not be less than the
amount remaining unsecured by deposit insurance.

Quoting of “Unsecured Where the proposed deposits is unsecured or is partly secured, the deposits shall be termed as “unsecured deposits” and shall be quoted in every circular, form,
Deposit” advertisement or in any other document relating to invitation or
or acceptance of deposits.

Deposit repayment reserve On or before 30th April of each year, a sum not less than 20% (As amended by Companies (Amendment) Act, 2017) of the amount of deposits maturing in the current
account financial year and the next financial
ncial year shall be deposited in a scheduled bank in a separate account called deposit repayment reserve account which shall be free from
charge or lien

Register One or more separate registers for deposits accepted or renewed shall be maintained at the registered office and entries shall
shal be made within 7 days from the date of
issuance of deposit receipt

Return of deposits A return shall be filed on or before 30th June of every year with the Registrar in Form DPT- 3 along with fee giving the status as on 31st March of that year duly audited
by the auditor of the company.

Penal rate of interest Amendment Act relaxes the minimum penalty of a company by linking this with the amount of deposits accepted, accordingly, the minimum fine is as rupees one crore
(Amended by Companies or twice the amount of deposit accepted by the company, whichever is lower. Further every officer of the company who is in default shall be punishable with
(Amendment) Act, 2017) imprisonment which may extend to seven years and with fine which shall not be less than twenty-five
twenty five lakh rupees. Maximum penalty remains unchanged.
 Topic: Acceptance of Deposits Prepared by:
by CS Tushar Pahade
Subject: Company Law Ms. Riddhi Verma
`
Contact 9881844466 or Visit cstusharpahade.com for more details on Video Lectures of CA & CS

Procedure & Conditions to Accept Deposits

1. Hold Board Meeting

2. Issue notice of general meeting to the members of the company. CONDITIONS FOR ACCEPTANCE OF DEPOSITS FROM PUBLIC
3. Hold the general meeting and pass resolution for acceptance of deposits. (OTHER THAN MEMBERS)
4. Issue circular to the members including therein a statement showing the
financial position of the company, the credit rating obtained, the total A public company having:-
number of depositors and the amount due towards depositors in respect
i) having a net worth of not less than 100 crore rupees
of any previous deposits and such other particulars as may be prescribed
ii) turnover of not less than 500 crore rupees
5. File the copy of aforesaid circular in the Form DPT-1
DPT along with such
iii) which has obtained the prior consent of the company in general meeting
statement with the Registrar within thirty days before the date of issue of
iv) and also filed the said resolution with the ROC
circular.
v) and where applicable, with the RBI before making any invitation to the
6. The company shall submit Form CHG-1 with Registrar for assets other
Public for acceptance of Deposits.
than intangible as
assets
sets and for an amount which shall not be less than the
amount remaining unsecured by the deposit insurance. Further, no Government company eligible to accept deposits under section 76 shall
7. After the expiry of 30 days of filing the circular in Form DPT-1 along accept or renew any deposits, if the amount of such deposits together with the
with application form is sent to all members by registered post with amount of other deposits outstanding as on the date of acceptance or renewal
acknowledgement
edgement due/ speed post/ electronic mail. exceeds thirty five percent of the aggregate of its paid up share capital and free
8. Collect duly signed application form along with money from the reserves.
members.
9. Issue receipts of deposits within 21 days of the receipts of money/ The procedure to accept deposits from public (other than members) can be
summarized as under:-
realisation of cheque.
10. Maintain register of deposits at its registered of
office
fice which shall contain 1. Convene board meeting and general meeting as specified earlier.
the details as prescribed under rule 14 Companies (Acceptance of 2. Submit Form MGT-14 with the ROC within 30 days of passing ssing the resolution.
Deposits) Rules, 2014 3. Issue circular and obtain credit rating.
11. Deposit such sum which shall not be less than twenty percent of the 4. Fill with ROC forms DPT-1, CHG--1 and company shall execute a deposit trust
amount of its deposits maturing during the financial year and the deed in Form DPT-2 at least seven days before issuing circular.
financial year next following and keeping it in a separate bank account 5. Further same procedure as carried on earlier from collecting application and
called deposit repayment reserve account. money from members to filling return of deposits.
12. Submit return of deposits in Form DPT-3 on or before 30th June each
year for information as on 31st March of respective year.