Deposits Under Companies Act, 2013

Deposit Under Companies Act, 2013

What can be regarded as Deposit?

Under the provisions of Companies Act, 2013 read with Companies (Acceptance of Deposits) Act, 2014, Deposit includes any receipt of money by way of deposit or loan or in any other form by a company, but does not include:

1.  Amount received from the Central Government, State Government, Local Authority or Statutory Authority constituted under an Act of Parliament or a state Legislature;
2.  Any amount received from any other source whose repayment is guaranteed by the Central Government or a State Government
3.  Any amount received from Foreign Government, foreign or international banks, multilateral financial institutions, foreign export credit agencies, foreign collaborators, foreign bodies corporate and foreign citizens, foreign authorities or persons resident outside India subject to the provisions of Foreign Exchange Management Act (FEMA).
4.  Any amount received as a loan or facility from banking Company, SBI, Co-operative Banks, etc notified by Central Government as per RBI Act
5.  Any amount received as loan or financial assistance from Public Financial Institutions, Regional Financial Institutions, Insurance Companies or Scheduled Banks
6.  Any amount received against Commercial Papers, etc.
7.  Any amount received by a Company from any other company
8. Any amount received pursuant to an offer towards subscription to any securities, including share application money or advance, pending allotment

Exception:

a)  If securities are not allotted within 60 days from the date of receipt of the application money or advance and

such amount is not refunded to the subscribers within 15 days from the date of completion of 60 days, such amount shall be treated as a deposit.

- Any share application money is pending allotment prior to 1^st April 2014 is also pending as on 31^st March 2015, then it was to be refunded by 1^st June 2015.

b) Amount is required to be actually refunded as any adjustment of the amount for any other purpose shall not be treated as refund

9.    Any amount received from directors of the company or any of their relatives

A declaration in writing should be submitted to company regarding amount is deposited with company out of his own funds.

10.   Bonds / debenture secured by first charge on any assets excluding intangible assets or convertible into shares within 10 years (5 years before 29.06.2016)

11.  Any amount raised by issue of non-convertible debentures listed on a recognised stock exchange

12.  Any amount received from employee under a contract of employment not exceeding his annual salary and the amount should be interest free security deposit

13.  Any non-interest bearing amount received and held in Trust

14.  Any amount received in the course of or for the purposes of the business of, the business of the company:

a.    For supply of goods or provision of services provided that such advance is appropriated against supply of goods or provision of services within a period of 365 days.

b.    As advance in connection with consideration for an immovable property under an agreement, whereas such advance is adjusted as per terms of agreement or arrangement.

c.     As Security deposit for performance of contract for supply of goods or provision of services

d.    Advance under long term projects for supply of capital goods (excluding immovable property)

e.    Advance for warranty or maintenance (AMC) as per written contract for period prevalent as per common business practice but not exceeding 5 years (inserted w.e.f. 29th June 2016)

f.      Advance received and as allowed by any sectoral regulator or in accordance with directions of Central or State Government (inserted w.e.f. 29th June 2016)

g.    Advance for subscription towards publication (in print or electronic) to be adjusted against receipt of such publications

Note :

i) Point No. e, f and g was inserted w.e.f. 29th June 2016

ii) If the amount received in point no. a, b and d above become refundable due to reason that the company does not have necessary permission or approval to deal in goods or properties or services, then amount received shall be deemed to be deposits on the expiry of 15 days from the date they become due for refund.

15.  Any amount brought in by the promoters of the company by way of unsecured loan due to conditions imposed by lending financial institution or bank where

Ø  The loan is brought in due to condition imposed by lending FI or bank

Ø  Loan is brought in by promoters or their relatives or both AND

Ø  Exemption is available till the time amount is repaid to FI or bank

16.  Any amount accepted by a Nidhi Company in accordance with rules made under section 406

17.  Any amount received by way of subscription in respect of Chit under the Chit Fund Act, 1982

18.  Any amount received by the company under any collective investment scheme under rules framed under SEBI regulations

19.  An amount of 25 lakhs or more received by a start up company by way of convertible note in a single tranche from a person

20.  Any amount received by a company from Alternate Investment Funds, Domestic Venture Capital Funds, Infrastructure Investment Trusts and Mutual Funds registered with SEBI in accordance with regulations made by it.

Deposits from Members

A Company may accept deposit from its members after passing resolution in general meeting under section 73(2) of the Companies Act, 2013 read with Companies (Acceptance of Deposits) Rules, 2014

W.e.f. 19^th Sepember 2017 after amendment brought in by Companies (Acceptance of Deposits) Amendment Rules 2017,

Maximum Limit of Deposit can be accepted in case of Private Companies:

Start up Companies	Other Than Start Up Companies
Without any limit	Without any limit	With limit
ØFor 5 Years from the date of Incorporation	If all the below 3 conditions have complied: Ø    Not an Associate or Subsidiary Company Ø    Borrowing from Banks/FIs               < 200% of Paid up capital (maxm upto 50 Crores) Ø    Has not defaulted in repayment of such borrowing	Upto 100 % of aggregate of Paid up Capital         + Free Reserves         + Securities Premiums

Maximum Limit of Deposit can be accepted in case of Public Companies:

Specified IFSC Companies (Unlisted Public Companies licensed to operate by RBI/SEBI/IRDA from International Financial Services Centre located in Multi Services SEZ)	Eligible Companies (Public Company with Net worth >= Rs. 100 Crores or Turnover >= Rs. 500Crores)	Other Public Companies
With limit	With limit	With limit
Upto 100 % of aggregate of Paid up Capital         + Free Reserves         + Securities Premiums	Upto 10% of aggregate of Paid up Capital         + Free Reserves         + Securities Premiums	Upto 35 % of aggregate of Paid up Capital         + Free Reserves         + Securities Premiums

All the companies accepting deposits have to file annual return of deposits in Form DPT-3 by June 30 in the next financial year.

