Deposits

By way of Excluding
Receipt of In any form
Deposit or negative list in
Money by company
Loan Definition

•Types of company accepting deposits

Chapter V Doesn’t Apply to
a) Banking Company
b) NBFC
c) Housing
• All laws made in consultation with RBI
 Acceptance of Deposits

Sec 73 Sec 76
From Members From Public

Every Company Eligible Company

PUBLIC COMPANY having:
Ordinary a) Networth > 100 Crore
Resolution Or
Conditions U/s b) Turnover > 500 crore
73(2)(a,b,c,e,f)
OR / SR
Sec 73(2) (a, b,c,e) + credit rating
+ secured
 Question

Ashish Ltd. having a net-worth of ` 80 crores and

turnover of ` 30 crores wants to accept deposits
from public other than its members. Referring to
the provisions of the Companies Act, 2013, state
the conditions and the procedures to be
followed by Ashish Ltd. for accepting deposits
from public other than its members.
(RTP MAY 2019)
 Question

ABC Limited having a net worth of 120 crore

rupees wants to accept deposit from its
members. They have approached you to advise
them regarding that if they fall within the
category of eligible company, what special care
has to be taken while accepting such deposit
from members.
(MTP MAY 2019)
Sec. 73(2) Accepting Deposit from Member
CONDITIONS
a) Circulate a Circular DPT-1 Among members with all details
b) File copy of Circular (DPT-1) with ROC within 30 Days before
issue of circular to others
c) Deposit Repayment Reserve A/c (DRRA)
On or Atleast 20% of In separate bank
Deposits  before 30th  amount of 
account in Scheduled
april of each deposit maturing bank called as DRRA
year following FY
NOTE: Min bal in DRRA should be 20% of amt of deposits maturing
during the FY.
d) No Subsisting Default  payment of P+I on any earlier deposits
e) Can be secured or Unsecured
(quoted in every circular)
 Question

State the procedure to be followed by

companies to accept deposits from its members
according to the Companies Act, 2013. What are
the exemptions available to the Private Limited
Companies?
(NOV 2018)
 Question

Atul Ltd. has passed a resolution in its general

meeting regarding accepting deposits from its
members. Can this company accept deposits
from its members under the Companies Act,
2013 ? If yes, state the conditions to be fulfilled
regarding this.
(MAY 2016)
 Sec. 76 Accepting Deposit from Public
Even this Company needs to follow
a) Basic Conditions  Sec. 73(2)(a,b,c,e)
b) Additional Condition 1

Company shall  Sufficient  In favour of

provide for to cover trustee
security by P+I
way of charge
c) Additional Condition 2
Obtain credit rating from recognised Agency
(before acceptance + every year)
+
Rating should not be below minimum rating for NBFC decided by RBI
 Maximum Amount of Deposits
Type of From Maximum limit of Conditions u/s
Company deposits 73(2) (a) to (e)

Eligible members 10%

Public 
company Public 25%

Eligible Public members + 35 %
Government
company
public

 Maximum Amount of Deposits
Type of Company From Maximum limit Conditions u/s
of P.U + F.R + 73(2) (a) to (e)
S.P.A
Other Public Co
(not eligible )
members 35% 
• A Specified IFSC members 100%
Public company X
• A private
company
Start up Private Co members No limit
(Upto 10 years X
from incorp. )
Private Co (which members No limit
satisfies X
conditions)(next
*Conditions to be fulfilled by a Private Company (all)

a) Not an associate or a subsidiary company of

any other company.
b) Borrowings from Banks or FI or Body Corp. is
less than
a) twice of its Paid-up capital or
b) 50 Crore
c) Has not defaulted in the repayment of such
borrowings subsisting at the time of accepting
deposits u/s 73
 True or False
ABC Private Limited may accept the deposits from
its members to the extent of ` 50.00 Lakh, if the
aggregate of its paid-up capital; free reserves and
security premium account is ` 50.00 Lakh.
A Government Company, which is eligible to accept
deposits under Section 76 of the Companies Act,
2013 cannot accept deposits from public exceeding
25% of the aggregate of its paid- up capital, free
reserves and security premium account.
(MAY 2019)
 Other Important Points
1. Interest / brokerage cannot be more than as prescribed by RbI for
nbFCs (rule 3)
2. Company cannot accept deposit which is repayable
a) On Demand
b) Less than 6 months
c) More than 36 months
Except : if deposit  does not exceed 10% (P+F+S) 6months can be reduced
to 3 months
3. Give receipt to depositor / agent within 21 days
4. Every year file a return before 30th June in DPT- 3 (rule- 16)
5. Penal Interest – 18% p.a. (Rule 17)
6. On permature termination – ROI reduced by 1 % for remaining
period ( if less than 6 months not considered and 6 months or
more , considered as a year )
 NEGATIVE LIST FOR DEPOSITS

