ACCEPTANCE OF

ACCEPTANCE OF DEPOSITS
DEPOSITS (Section
(Section 73
73 To
To 76
76
))
Read With
Read With The
The Companies
Companies
(Acceptance Of
(Acceptance Of Deposits)
Deposits) Rules,
Rules, 2014
2014
Contents

7
Snapshot – Companies Bill (2012-2013)

18.12.2012 – Lok Sabha

08.08.2013 – Rajya Sabha

29.08.2013 – President Assent

30.08.2013 - Act
Introduction

Section 73 to 76 of Companies Act, 2013 and Companies (Acceptance of Deposits)

Rules, 2014 deals with Deposits

Definition (Sec 2(31) WEF 01.04.2014

“Deposit” includes any receipt of money by way of deposit or loan 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

“Depositor” : Any member of the company who has made a deposit with the company
in accordance with the provisions of sub-section (2) of section (73) of the Act OR
Any person who has made a deposit with a public company in accordance with the
provisions of section 76 of the Act.

Exclusions (Sec 75 WEF 01.04.2014

- Banking Companies
- NBFC’s
- Housing Finance Company
- Companies specified by the Central Government
Highlights of Section 73 - 76

1. Private company can accept deposit from its members up to 100% of

paid up Share capital + Free reserves. Provision of section 73 (a to e)
shall not apply to private company.

2. Only eligible companies can accept deposits from public. Eligible

Companies Section 76(1): means a public company having following
criteria.
Criteria

• Net worth >100 Crore

• Turnover > 500 Crore

3. Non Eligible Public Company can accept deposit only up to 25% of

paid up Share capital + Free reserves.

4. Deposits from Director – Company can accept deposit without any

limit.

5. In case of secured deposit- Create charge on assets and appointment

of Deposits Trustee.
The following is not included in deposit:
1) Any amount received from C.G. or S.G. or any other source whose repayment is
guaranteed by C.G. or S.G.

2) Any amount received from foreign governments, foreign banks, multilateral

financial institutions, foreign governments owned development financial
Institutions, credit agencies, collaborators, foreign authorities or persons resident
outside India subject to the provisions of FEMA.

3) Any amount received as a loan facility from any banking company or from SBI or
any of its subsidiaries or banking institution notified by C.G. or a new bank as
defined in clause (d) of section 2 of the Banking Companies Act, 1970 or
Banking Companies Act, 1980.

4) Any amount received as loan or financial assistance from PFI notified by C.G. in
consultation with R.B.I.

5) Any amount received against issue of commercial paper or any other instruments
issued in accordance with the guidelines or notifications issued by the R.B.I
The following is not included in deposit:
6) Any amount received by a company from any other company

7) Any amount received and held pursuant to an offer made towards subscription to and
securities , including share application money or advance towards allotment of securities
pending so long as such amount is appropriated only against the amount due on
allotment of the securities applied.
Explanation: If the securities for which such application money or advance money is
received are not allotted within 60 days from the date of receipt of application money
or advance and such money is not refunded within 15 days from the expiry of 60 days,
such amount shall be treated as a deposit. Adjustment to such money shall not be
treated as refund.

8) Any amount received from a person who at the time of such receipt was a director of
the company or a relative of the director of the private company. Provided that the
director or relative of such director furnishes to the company at the time of giving
money a declaration in writing to the effect that the amount is not being given out of
funds acquired by borrowing or accepting loans or deposits from others and the
company shall disclose the same in its Board report
The following is not included in deposit:
9) Any amount raised by issue of bonds or debentures secured by a first charge excluding
intangible assets of the company or bonds / debentures compulsorily convertible into
Shares of the company within 10 years.

Provided that if such bonds or debentures are secured by the charged Assets, the amount
of such bonds or debentures shall not exceed market value of such assets assessed by a
registered valuer.

9A) Any amount raised by issue of non-convertible debenture not constituting a charge on
The assets and listed on a recognised stock exchange as per regulations made by SEBI.

10) Any amount received from an employer 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

