Are you a public limited company wanting to raise funds from public through deposits under the Companies Act, 2013? First understand the nitty-gritty of deposits under the Companies Act, 2013.
Applicable Provisions
Sections 73- 76A of the Companies Act, 2013
Rule 2 to 18 & 21 of Companies (Acceptance of deposits) Rules, 2014 and
Rule 73 of NCLT Rules, 2016
Applicability
All companies except:
Banking Company
Non-Banking Financial Companies as per the RBI Act 1934
A Housing Finance Company registered with the national Housing bank established under National Housing Bank Act 1987
Any other company notified by the Central Government in consultation with the RBI.
Definition
As per the provisions of Companies Act, 2013, “deposit” means any receipt of money by way of deposit or loan or in any other form by a company, but deposit does not include the following: -
1. Any amount received from –
i. | the Central Government; or |
ii. | a State Government; or any amount received from any other source whose repayment is guaranteed by the Central Government or State Government; or |
iii. | any amount received from a local authority; or |
iv. | any amount received from statutory authority constituted under an Act of Parliament or a State Legislature |
2. Any amount received from -
i. | Foreign Governments; or |
ii. | Foreign or international banks; |
iii. | Multilateral financial institutions; |
iv. | Foreign Governments owned development financial institutions; |
v. | Foreign export credit agencies; |
vi. | Foreign collaborators; |
vii. | Foreign body corporates; |
viii. | Foreign citizens; |
ix. | Foreign authorities. |
3. Person’s residents outside India subject to the provisions of Foreign Exchange Management Act, 1999 (42 of 1999)
4. Any amount received as -
i. | A loan or facility from any banking company; |
ii. | From the state Bank of India or any of its subsidiary banks; |
iii. | From a banking institution notified by the Central Government under section 51 of the Banking Regulation Act, 1949 (10 of 1949); |
iv. | A corresponding new bank as defined in clause (d) of section 2 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980); |
v. | From a cooperative bank as defined in clause (b-ii) of section 2 of the Reserve Bank of India Act, 1934 (2 of 1934) |
5. Any amount received as loan or financial assistance from –
i. | Public Financial Institutions notified by the Central Government; |
ii. | Any regional financial institutions; or |
iii. | Insurance companies; or |
iv. | Scheduled Banks as defined in the Reserve Bank of India Act,1934 (2 of 1934) |
6. Any amount received against issue of commercial paper or any other instruments issued in accordance with the guidelines or notification issued by the Reserve Bank of India.
7. Any amount received by the company from any other company.
8. Any amount received and held pursuant to an offer made in accordance with the provisions of the Act towards subscription to any securities, including share application money or advance towards allotment of securities pending allotment.
Except the following:
If the securities for which application money or advance for such securities was received cannot be allotted within 60 days from the date of receipt of the application money or advance for such securities and such application money or advance is not refunded to the subscribers within 15 days from the date of completion of sixty days, such amount shall be treated as a deposit under these,
any adjustment of the amount for any other purpose shall not be treated as refund.
9. Any amount received from a person who, at the time of the receipt of the amount, was a director of the company or the relative of the director of a private company.
10. Any amount raised by the issue of bonds or debentures secured by a first charge or a charge ranking pari-passu with the first charge on any assets referred to in Schedule III of the Act excluding intangible assets of the company; or bonds or debentures compulsorily convertible into shares of the company within ten years
11. Any amount raised by the issue of non-convertible debentures not constituting a charge on the assets of the company and listed on recognised stock exchange as per applicable regulations made by Securities and Exchange Board of India.
12. Any amount received from an employee of the company not exceeding his annual salary under a contract of employment with the company in the nature of non-interest bearing security deposit.