2
D iLiP
is having
2
WINE in A C with
GF
D  Director  Amt received from Debtor
• Director of Public or Private Co.
• Relative of Director of private co.

i. Written Declaration that amount
not given out of borrowing from
others.
ii. Disclosed in board report
iii. Disclosed in notes to accounts
 D  Debentures
i. Secured debentures  Not deposit
(M.V of asset covers amt of debentures)
ii. Unsecured debentures  deposits
iii. Conv. Deb. Into shares

Conversion within 10 years More than that

 
Not deposit Deposit
iv. Unsecured Deb.+ Non Convertible

Listed on S.E

Not deposits
L Loan from banks and F.I
P Promoters

By way of unsecured loan but lended from bank or
F.I

Conditions

i. By promoter or relative
ii. Loan to banks & F.I paid by him
iii. Exception till such loan paid to banks
W Warranty  Advance for Warranty
Not deposit if

 Period does not exceed
a) 5 years
w.e.less
b) As per business practice
 Refunded when due
If not refunded within 15 days it
becomes due, it is deposit from date of
refund.
I Inter – Corporate loans
N Nidhi Company  Amt accepted as per
rules
E Employee  Security deposit from
employees

Not deposit if
Non –interest bearing
Amt does not exceeds annual salary of employee
Deposit if interest bearing or amt exceeds his
annual salary.
A  Application money on subscription
• For Any security
• If not allotted within 60 days

Shall be refunded in next 15 days

Otherwise deposits
• If adjusted against any other
purpose other than for allotment 
then deposit
 A Advance
Goods or For supply of For sale of
Services capital goods Immovable

property

• If adjusted within 
Deposits
365 days Same like supply
• If not refunded
• Rules of 365 days 
of capital goods
not applicable if
within 15 days from
date it becomes due point
legal proceeding
• If not refunded or
within 15 days • Not refunded inf
from due date, necessary
then deposits permission or
(same rule for approval not
security deposit for obtained
advance )
C Commercial Papers  Issue
G Government  Amt recd. From Gov.

C.G
S.G
Local authority
Statutory authority
Any other (repayment Guaranteed by C.G/S.G)
F Foreign
Govt.
Banks
Collaborators
Citizen
Body Corporate
 Question

• Define the term 'deposit' under the provisions of the Companies Act,
2013 and comment with relevant provisions that the following
amount received by a company will be considered as deposit or not;
1. Rs.5,00,000 raised by Rishi Ltd. through issue of non-convertible
debenture not constituting a charge on the assets of the company
and listed on a recognised stock exchange as per applicable
regulations made by Securities and Exchange Board of India.
2. Rs.2,00,000 received from Mr. T, an employee of the company who
is drawing annual salary of r 1,50,000 under a contract of
employment with the company in the nature of non-interest
bearing security deposit.
3. Amount of Rs.3,00,000 received by a private company from a
relative of a Director, declared by the depositor as out of gift
received from his mother.
(NOV 2019)
 Question
Discuss the following situations in the light of ‘deposit
provisions’ as contained in the Companies Act, 2013 and
the Companies (Acceptance of Deposits) Rules, 2014, as
amended from time to time.
i. Polestar Traders Limited received a loan of Rs. 30.00
lacs from Rachna who is one of its directors. Advise
whether it is a deposit or not.
ii. Is it in order for the Diamond Housing Finance
Limited to accept and renew deposits from the public
from time to time?
(MTP MAY 2020)
 Dividend – Introduction