11) Any non-interest Bearing amount received and held in trust

The following is not included in deposit:
12)Any amount received for the purpose of business of the company:
a) as an advance for supply of goods or provision of service. Provided that such advance is
Appropriated against supply of goods or service within a period of 365 days from acceptance
of such advance;
b) as advance received in connection with consideration for an immovable property. Provided
that such advance is adjusted in accordance with the terms of agreement or arrangement;
c) as security deposit for performance of the contract for supply of goods or provision of services;
d) advance under long term projects for supply of capital goods
e) Advance towards consideration for providing future services in the form of a warranty or
maintenance contract as per written agreement if the period for providing such service does not
exceed the period as per common business practice or 5 years from the date of acceptance of such
service whichever is less
f) As advance received and as allowed by any sectoral regulator or in accordance with directions of
C.G. or S.G.
g) Advance for subscription towards publication, whether in print or in electronic to be adjusted
against receipt of such publications. Provide that in clause (a), (b) and (d) if the amount becomes
refundable due to reasons that the company accepting the money does not have necessary
permission or approval to deal with the goods or properties or services for which the money is
taken, then the amount received shall be deemed to be deposit. The amount shall be deemed to
be deposit on the expiry of 15 days from the date they become due or refund.
The following is not included in deposit:
13) Amount brought in by promoters of the company by way of unsecured loan in
pursuance of the stipulation of any lending financial institution or bank subject to
fulfilment of the following conditions:
The loan is bought in pursuance of the stipulation imposed by the lending institutions on
The promoters to contribute such finance. The loan is provided by the promoters
themselves or by their relatives or by both and The exemption under this sub-clause
shall be available only till the loans of financial institution or bank are repaid and not
thereafter.
14) Any amount accepted by a Nidhi company.
15) Any amount received by way of subscription in respect of a chit under the Chit Fund
Act, 1982.
16) Any amount received by the company under any collective investment scheme in
compliance with regulations framed by SEBI
17) An amount of 25 lakh or more received by a start-up company, by way of a
convertible note (convertible into equity shares or repayable within a period not
exceeding 5 years from the date of issue) in a single tranche, from a person.
Whether deposit can be held in joint name?

The depositors may hold the deposit in joint name not

exceeding 3.
Conditions for Acceptance of Deposits

Generally:
6 months to 36 months.

For meeting short term fund requirement:

3 months to 6 months.

However, for short term purpose the amount of deposit shall not exceed
10% of aggregate of the paid up share capital + free reserves + securities
premium.

Second amendment rules on 15.09.2015 which made paid up share capital

and free reserves as paid up share capital+ free reserves + securities
premium.
Conditions for Acceptance of Deposits
COMPANY MEMEBERS PUBLIC
ELIGIBLE Up to 10% of aggregate of the paid Up to 25% of aggregate of
up capital + free reserves + the paid up capital + free
securities premium account. reserves + securities
premium account.
COMPANY REFERRED Up to 35% of aggregate of the paid Prohibited
IN SECTION 73 (2) up capital + free reserves +
securities premium account.
Provided that the amount shall not
exceed 100% of the aggregate of
the paid-up share capital + free
reserves + securities premium.

GOVERNMENT - Up to 35% of aggregate of

the paid up capital + free
reserves + securities
premium account.

The rate of interest or the brokerage shall not in any case exceed the
maximum rate of interest prescribed by RBI.
Procedure for acceptance of Deposits by Eligible
and non eligible U/s. 73 (2).

Filing a copy of circular

Opening a deposit
Issuance of a circular to with the Registrar
repayment reserve
its members 30days prior issue of
account
circular

Certifying that the

Providing deposit Secured deposit- create
company has not
insurance charge
committed any default
Repayment of Existing Deposits (Sec.74) 

• Deposit Which were Deposits within the meaning of Deposit

before commencement of the new Act.
• File a statement with Registrar within 3 months from the
commencement of all existing deposits.
• Repay within 1 year or balance term as per terms agreed.
Officer in Default : Imprisonment
extending to 7 years or fine not
Company- less than 25 lakhs but not
exceeding 2 crores, or both.
Fine of not less than 1 crore and
not exceeding 10 crores
Acceptance of Deposits from Public by certain
Companies (Section 76)

 Eligible Companies - Public Companies having the following

criteria:

Criteria • Net worth >100 Crore

• Turnover > 500 Crore

 Credit Rating Mandatory

 Secured deposit- create charge

Credit Rating

Every eligible company shall at least once in a year obtain credit rating for the
deposits and a copy of such rating shall be filed with ROC in Form DPT-3. Further
the credit rating shall not be below the minimum investment grade rating
specified for NBFC in the Non Banking Financial Companies Acceptance of
Public Deposits (Reserve Bank) Directions, 1998 issued by the Reserve Bank of
India.
Issue of Circulars to Members
Every Private company shall issue a circular to its members by registered post with acknowledgement
due or by speed post or by electronic mode in Form DPT-1 and shall also publish the same in English
newspaper and in vernacular language newspaper having wide circulation in state where registered
office of the company is situated.

Every Eligible company shall issue a circular to its members in the form of advertisement in form DPT 1
and shall also publish the same in English language in English newspaper having country wide
circulation and in vernacular language in a vernacular newspaper having wide circulation in the state in
which the Registered office of the company is situated.
They shall also upload the same on website if any.

No company shall issue circular in the form of advertisement unless it is issued on the authority and in
the name of the BOD of the company. Further the circular needs to be filled with registrar for
registration not later than 30 days before the date of issue, and signed by a majority of directors of the
company
Validity of circular issued
A circular or circular issued in the form of advertisement shall be valid until
expiry of
6 months from:
The date of closure of financial year in which it is issued
OR
Until the date on which the financial statement is laid before the company in the AGM
OR
If AGM is not held the latest date on which that meeting should have been held
whichever is earlier

A fresh circular shall be issued in each succeeding financial year for inviting
deposits
during that financial year.
Insurance and Minimum Amount
Every private company and eligible company inviting deposits shall enter into a
contract providing for deposit insurance at least thirty days before the issue of
circular or advertisement for an amount covering minimum 20,000 rupees for
each
deposit.

