Acceptance of Deposits [Ch. V]

“Deposit” [R.2(1)(c)]

includes any receipt of money by way of a deposit or loan in any other form, by a company but excludes any amount received:

• From CG / SG, or from any other source whose repayment is guaranteed by CG / SG.

• From Foreign Governments, foreign or international banks, multilateral financial institutions subject to provisions of FEMA, 1999.

• as a loan or facility from any banking company or from SBI or any of its subsidiary banks.

• as a loan or financial assistance from PFIs notified by CG, or Insurance Companies or Scheduled Banks.

• against issue of commercial paper or any other instruments issued in accordance with the guidelines issued by the RBI.

• by a company from any other company.

• 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 Co 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.

• From director of the Co with declaration that it is not given out of borrowings or accepting loans from others.

• raised by the issue of bonds or debentures
  • secured by a first charge or a charge ranking pari passu on any assets referred in Schedule III excluding intangible assets; or
  • compulsorily convertible into shares of the Co within 10 years.

• from an employee of the Co not exceeding his annual salary in the nature of non – interest bearing security deposit.

• (Any non-interest bearing amount) received and held in trust.

• in the course of, or for the purposes of, the business of the Co, 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 365 days from date of acceptance of advance
  • in connection with consideration for an immovable property under an agreement or arrangement.
  • received under long-term projects for supply of capital goods.
  • towards consideration for providing future services in the form of a warranty or maintenance contract as per written agreement / arrangement
  • received and as allowed by any sectoral regulator or in accordance with directions of CG / SG
  • for subscription towards publication
  • As security deposit for the performance of the contract for supply of goods or provision of services

• 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.

• Any amount accepted by a Nidhi Company in accordance with the rules made u/s 406 of the Co Act 2013

• Any amount received by way of subscription in respect of a chit under Chit Fund Act 1882

• An amount up to ₹ 25 lakhs received by a start-up co by way of a convertible note (convertible into equity or repayable within 5 years).

• Any amount received from AIF, DVCFs, Ifra InvITs, MF registered with SEBI

“Depositor” [R.2(1)(d)]

• means –
• any member of the Co. who has made a deposit with the Co. u/s. 73(2); or
• any person who has made a deposit with an eligible company u/s. 76

Who can accept deposit

Quantum and Term of Deposits which can be accepted by Companies other than Eligible companies from MEMBERS [R.3(1), (3)]

Quantum of Deposits which can be accepted by eligible Co.

[R.3(1), (4)]

Quantum of Deposits by Govt. Co [R.3(5)]

Conditions in brief

• Pass a resolution in GM
• Issue a Circular (in case of acceptance of deposit from members) / Circular in the form of an advertisement (in case of acceptance of deposit from members) and file it with the RoC within 30 days of before the issue of circular
• Enter into a contract for providing Deposit Insurance at least 30 days before the issue of circular / advertisement or renewal
• Not applicable till the 31st March, 2018 or till the availability of a deposit insurance product, whichever is earlier
• Rate of interest and brokerage on acceptance / renewal of deposits shall not exceed the maximum rate of interest or brokerage provided by RBI for acceptance of deposits by NBFCs.
• In case of a Co inviting secured deposit shall provide security for the due repayment of deposit and interest thereon by way of [charge on its assets excluding intangible assets] + Deposit insurance. The security (not being in the nature of a pledge) shall be created in favour of a trustee for the depositors.
• If deposits are unsecured or partly secured then to state that such deposits are ‘unsecured deposits’ in circular, form, advertisements, invitation etc.
• Maintain liquid assets and create a separate bank a/c called Deposit Repayment Reserve a/c and deposit therein on or before 30th April each year ⁶NOT < 15% of the amount of its deposits maturing during (FY + next FY), which shall not be utilised for any purpose other than for the repayment of deposits.
  • amount remaining deposited shall not at any time fall below 15% of the amount of deposits maturing, until the end of the current FY and the next FY

Repayment of deposits, etc., accepted before commencement of Co Act 2013 [S.74]

• In respect of any deposit accepted by a Co before the commencement of Co Act 2013, 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, the Co shall—
  • file, within 3 months from such commencement or from the date on which such payments, are due, with the RoC, a statement of all the deposits accepted by the Co and sums remaining unpaid on such amount with the interest payable thereon along with the arrangements made for such repayment, and
  • repay within 3 years from such commencement or on or before expiry of term of the deposits, whichever is earlier.

Punishment for Contravention of S. 73 & S. 76

[S.76A]