• Chapter VIII
• Sec. 123 to Sec. 127
• Definition  Sec. 2(35)  Dividend includes interim
dividend
• Right to claim dividend arise only when dividend is
declared
• Dividends is paid in proportion to the amount paid – up
 Sources
Dividend
Basics Mode of Using Free Reserves Other points
 Latin word (Sec. 123(1)) Payment Whenever company uses past  Rate of declared
‘Dividendum’ profits / reserves / accumulated dividend cannot be
means a thing to  Profits of  By cash profits more than
be divided current year recommended
 By cheque Rule 3 should be complied
 Profit available for  Company may transfer
distribution of  Accumulated  Rate of dividend cannot be
 Dividend more than any amount into
dividend known as profits of reserve (not
‘divisible profit’ warrant
previous Average rate of Preceding 3 compulsory)
 It is not debt till it years  Crediting in years
is declared  Capital profits can be
(Reserves) bank account Note: This rule is not applicable if used for payment if it is
 It is appropriation company has not paid dividend in any actually realised
 ECS year
of profit
Follow Rule 3  If company paying
 Two Types  Amount that can be drawn
 But Cannot from reserves interim dividend and it
 Final  Both 1 and 2 be paid in has incurred loss upto
At AGM 1/10th of PUC + FR (as per previous quarter end
 Money by Kind i.e. previous F.S) this year
Recommended by
CG / SG goods, gift or
BOD
giving bonus  Balance to be kept in FR not Rate of dividend should
Declared by less than 15% of PUC not be higher than
SHAREHOLDERS share instead average rate of
Since they Rule 3 does not apply to 100%
 Interim of dividend is preceding 3 years
gave government company (i.e. all
Declared by BOD not allowed shares held by CG/ SG)
guarantee
 Note –
1. For paying dividend , adjust current year Profit with
a) Carried over previous losses and deprecation not provided in previous year or years are set off
b) Excludes notional and revaluation profits.
2. Only free reserves can be used, Capital reserves cannot be used can’t be used
3. In case of joint shareholders, the divided may be paid to one of the joint shareholders
who is first named in the Register of Members
4. No dividend if Sec. 73 & Sec. 74 (deposits) not complied
5. Depreciation shall be provided as per Scd. II
6. Normally dividend paid cannot be revoked except
a) Declaration ultra vires
b) Company ceases to be going concern
7. All rules of normal dividend applies to interim dividend.
 Interim Dividend (Sec 123)
Dividend decl. bet 2 AGMs

By Board
Sources –
1. Surplus in P&L Account
2. Profits of FY
3. Profits generated in the FY till quarter prec the dt. Of decl. of interim dividend

If loss in current year till end of quarter

Avg. rate of dividend of immediately preceding
Rate of interim dividend≤ 3 F.Y
Other Pts. – Shall be paid within 30 days, once decl.
cannot be revoked.
 Practical Question
MNP Ltd. has a paid up share capital of ` 10 crore and free
reserves of ` 50 crore, as on 31st March, 2019. The company
made a loss of ` 40 lakh after providing for depreciation for
the year ended 31st March, 2019 and as a result, the
company was not in a position to declare any dividend for
the said year out of profits. However, the Board of directors
of the company announced the declaration of dividend of
20% on the equity shares payable out of free reserves. The
average dividend declared by the company in the last three
years is 25%. Referring to the provisions of the Companies
Act, 2013, examine the validity of declaration of dividend.
(RTP MAY 2020)(MTP N18/M19)
 Practical Question
Cadila Ltd. incurred loss in business upto current
quarter of financial year 2018-19. The company has
declared dividend at the rate of 12%, 15% and 18%
respectively in the immediately preceding three
years. In spite of the loss, the Board of Directors of
the company have decided to declare interim
dividend @ 15% for the current financial year.
Examine the decision of Cadila Ltd. stating the
provisions of declaration of interim dividend under
the Companies Act, 2013.
(May 2018/2019)(MTP MAY 2020/2021)
 Theory Question
Komal Ltd. declares a dividend for its shareholders
in its AGM held on 27th September, 2018. Referring
to provisions of the General Clauses Act, 1897 and
Companies Act, 2013, advice:
(i) The dates during which Komal Ltd. is required
to pay the dividend?
(ii) The dates during which Komal Ltd. is required
to transfer the unpaid or unclaimed dividend to
unpaid dividend account?
(Nov. 2018)
 Time limit for payment of Dividend  Final Dividend
Recommended by
BOD

By passing OR
Declared in AGM Rate of declared should not be Rate of dividend
dividend  more than recommended

Transfer amount to Within 5 days of declaration
Separate Bank N.A to 100% government Co.
Account

Pay Amount Within 30 days of declaration

Or else pay 18% p.a. for period of default
(Sec 127)
 (Sec 124)
Transfer unpaid / Within 7 days from completion of 30 days In unclaimed dividend account
Unclaimed amount in If late then also pay 12% p.a.
separate bank
account N.A. to 100% government co.