However, Companies may accept the deposits without deposit insurance contract
till 31st March, 2017 or till availability of a deposit insurance product whichever
is
earlier.
Default in complying with deposit Insurance
If a company makes any default in complying with the terms and conditions of the
deposit insurance contract then the company shall either rectify the default immediately
OR
Enter into a new contract within 30 days and in case of non compliance the amount of
deposits covered under the Insurance contract along with the interest shall be repaid
within next 15 days.

Further if the company does not repay the amount within the said 15 days, it shall be
liable to pay an interest @ 15% p.a. for the period of delay and shall also be treated as
Having default.
Manner of creating charge:
Every company inviting secured deposits shall provide for security by way of a
charge on its assets excluding intangible assets for the due repayment of the
amount of deposit and interest of an amount which shall not be less than the
amount remaining unsecured by the deposit insurance.

The amount of deposits and interest payable thereon shall not exceed the
market value of the charged asset as decided by the valuer.
Appointment of trustees
No company referred in 73(2) or eligible company shall issue a circular
advertisement inviting secured deposit unless the company has appointed 1 or
more trustees for depositors for the purpose of creating security for the
deposits.

The company shall execute a deposit trust deed in Form DPT 2 at least 7 days
before issuing the circular.

Further, no trustee shall be removed from his office after Issue of circular and
before the expiry of his term except with The consent of all the directors
present at a meeting of the board.
Meeting of the Depositors
The trustee shall call for a meeting of all the depositor on:

Receiving a request in writing signed by at least one- tenth of the depositors in

value for the time being in force
OR
On happening of any such event which constitutes as a default and affects the
interest of the depositors.
Issue of Deposit Receipt
Within 21 days from the day of receipt of money or realisation of cheque or date
of renewal, the company shall issue deposit receipt to the depositor or to his
agent. The receipt must be signed by an officer duly authorised by the Board and
shall state the following:

Date of deposit

Name and address of the depositor

Amount received by the company as deposit

Rate of interest payable

Date on which the deposit is repayable.

Creation of depository repayment reserve
account
Every company shall on or before 30th April of each year deposit a sum not less
than 15% of the amount of deposits maturing in the current financial year and the
next financial year in a separate bank account with a scheduled bank called
Depository repayment reserve account.
Return of Deposits

 Every company shall before 30th day of June, file a return in form DPT-3

Disclosures in financial statements

 Every company other than a private company shall disclose in its financial
statement, by way of notes, about the money received from the director.

 Every private company shall disclose in its financial statements by way of notes
about the money received from the directors or relative of directors.
Penalty

Every company shall pay a penalty at a rate of 18% for the

overdue period.
Changes made to Companies Act 1956
The depositors being in the nature of unsecured creditors, had been subjected to a lot of
hardship and in many cases lost their hard earned money, the Act 2013 proposes to prohibit
companies from accepting deposits except from members. Further even for accepting
deposits from the members, stringent conditions have been stipulated which include :

1) Passing resolution in general meeting

2) Compliance with rules to be made in

consultation with the Reserve Bank of India

3) providing security for the repayment of

deposits
Changes made to Companies Act 1956
4) Issuance of circular to members including therein a statement showing the
financial position of the company; credit rating obtained; total number of
depositors and the amount due to these depositors in respect of previous
deposits accepted by the company

5) other particulars in such form and in such manner as may be

prescribed.

6) Filing copy of the circular along with the statement with the
Registrar 30 days before the date of the issue of the circular.

7) Depositing a sum which shall not be less than 15% of the amount of
its deposits maturing during the financial year and the financial year
next following in a Deposit Repayment Reserve Account.
Changes made to Companies Act 1956

8) Providing deposit insurance in such manner and to such extent as

may be prescribed.

9) Certifying that the company has not defaulted in the repayment of

deposit, accepted either before or after the commencement of the Act
or in the payment of interest on such deposits.

10) Where a company fails to repay the deposit or part thereof or any interest
thereon, the depositor 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.
Observations (Revised Act)

 While provision of security for the payment of sum and interest has been
made, the manner in which the security would be created has not been
specified and totally left to be decided as between the company and the
members

 No specific penal provision has been made where the company makes a
default in complying with the order of the Tribunal

 A public company having prescribed net worth or turnover may accept

deposits from persons other than its members subject to a stricter regime.
Such company will have to comply with Chapter V of Companies Act 2013,
2012 and rules made by Central Government after consulting Reserve Bank
of India
Case Law
Gopal K Maheswari v Hawk Multimedia (P.) Ltd.
and Others