Understanding Deposits under the Companies Act, 2013
Deposits are an important source of funds for businesses, allowing them to finance their operations and growth. However, to protect investors’ interests and prevent fraudulent activities, the Companies Act 2013 (the Act) has introduced provisions for regulating the acceptance of deposits by the companies.
A deposit, according to Section 73 of the Companies Act of 2013 (Act), is any money received by a company as a deposit, loan, or in any other form, but excludes certain specific types of transactions/amounts.
An exclusive list of transactions/amounts outside the scope of definition of deposits are provided in Rule 2 of The Companies (Acceptance of Deposits) Rules, 2014.
It is essential to note that while these transactions are not considered deposits, companies still need to comply with other provisions of the Companies Act, such as maintaining proper records, reporting requirements, and adhering to accounting standards. Companies must also ensure that they are not violating any other laws while accepting funds under these transactions.
- 35% of the aggregate of the Paid-up share capital, free Reserves and securities premium account of the company.
- However, a private company may accept 100% of the aggregate of the Paid-up share capital, free Reserves and securities premium account of the company.
- The above limits are not applicable to following class of private companies which:
* is a start-up, for 10 years from the date of its incorporation
*is not an associate or a subsidiary company of any other company
*the borrowings of such a company from banks or financial institutions or any body corporate is less than twice of its paid up share capital or Rs. 50 Crores, whichever is less
*has not defaulted in the repayment of such borrowings subsisting at the time of accepting deposits under section 73:
B. Approval from Shareholders
A company can accept deposits only after obtaining approval from its shareholders by passing a resolution at a general meeting. The resolution must specify the maximum amount of deposits that the company can accept, the duration for which the deposits can be accepted, and the interest rate payable on the deposits.
C. **Creation of a Deposit Repayment Reserve
A company accepting deposits must create a deposit repayment reserve account and transfer at least 20% of the amount of deposits maturing during the financial year to this account. The deposit repayment reserve must be created on or before 30th day of April each year.
D. **Disclosure of Particulars in Circular for acceptance of Deposits (DPT- 3)
Companies accepting deposits must disclose the particulars of the deposit scheme in the prospectus or the circular or the form in which the offer of the deposit is made. The particulars must include the terms and conditions of the deposit scheme, statement showing the financial position of the company, the credit rating obtained, the total number of depositors and the amount due towards deposits in respect of any previous deposits accepted by the company the interest rate payable, the duration of the deposit, the security offered, and any other relevant information.
E. Maintenance of Records
Companies accepting deposits must maintain a register of deposits in Form DPT-2, which needs to be updated on a regular basis. This register contains details of the deposits accepted by the company, including the amount, date of acceptance, maturity date, rate of interest, and details of security provided, if any. The register must be maintained for a period of at least eight years from the date of the last entry.
F. Offer of Security for due Repayment of Deposits
Companies accepting deposits must offer adequate security for the due repayment of deposits. The security can be in the form of a charge on the company’s assets or any other security approved by the Reserve Bank of India.
G. Repayment of deposit with interest
Every deposit accepted by a company shall be repaid with interest in accordance with the terms and conditions of the agreement.
If a company fails to repay a deposit, any interest due, or a part of it, the depositor can approach the Tribunal to seek an order directing the company to pay the amount due or for any loss or damage suffered by the depositor due to the non-payment. The Tribunal can also issue any other orders it considers appropriate in this matter.
**Note – Clauses C and D as mentioned above are not applicable to Private Limited Companies.
* Filing of return for acceptance of deposits
The Act mandates that companies that have accepted deposits to file return of the deposits in Form DPT-3 annually on or before 30th of June each year for the preceding financial year.
* The form shall be filed even in case of acceptance of exempt deposits.
Consequences of Non-compliance
The Act prescribes strict penalties for companies that violate the provisions governing deposits. Non-compliance can result in fines, imprisonment, and other sanctions. The punishment for non-compliance with deposit provisions is as follows:
Fine: The Company shall in addition to payment of the amount of deposits, is liable to pay a fine of not less than Rs. 1 Crore or twice the amount of the deposit received, whichever is lower which may extend to Rs. 10 Crores..
Imprisonment: In addition to a fine, the officers responsible for non-compliance shall be punishable with imprisonment for a term of up to seven years and fine
Repayment: Companies that violate the deposit provisions of the Companies Act, 2013 must repay the deposits within one year from the date of the order.
The Companies Act, 2013 lays down strict provisions governing deposits to protect the interests of investors and prevent fraudulent activities. While there are several particulars that are not considered as deposits, companies must still maintain transparency and comply with other provisions of the Act to ensure proper functioning and growth of their business.
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