13. Any non-interest-bearing amount received and held in trust.
14. Any amount received in course of, or for the purposes of the business of the company as an advance-
i. | for the supply of goods or provision of services for upto 365 days (in case of any advance which is due to any legal proceedings before any court of law, the time limit of 365 days shall not apply) |
ii. | consideration for property under an agreement, |
iii. | as security deposit for the performance of the contract for supply of goods or provision of services, |
iv. | received under long term projects for supply of capital goods except those covered under item (b) |
v. | towards consideration for providing future services in the form of a warranty or maintenance contract as per written agreement or arrangement (if the period for providing such services does not exceed the period as per common business practice or five years, from the date of acceptance of such service whichever is less) |
vi. | received and as allowed by any sectoral regulator or in accordance with directions of Central or State Government, |
vii. | for subscription towards publication, whether in print or in electronic to be adjusted against receipt of such publications, |
15. Any amount brought in by promoters of the company by way of unsecured loans in pursuance of the stipulation of any lending financial institution.
16. Any amount received by a Nidhi company in accordance with the rules made under section 406 of the Act.
17. Any amount received by way of subscription in respect of chit under the Chit Funds Act, 1982(4 of 1982).
18. Any amount received by company under any collective Investment scheme in compliance with regulations framed by the Securities and Exchange Board of India.
19. Any amount of twenty-five lakh rupees or more received by a startup company, by way of convertible note (convertible into equity shares or repayable within a period not exceeding five years from the date of issue) in a single tranche, from a person.
20. Any amount received by a company from –
(i) Alternate Investment Funds;
(ii) Domestic venture Capital Funds
(iii) Infrastructure Investments Trusts;
(iv) Real Estate Investment Trusts;
(v) Mutual Funds registered with the Securities and Exchange Board of India
Prohibition on Acceptance of Deposits (Section 73)
No company can accept deposits unless following conditions are satisfied:
Pass a resolution in General meeting
Issuing circulars to its members (which shall include financial statements, credit rating obtained, total no. of depositors etc.) in for DPT-1.
File copy of circular with ROC within 30 days before date of issue of circular.
Depositing on or before 30th April each year an amount at least 20% of the amount of deposit maturing in the following financial year and keep it in deposit repayment reserve account with schedule bank.
Certifying that company has not defaulted in repayment of deposits. Where there was a default on the part of the company, and the company has made good of the same, and a period of five years has passed since the default has been made good.
A security has to be provided for the deposits accepted, and where there is no security provided, such deposits will be shown as Unsecured Deposits in all documents pertaining to the deposits.
Damages for Fraud (Section 75)
If company fails to repay the deposit and it is proved that the deposits had been accepted with intent to defraud the depositors then every officer of the company who was responsible for the acceptance of such deposit shall be liable under section 447 (punishment for fraud)
Acceptance of Deposits from Public by Certain Companies (Section 76)
Following class of companies can accept deposits from public:
Having a net worth of not less than 100 crore;
Having turnover of not less than 500 crore;
Has obtained consent of the company in general meeting by passing a resolution;
Has filed resolution with ROC before making any invitation to public for acceptance of deposits.
Additional Requirements:
Company is required to obtain credit rating from recognised credit rating agency at the time of invitation of deposits
The company is also required to obtaining the credit rating every year during the tenure of deposits.
The company accepting deposits from the public shall create a charge on the assets(of amount at least equal to the amount of deposits accepted) within 30 days of such acceptance.
Punishment for Contravention of Section 73 and Section 76 (Section 76A)
Company | 1 crore rupees or twice the amount accepted by the company whichever is lower which may extend to 10 crore rupees |
Officers in Default | Imprisonment which may extend to 7 years and fine of rupees 25 lakhs to 2 crore rupees |
Certification by Chartered Accountant
Certification of CA is required only if following items are selected in the form for Return of Deposits (DPT-3):
Option of Return of Deposits or
Return of Deposit and particulars of transactions by a company not considered as deposit.
Applicable e-Forms
DPT-1- Circular of members for inviting deposits
DPT-2- Deposit Trust Deed
DPT-3- Return of Deposits (to be filed on or before 30th June every year)
DPT-4- Statement regarding deposits existing on the commencement of the Act.
Disclaimer: This article is intended for educational and informational purpose only. It is recommended to seek the assistance of a Practising Company Secretary or consultant in India to understand the applicable laws for your business.
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