Publish list on Within 90 days from transfer to separate account

Of shareholder who have not claimed
website

Transfer unclaimed If not claimed till 7 years from day it becomes due
amount to Investors
education &
Protection Fund
(IEPF)

Special Point:
If no dividend is claimed for a SHARE then such SHARE should be transferred to IEPF
account.
 Theory Question
The Director of Happy Limited proposed dividend at 12% on equity shares
for the financial year 2016-17. The same was approved in the annual
general meeting of the company held on 20th September, 2017. The
Directors declared the approved dividends. Analyzing the provisions of the
Companies Act, 2013, give your opinion on the following matters:
i. Mr. A, holding equity shares of face value of Rs. 10 lakhs has not paid
an amount of Rs. 1 lakh towards call money on shares. Can the same
be adjusted against the dividend amount payable to him?
ii. Ms. N was the holder of 1,000 equity shares on 31st March, 2017, but
she has transferred the shares to Mr. R, whose name has been
registered on 20th May, 2017. Who will be entitled to the above
dividend?
(Nov 2018)(May 2019)(RTP MAY 18/21)
 Theory Question
RST Ltd. declared dividend at the rate of 20% for the financial
year 2017-2018 in the AGM scheduled on 15th June 2018. As RST
Ltd. is left with certain unpaid and unclaimed dividend, it
transferred amount of unpaid and unclaimed dividend to UDA
(unpaid dividend account). After remaining unpaid and
unclaimed for more than 2 years in the UDA, some of the entitled
shareholders made liable RST Ltd. for noncompliance of section
124, and claimed for their unpaid dividend amount. RST Ltd.
denies saying that there were certain legal issues on the
entitlement of the dividend amount to the respective shareholders.
State in the light of the given facts, whether the allegation marked
by shareholders and claim for the divided amount, against RST
Ltd. is justifiable?
(RTP MAY 2019)
 Practical Question
YZ Ltd is a manufacturing company & has
proposed a dividend @ 10% for the year 2017-
18 out of the current year profits. The company
has earned a profit of Rs. 910 crores during
2017-18. YZ Ltd. does not intend to transfer any
amount to the general reserves of the company
out of current year profit. Is YZ Ltd. allowed to
do so? Comment.
(Nov 2018)(MTP M 19/N 20)
 Theory Question
Mars Ltd. declared and paid dividend in time to all its equity holders
for the financial year 2016-17, except in the following two cases:
i. Mrs. Sheetal, holding 250 shares had mandated the company to
directly deposit the dividend amount in her bank account. The
company, accordingly remitted the dividend but the bank returned
the payment on the ground that there was difference in surname of
the payee in the bank records. The company, however, did not
inform Mrs. Sheetal about this discrepancy.
ii. Dividend amount of Rs. 50,000 was not paid to Mr. Piyush,
deceased, in view of court order restraining the payment due to
family dispute about succession.
You are required to analyze these cases with reference to provisions of
the Companies Act, 2013 regarding failure to distribute dividends.
(May 19)(MTP NOV 19/MAY 21)
 Practical Question
The Annual General Meeting of ABC Limited declared a
dividend at the rate of 30 percent payable on paid up equity share
capital of the Company as recommended by Board of Directors
on 30th April, 2019. But the Company was unable to post the
dividend warrant to Mr. Ranjan, an equity shareholder of the
Company, up to 30th June, 2019. Mr. Ranjan filed a suit against
the Company for the payment of dividend along with interest at
the rate of 20 percent per annum for default period. Decide in the
light of provisions of the Companies Act, 2013, whether Mr.
Ranjan would succeed? Also, state the directors’ liability in this
regard under the Act.
(MTP NOV 2019)
 Practical Question
Referring to the provisions of the Companies Act, 2013,
examine the validity of the following :
i. The Board of Directors of Anand Ltd. proposes to
declare dividend at the rate of 20% to the equity
shareholders, despite the fact that the company has
defaulted in repayment of public deposits accepted
before the commencement of this Act.
ii. Whether a Company can declare dividend for the
financial year in which it incurred loss.
(NOV 2019)
Investors Education & Protection Fund (Sec 125)
SOURCE APPLICATION

A Application Money not refunded  Refund

B Being Money unpaid of matured deposit, debenture, pref  Refund
shares & interest there on
C Company’s unclaimed dividend for 7 years
D Donations from CG/SG/any Co./ other institutions
E Earlier Act, 1956

F Fractional shares left unsettled during amalgamation,

merger or issue of bonus shares
G Govt. Grants
H  Haram ki kamai – Shares or money disgorged by  Distribution of disgorged amount
Govt. because of fraudulent transaction to aggrieved party
I Investment income from money in fund
Investors Education & Protection
Fund
SOURCE APPLICATION
Promotion of investors education &
awareness
Helping non-competent by
reimbursing legal expenses in case
of suit for non-compliances of
companies Act.
 Theory Question
State any 6 amounts that can be credited to
the Investor Education and Protection
Fund. Give your answer as per the
provisions of the Companies Act, 2013.
(MTP MAY 2019)
 Shares held in abeyance (sec 126)
• Where instrument of transfer is delivered to
company for registration and transfer not
registered
• Company will transfer such shares to unpaid
dividend account , nor pay right shares and
bonus shares
• Till registered shareholder ask in writing to
pay it to transferee