Acceptance of Deposits

• Company formation / Compliances
• ||
• August 15, 2020

In a modern era corporate world, companies need funds for the accomplishment of their long term objective, growth, and expansion. One of the ways companies find for funds is via acceptance of deposits from their members or the public. The acceptance of deposits is regulated under Section 73 to 76 of Companies Act 2013 read with Acceptance of Deposit Rules, 2014. Deposits have been a significant basis for corporate funding in India. Deposits may be secured or unsecured borrowings.

Meaning of Deposits
As per rule(2)(1)(c) of Acceptance of Deposit rules 2014, Deposit means any receipt of money by way of deposit or loan or in any other form, by a company, but does not include –

• any amount received from the Central Government or a State Government,
• any amount received from foreign Governments, foreign or international banks, etc.
• any amount received as a loan or facility from any banking company or Public Financial Institutions
• any amount received against the issue of commercial paper or any other instruments
• any amount received by a company from any other company;
• any amount received towards the share application money;
• any amount received from the director of the company or a relative of the director of the Private company;
• any other receipts as prescribed under the law.

Kinds of Deposits

• Acceptance of deposit from Members: A Private or Public company can accept deposits from its members anytime after fulfilling certain conditions following up by passing a resolution in general meeting.
• Acceptance of deposits from the Public: A Public company only after fulfilling the following requirements before inviting any deposits from the public as:
• A Public Company holding a net worth of not less than 100 crore rupees; or
• The turnover of the public company shall not be less than 500 Crore rupees; and

acquired the earlier consent of shareholders through Special Resolution and such resolution has been filed with the registrar.

Prohibition on acceptance of Deposits
No company can invite, accept, or renew deposits from the public unless in the manner provided in provisions of Companies Act 2013. The deposit provisions do not apply to the following companies:

Procedure for acceptance of deposits from

• Members: A company by passing ordinary resolution may accept deposits from its members subject to the contentment of the subsequent conditions, namely:
• A circular in form DPT–1 shall be issued to the members comprising a declaration presenting financial position, credit rating, number of existing depositors, and amount due to them and also upload a copy of circular on the website (if any);
• The circular along with such a statement shall be filed within thirty days before the date of the issue of the circular;
• The company shall every year on or before 30^th April deposit at least 20% of the amount of its deposits maturing during the subsequent financial year in a scheduled bank in a separate bank account named as deposits repayment reserve account and such account shall not be used for other than repayment of deposits purpose; and
• The company has not committed any default in the repayment of deposits acknowledged either before or after the commencement of this Act or payment of interest on such deposits.
• Public: Section 76 of the companies Act 2013 provides that a public company having such net worth or turnover as mentioned above may accept deposits from the public. A public company shall comply with the conditions stipulated below along with above conditions:
• An eligible public company intending to invite deposits shall issue a circular in the form of an advertisement in DPT-1 in the English newspaper having countrywide circulation and a local newspaper having a wide circulation of the state along with certification by statutory auditor has the company has not committed any default;
• Every single qualified company shall attain at least once, in a year, credit rating for deposits acknowledged by it and a copy of the rating shall be sent registrar of Companies along-with the return of deposits in Form DPT-3;
• The credit rating shall not be below the minimum investment grade rating or other specified credit rating or fixed deposits, from any one of the approved credit rating agencies; and
• The company shall, within thirty days of the acceptance of deposits from the public, create a charge on its assets in favor of the deposits holders for the full value of such deposits.

Ceiling limits for acceptance of Deposits

Important Notes

• Every company that accepts the deposits shall file a return of deposit in form DPT -3 or before 30^th June of every year;
• The minimum period of accepting deposits is six months and the maximum period of accepting deposits is thirty-six months;
• In a case where a company does not secure the deposits or secures such deposits partially then, the deposits shall be termed as “unsecured deposits” and shall be quoted in every notice of circular, form, advertisement, or in any document related to offer or receipt of deposits;
• Every deposit accepted by the company shall be repaid with interest as per the terms and conditions of the agreement; and
• Where an enterprise fails to refund the deposits or part thereof or any interest thereon, the depositor concerned may apply to Tribunal for an order directing the company to pay the sum due or any damage sustained by him as a result of such non-payment and for such other orders as the tribunal may deem fit.

At AJSH, we understand the importance of adhering to the statutory compliance regime. We provide services to our clients regarding company incorporation, statutory audit, statutory compliances, etc. To know more about filings for acceptance of deposits, kindly contact us.