Acceptance of Public Deposits Critical Aspects
REGULATORY FRAMEWORK FOR PUBLIC DEPOSITS AS PER COMPANIES ACT 2013 Chapter V: Acceptance of Deposits by Companies Section 2(31): Definition of Deposits. Section 73: Prohibition on acceptance of Deposits from Public Section 74: Repayment of Deposits, etc. accepted before commencement of this Act Section 75: Damages for Fraud Section 76: Acceptance of deposits from Public by certain Companies Section 76A: Punishment for contravention of section 73 or section 76 • The Companies (Acceptance of Deposits) Rules, 2014
Deposits – As per Section 2(31) of the Companies Act, 2013 “Deposit” includes any receipt of money by way of deposit or loan or 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.
Amounts exempted from Deposits • Any share application money accepted under this Act shall be treated as Deposit if allotment is not made within 60 days. • Customers Advances if not appropriated within 365 days shall be deposit. • Convertible Bond or debentures with conversion period of more than 10 years are deemed deposit. • Any amount received by a company from any other company shall not be treated as Deposits. • Any amount received from the Government/ Authority shall not be treated as Deposits.
Amounts exempted from Deposits • Any amount received from a person who, at the time of the receipt of the amount, was a director of the company or a relative of the director of the private company shall not be treated as Deposit. • Any amount received from an employee of the company exceeding his annual salary with the company shall be treated as Deposit. • An amount of Rs. 25 lacs 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 five years from the date of issue) in a single tranche, from a person shall not be treated as Deposit. • Any amount received as a loan from any Banking Company/ S.B.I/ P.F.I/ Insurance Companies/ Schedule Banks shall not be treated as Deposits.
From whom Deposits can be accepted?? Eligible Company Non-Eligible Public Company Private Company From Public From any member * Eligible Companies are Public Companies having net worth of at least INR 100 crore or turnover of at least INR 500 crore and are allowed to raise deposits from the persons other than its members
Limit on Acceptance of Deposits DEPOSITS Deposits From Public From Members C O By Eligible Companies 25% of paid-up capital, 10% of paid-up capital, M free reserves and free reserves and P securities premium securities premium A account. account N By Public Company (Non-eligible - 35% of paid-up capital, I Company) free reserves and E securities premium S account By Private Company - 100% of paid-up capital, free reserves and securities premium account By Government Company 35% of paid-up capital, free reserves and securities premium account
Period for Accepting Deposits No Company shall accept any deposit which is repayable within a period of :- Less than 6 More than OR months 36 months * A company may, for the purpose of meeting its short term requirement, accept the deposits for repayment earlier than 6 months, but not earlier than 3 months & such deposits shall not exceed 10 % of paid-up share capital, free reserves & security premium account.
Non-Applicability of Public Deposits Rules on certain Companies NBFC Housing Finance Banking Company Company registered with NHB Non- Applicability of Deposit Rules
RESOLUTIONS REQUIRED • By Eligible Companies Special Resolution • By Non-eligible Public Companies Ordinary Resolution • By Private Companies
Important Compliances Issuance of Circular to all its Filing a copy of the Circular with members by registered post or ROC within 30 days before the speed post or by electronic mode date of issuance of the Circular. in Form DPT-1 Not applicable on private company Mandatory Appointment of one or more Deposit Trustees for creating security for the Deposits (in the event of inviting secured deposits) by executing Trust Deed as prescribed in terms of Form DPT-2 within 7 days before issuing the advertisement inviting Deposits.
Deposit Repayment Reserve Account As per Section 73 (2) (c) of the Companies Act, 2013 read with Rule 13 of the Companies (Acceptance of Deposits) Rules, 2014, a deposit of not less than 15% of the amount of its deposits maturing during the Financial Year and the next following financial year is required to be maintained with scheduled commercial bank in a separate bank account to be called as Deposit Repayment Reserve Account on or before the 30th day of April of each year. For Example: If the Company came out with the Deposit Issue of Rs. 50 Crores wherein Deposits amounting to Rs. 12 Crores are to be redeemed during the current financial year and Rs. 20 Crores are proposed to be redeemed in the next financial year, then the Company is required to deposit Rs. 4.80 Crores (15% of 32 Crores) Note- this provision is not applicable on private company
Important Filing Every eligible company shall obtain, at least once in a year, credit rating for deposits accepted by it and a copy of the rating shall be sent to the Registrar of Companies along with the return of deposits in Form DPT-3. * Furnishing of Return with ROC in Form DPT-3 on or before 30 th June of every year for the period ended 31 st March as per the information duly audited by the Auditor.
Penal Provisions • Penal Rate of Interest: 18% per annum for the overdue period in case of deposits, whether secured or unsecured, matured and claimed but remaining unpaid. • Punishment for Contravention: Company & every officer of the Company who is in default shall be punishable with fine which may extend to Rs. 5000 and where the contravention is a continuing one, with a further fine which may extend to Rs. 500 for every day after the first day during which the contravention continues.
Thank You 8/31/2016 Pavan Kumar Vijay Corporate Professionals Capital Private Limited D-28, South Extension – I, New Delhi-110 049 Ph: +91.11.40622200; Fax: +91.11.40622201; E: pkvijay@indiacp.com
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