Provisions relating to deposits along with the Companies (Acceptance of deposit)

Rules, 2014 are given below :

As per section 2(31),’ Deposits’ includes any receipt of money by way of deposits 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 RBI.

What is a Deposit?

‘Deposit’ in Company Law includes any receipt of money by way of deposits or loan or in any other form by a company, but does not include :

Any amount received from the Central Government or a State Government, or any amount received from any other source whose repayment is guaranteed by the Central Government or a State Government, or any amount received from a local authority, or any amount received from a statutory authority constituted under an Act of Parliament or a State Legislature;
Any amount received from Foreign Governments, foreign or international bank multilateral financial institutions;
Any amount received as a loan or facility from any Bank or Financial Institution;
Any amount received against the issue of commercial papers or any other instrument;
Any amount received by a company from any other company (Inter-corporate deposits);
Any amount received towards a subscription to any securities, including share application money or advances towards the allotment of securities pending allotment.
Any non-interest bearing amount received or held in trust;
Any amount received in the course of, or for the purposes of, the business of the company, such as an advance for the supply of goods or provision of services or sale of property, provided that if the aforesaid amount becomes refundable on account of not getting the requisite approval/permission, then the money should be refunded within fifteen days from the date it becomes due for refund. Otherwise, it shall be treated as a deposit ;
Any amount brought in by promoters of the company by way of unsecured loan subject to fulfillment of the following condition:

The loan is brought in pursuance of stipulation imposed by the lending financial institution or bank or the promoters to contribute such finance ;
The loan is provided by the promoters themselves or by their relatives or by both and not by their friends and business associates;
The exception shall be available only till the loans of the financial institutions or banks are repaid and not thereafter.

Types of Deposits in Company

1. Acceptance of Deposits from the Members (sec.73 of Companies Act 2013) – Any company can accept deposits from its members, subject to the passing of a resolution in a general meeting and subject to certain specified conditions.

In order to accept deposits from the members, the company has to certify, in circular, that it has not committed any default in the repayment of the deposits received either before or after the commencement of the act or payment of interest on such deposits.

2. Acceptance of Deposits from the Public (sec.76 of Companies Act 2013) – Only a public company, having a net worth of not less than one hundred crore rupees OR a turnover of not less than five hundred crore rupees can accept deposits from the public. Such companies are also known as Eligible Companies. Furthermore, they must also pass a special resolution to do so.

Exemptions

http://corporatelawreporter.com/companies_act/section-73-of-companies-act-2013-prohibition-on-acceptance-of-deposits-from-public/

Section 73 of Companies Act 2013

[Acceptance of Company Deposits]

*73. (1) On and after the commencement of this act, no company shall invite, accept or renew deposits under this act from the public except in a manner provided under this Chapter:

Provided that nothing in this subsection shall apply to a banking company and non-banking financial company as defined in the Reserve Bank of India Act, 1934 and to such other companies as the Central Government may, after consultation with the Reserve Bank of India, specify in this behalf.

(2) A company may, subject to the passing of a resolution in general meeting and subject to such rules as may be prescribed in consultation with the Reserve Bank of India, accept deposits from its members on such terms and conditions, including the provision of security, if any, or for the repayment of such deposits with interest, as may be agreed upon between the company and its members, subject to the fulfillment of the following conditions, namely:—

(a) issuance of a circular to its members, including therein a statement 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 warranties accepted by the company and such other particulars in such form and such manner as may be prescribed;

(b) filing a copy of the circular along with such statement with the Registrar within thirty days before the date of issue of the brochure;

1 [(c) depositing, on or before the thirtieth day of April each year, such sum which shall not be less than twenty percent. of the number of its deposits maturing during the following financial year and kept in a scheduled bank in a separate bank account to be called deposit repayment reserve account;]

(d) 2[(c) depositing, on or before the thirtieth day of April each year, such sum which shall not be less than twenty percent. of the number of its deposits maturing during the following financial year and kept in a scheduled bank in a separate bank account to be called deposit repayment reserve account;]

(e) certifying that the company had not committed any default in the repayment of deposits accepted either before or after the commencement of this act or payment of interest on 3[such deposits and where a default had occurred, the company made good the default and a period of five years had elapsed since the date of making good the default;] and

(f) providing security, if any, for the due repayment of the amount of deposit or the interest thereon including the creation of such charge on the property or assets of the company:

If a company does not secure the deposits or secures such deposits partially, then the deposits shall be termed as ‘‘unsecured deposits’’ and shall be so quoted in every circular, form, advertisement, or any related document to invitation or acceptance of deposits.

(3) Every deposit accepted by a company under sub-section (2) shall be repaid with interest in accordance with the terms and conditions of the agreement referred to in that sub-section.

(4) 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.

(5) The deposit repayment reserve account referred to in clause (c) of sub-section (2) shall not be used by the company for any purpose other than repayment of deposits.

FAQ’s

1. What is Section 73 of Companies Act, 2013?

Furnishing of deposit receipts to depositors.-

Every 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. Can company accept deposits from directors?

If the amount given by the director or his relative is out of borrowed funds, and declaration is received by the company to that effect then the transaction would fall under the category of “Deposits” and the company must comply with Deposit Rules.

3. What is a deposit in company law?

As per the Companies Act, 2013, a deposit is any money that is received, either by means of a deposit or a loan or any other form as may be prescribed, but does not include certain classes of transactions.

4. Can company take deposits?

The Companies Act, 2013 allows only banking companies, non-banking financial companies, housing finance company and company specified by the Central Government to accept invite, accept or renew deposits from the public.

5. What is not deposit under Companies Act, 2013?

(ix) any amount which has been raised by way of issuing bonds, or debentures secured by first charge assets as referred to in Schedule III of the Companies Act, excluding the intangible assets of company or bonds or debentures which shall be converted compulsorily into shares of the company within 10 years then such

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Section 73 Of Companies Act 2013: Deposits In Company Law

Jain Saloni

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