(With reference to The Companies (Acceptance of Deposits) Rules,2014)

[Submitted by CA. VMV S Rao,
Nellore, Andhra Pradesh]

May 6, 2014

Definition of “Deposit:

As per Section 2(31) “deposit” includes any receipt of money by way of deposit or loan or in any other form by a Company, but does not include such categories of amount as may be prescribed in consultation with the Reserve Bank of India.

Earlier this definition is not part of definition section of the Act and it is provided in Rules.

Definition is changed, now all money accepted as deposit or loan shall be treated as deposit except such categories as prescribed by RBI.

As per the New Act, NBFC’s are not covered by the provisions relating to acceptance of deposits and they will be governed under rules issued by Reserve Bank of India.

Acceptance of Deposits (Section 73)

  • A Company cannot accept deposits from persons other than its members.
  • A Company may accept deposits from its members subject to fulfillment of the following
    • Passing of resolution in a general meeting.
    • Issue of circular to members showing the financial position of the Company, the credit rating obtained, the total number of depositors and the amount due towards deposits in respect of any previous deposits accepted by the Company etc.
      • Circular in Form DPT-1
      • Deposit Trust Deed in Form DPT – 2 (to be executed seven days before executing circular)
    • Filing a copy of the circular with the Registrar within 30 days before the date of issue of the circular.
    • Providing deposit insurance.
    • Certification by the Company that it has not defaulted in the repayment of deposits.
    • Provision of security in respect of deposit and interest and creation of charge on company’s properties and assets.
    •  An amount of not less than 15% of the deposits maturing during a financial year shall be deposited in Deposit Repayment Reserve account which shall not be used for any other purpose.
  • A Public Company, having a net worth of not less than Rs.100 Crores or a turnover of not less than Rs.500 Crores , may accept deposits from persons other than its members, subject to compliance with above conditions referred and the rules prescribed, after consultation with the Reserve Bank of India. (Section 76)
    • Special Resolution to be passed in Annual General Meeting.
    •  Ordinary Resolution to be passed in Annual General Meeting if accepting deposits will not exceeds aggregate of its paid up share capital and free reserves. (Section 180(1)( c).
  • Deposits accepted by the Company before 1st April, 2014 or any interest thereon shall be repaid within one year of 1st April,2014 or the due date, whichever is earlier.
    • Form DPT-4 to be filed with Registrar before 30th June, 2014 along with Auditor’s
      Certificate (No specific format prescribed for auditor’s certificate)
    •  Every Company shall on or before 30th day of June of every year, file with Registrar a Return in Form DTP-3 along with fee and furnish the information contained therein as on 31st day of March of that year duly audited by auditor of the Company. (No specific format prescribed for auditor’s certificate).
  • The Form of application for deposits shall contain a declaration by the intending depositor to the effect that the deposit is not being made out any money borrowed by him from any other person.
  • Every Company shall furnish deposit receipt to depositors within a period of 21 days from the date of receipt of money or realization of cheque or date of renewal.
  • Every Company shall maintain Register of Deposits with particulars specified in Rules at its
    registered office and preserve it in good order for a period of not less than 8 years from the financial year in which the latest entry in the register.
  • As per Rule 2(1)( c) of The Companies (Acceptance of Deposits) Rules 2014, the deposit does not include:
    • any amount received from Government & Foreign Government.
    •  any loan received from Bank/Public Financial Institutions
    •  any amount received against issue of commercial paper
    •  any amount received by a Company from any other Company
    •  any amount received as share application money
      • If share application money is not refunded within 75 days of receipt of share application money for shares where shares are not allotted within 60 days of receipt of money shall be treated as deposits.
    • any amount received from a person who, at the time of the receipt of the amount, was a director of the Company.
    • any amount raised by the issue of bonds or debentures.
    •  Any amount received from employee of the Company.
    •  Any non-interest bearing amount received or held in Trust.
    •  Any amount received in the course of or for the purpose of the business of the
      • Advance should be appropriate within 365 days of acceptance of deposit.
    • 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 banks subject to certain conditions.
    •  Any amount accepted by a Nidhi Company in accordance with the rules made under Section 406 of the Act.
  • Any amount received by the Company, whether in the form of instalments or otherwise, from a person with promise or offer to give returns, in cash or in kind, on completion of the period specified , in cash or kind, on completion of the period specified in the promise, or offer, or earlier accounted for in any manner whatsoever shall be treated as deposit.
    • Various Monthly Schemes of Business Entity like Gold Deposit Scheme offered by Jewelers.
  • Terms and Conditions of Acceptance of Deposits:

    • No Company shall accept deposit whether secured or unsecured:
      • which is repayable on Demand
      • Upon receiving a notice within a period of less than 6 Months from the date of
        acceptance of deposit.
      • Upon receiving a notice more than 36 months from the date of acceptance of
    • A Company shall not accept or renew deposit from its members, if the amount of such deposits together with the amount of other deposits outstanding as on the date of acceptance or renewal of such deposits exceeds 25% of the aggregate of the paid-up share capital and free reserves of the company.

      • A Company can accept deposit from members only to the extent of 25% of the paid up capital and reserves.
      • This restriction in acceptance of deposit will give practical difficulties to Private Limited Companies.
    •  A Public Eligible Company shall not accept any deposit from its members more than 10% of paid-up capital and free reserves.
    •  A Public Eligible Company shall not accept any other deposit more than 25% of paid-up capital and free reserves.
    •  The rate of interest on Deposit shall not exceed maximum rate of interest prescribed by the Reserve Bank of India.
  • In case of repayment of deposit before expiry of period tenure of deposit after expiry of six month, the rate of interest shall reduced by 1%.
  • The Penal Provisions for violation of Section has not yet been notified by the Government.
    •  Penal provisions are very stringent.
  • Any contravention to any provision of the Rules for which no punishment is provided in the Act, the Company and every officer of the who is in default shall be punishable with fine which may extend to Rs.5,000/-, with a further fine which may extend to Rs.5,000/- for every day after the first day during which the contravention continues.