Deposits from Directors

Any amount received from a person who is director of company at the time of receipt of money is not a deposit under Companies Act, 2013.

However, a declaration in writing that the amount is not being given out of funds acquired by him by borrowing or accepting loans or deposits from others.

Moreover, w.e.f. 15^th September 2015, the company shall disclose the details of money so accepted in the Director’s Report

Furthermore, w.e.f. 29^th June 2016, the company shall disclose in its financial statements, by way of notes (Notes to Accounts), about the money received from the directors.

Deposits from Relatives of Directors of a Private Company

After the amendment brought into Deposit Rules by Companies (Acceptance of Deposits) Second Amendments Rules, 2015 i.e. w.e.f. 15^th September 2015, any amount received from a relative of a person who is director of a private company at the time of receipt of money is not a deposit under Companies Act, 2013.

However, a declaration in writing that the amount is not being given out of funds acquired by such relative by borrowing or accepting loans or deposits from others.

Moreover, w.e.f. 15^th September 2015, the company shall disclose the details of money received from such relatives accepted in the Director’s Report

Furthermore, w.e.f. 29^th June 2016, the company shall disclose in its financial statements, by way of notes (Notes to Accounts), about the money received from the relatives of directors of a private company.

Deposits from Public

Following companies can invite deposits from Public:

ØBanking Company as defined in the Reserve Bank of India (“RBI”)

ØNon-banking Financial Company as defined in the RBI

ØOther Company as specified by Central Government after consultation with RBI

ØEligible Company being Public Company having:

a)    Net worth not less than Rs. 100 Crores or

b)    Turnover not ness than Rs. 500 Crores

Requirement for compliance of Provisions related to Deposits from Public by Eligible Companies

a)    Prior Consent by way of Passing of special resolution

b)    Obtain credit rating from recognised credit rating agency every year during the tenure of deposits and shall file a copy of rating with Registrar of Companies alongwith return of deposits in Form DPT-3.

c)    Credit rating shall not be below the minimum investment grade rating or other specified credit rating for fixed deposits from any one of the approved credit rating agencies as specified for NBFCs in Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998 issued by RBI.

d)    The company shall issue a circular in the form of an advertisement in form DPT-1:

For the purpose of English Language: In English Newspaper having country wide circulation AND

For the purpose of vernacular language: In vernacular language having wide circulation in the state in which registered office is situated AND

On the website of the company, if any

e)    Such circular shall be issued under the authority of Board of Directors only

f)     Application form for deposit should be submitted by Intended depositors which must contain a declaration that the deposit is not being made by out of any money borrowed by him from any other money.

g)    Where the secured deposits are issued by company, it shall create charge on the asset of the company within 30 days from acceptance of deposits.

h)    The circular shall only be issued within 30 days of the date of delivery of the circular (duly signed by majority of directors of the Board of directors approving the circular) to the Registrar of Companies for registration of copy of circular.  

i)      The company issuing secured deposits shall execute a deposit trust deed in Form DPT-2 at least seven days before issuing the circular.

j)      Every company shall on acceptance or renewal of deposits furnish deposit receipt within 21 days of amount received (realisation of cheque) to the depositor.

k)    Such companies shall on or before 30^th April every year required to deposit amount equivalent to 20% of amount maturing in the following financial year in a separate bank account which shall be called as Deposit Repayment Reserve Account.

l)      No company shall invite or accept or renew any deposit in any form, carrying a rate of interest or pay brokerage thereon at a rate exceeding NBFC norms.

Premature Withdrawal of Deposits

On the request of depositors, the company may make repayment of deposits after expiry of a period of six months from the date of such deposits but before the expiry of the period for the deposit. However, rate of deposit shall be reduced by 1% from the interest rate which the company would have paid had the deposit been accepted for the period for which such deposit had actually run.

Penal rate of Interest on Deposit

Every Company shall pay 18% per annum for the overdue period in case of deposits, whether secured or unsecured, matured and claimed, on remaining unpaid.

Punishment for Contravention

Where any company accepts or invites or allows or cause any other person to accept or invite on its behalf any deposit in contraventions of the manner of the conditions prescribed under section 73 or section 76 or rules made thereunder or Fails to repay the deposit or part thereof or any interest due thereon within the time specified under section 73 or section 76 or rules made thereunder or such further time as may be allowed by the Tribunal under section 73:

Ø  The Company shall, in addition to the payment of the deposit or part thereof, Pay fine of Rs. 1 Crores or twice the amount of deposit, whichever is lower which may be extended to Rs. 10 crores

Ø Every officer in default may be liable for imprisonment which may extend to 7 years with fine of Rs. 25 lakhs which may be extended to Rs. 2 crores.

Various Forms Under Companies (Acceptance of Deposits) Rules, 2014

Form No.	Purpose
DPT-1	Circular or Circular in the form of advertisement inviting deposits
DPT-2	Deposit Trust Deed
DPT-3	Return of Deposits
DPT-4	Statement regarding deposits existing on the commencement of the Act

DISCLAIMER

The material and information contained in this blog are for general information purpose only.  Though we have made every efforts to make our interpretation correctly, we do not make representation either express or implied about the completeness or correctness of the subject matter.  Under no circumstances the author is not responsible / liable for any loss or damage caused to anyone due to any mistake / error / omissions.