Deposits are one of the means of acquiring funds by companies. It includes any receipt of money by way of deposit or loan or in any other form, by a company, except for certain specified amounts. Any company or Eligible Company* can invite, accept or renew deposits from its members subject to adhering the conditions specified under Section 73 of the Companies Act, 2013 read with Companies (Acceptance of Deposits) Rules, 2014. The following class of companies are exempted from the applicability of the said Rules:
- Banking Company
- Non-Banking Finance Company duly registered with the Reserve Bank of India
- Housing Finance Company registered with the National Housing Bank
- Companies specified by the Central Government u/s 73 (1) of the Companies Act, 2013.
*Note: Eligible company means a Public Company u/s 76 (1), having:
- net worth of not less than 100 crore rupees or
- turnover of at not less than 500 crore rupees.
Applicable Rules and Provisions:
- Section 73, 76, 96, 100, 173 of the Companies Act, 2013
- Rule 3, 4, 6, 7, 12, 13, 16 of the Companies (Acceptance of Deposits) Rules, 2014
- Secretarial Standard 1 and 2
- Member’s approval by passing a special resolution in a duly convened general meeting
- Deposit on or before 30th April each year, a sum not less than 20% of the amount of deposits maturing during the following financial year, in Deposit Repayment Reserve Account
- Certify that no default has been committed in repayment of deposits or payment of interest on such deposits
- Obtain written consent from the person to be appointed as Trustee for Depositors
- Amount of deposits together with any outstanding deposit amount as on the date of acceptance or renewal of such deposits shall not exceed the prescribed threshold limits.
Note: Every Company or Eligible company shall accept or renew any deposit (secured or unsecured) which is repayable on demand or upon receiving notice only between 6 months – 36 months from the date of acceptance or renewal of such deposit.
- Convene a Meeting of Board of Directors:
The company shall pass a Board resolution in a duly convened board meeting, approving the following:
Refer to the Procedure for Meeting of Board of Directors for detailed procedure.
- proposal for acceptance of deposits from its members
- issuance of circular in Form DPT-1 for the purposes of inviting deposits
- proposal of appointment of trustee for the depositors, subject to the approval of the members
- authorizing Company Secretary or such other officer/ Director to take such necessary actions as may be necessary, to give effect to the decision of the Board
- Convene General Meeting and Obtain Shareholder’s Approval:
The company shall convene a General Meeting of its Members to pass a special resolution for approving the proposal of acceptance of deposits, as recommended by the Board.
Refer to the Procedure for Conducting General Meeting for detailed procedure.
- File Form MGT-14 with ROC:
The company shall file the copy of Board Resolution and Special Resolution passed in its duly convened Board meeting and General meeting in Form MGT-14, within 30 days of passing such resolution accompanied with the relevant documents and prescribed fees, with the Registrar of Companies (ROC).
- Appointment of Trustee for Depositors and Execution of Deposit Trust Deed:
- Company/ Eligible Company, shall appoint one or more trustees for the depositors so as to create a security for the deposits, after obtaining a written consent from such trustees prior to their appointment.
- A deposit trust deed in Form DPT-2 shall be executed, at least 7 days prior to the issuing of circular or circular in the form of advertisement, for the purposes of invitation of deposits.
- Issue Circular Inviting Deposits and Publication of the same:
- . Company/ Eligible Company, intending to invite deposits from its members, shall issue a circular in Form DPT-1, to all its members by registered post with acknowledgment due or speed post or by electronic mode.
- Additionally, such circular shall also be published in:
- English language newspaper having countrywide circulation
- vernacular language newspaper having wide circulation in the State where the company’s registered office is located.
- A copy of such circular inviting deposits from the members, shall also be posted on the company’s website, if any.
- Such circular in Form DPT-1, shall be accompanied with a certificate from the statutory auditor, stating that the company has not defaulted in repayment of its deposits or interest payments on such deposits accepted either before or after commencement of the Act. And, in case any default has been committed, then it has been made good and a period of 5 years had elapsed since the date of making good such default.
- Such circular shall be valid until the expiry of 6 months from the date of closure of the financial year in which it is issued or earlier of the following:
- date on which financial statement is put before the company in AGM or
- where AGM for any year has not been held, the latest day on which such meeting should have been held in accordance with the provisions of the Act.
- A fresh circular shall be issued in each financial year, for inviting deposits during that financial year.
- A statement shall be provided in the circular with reasonable prominence to the effect that trustees for depositors have given their affirmation to the company to be so appointed.
- File Copy of Circular with the Registrar:
Company/ Eligible Company, shall file the copy of the circular so issued with the Registrar, for registration, not less than 30 days prior to the date of such issue and such copy must be signed by the majority of the directors of the company.
- Creation of Security:
*Note: In case of deposits which are secured by the charge on the assets referred to in Schedule III of the Act excluding intangible assets, the amount of such deposits and the interest that is due thereon shall not exceed the asset’s market value as determined by the registered valuer.
- Company/ Eligible Company, shall provide for security by way of a charge on its assets as referred in Schedule III of the Act excluding company’s intangible assets, for repayment of the deposit amount and interest thereon, for an amount which shall not be less than the amount remaining unsecured by the deposit insurance.
- Such security (not being in the nature of a pledge) shall be created in favour of a trustee for the depositors on:
- company’s specific movable property or
- company’s specific immovable property wherever situated or any interest therein.
- Post Acceptance of Deposit Obligations:
- Company/ Eligible Company, shall on acceptance or renewal of a deposit furnish a receipt in lieu of the amount so received, to the depositor or his agent, within 21 days from the date of receipt of such money or realization of cheque or date of renewal.
- A sum of not less than 20% of the amount of the deposits maturing during the following financial year, shall be deposited, in the Deposit Repayment Reserve Account held with any scheduled bank, on or before 30th day of April of each year.
- A return in Form DPT-3 shall be filed on or before 30th day of June of every year, with the Registrar along with the prescribed fees and the following documents:
- Auditor’s certificate
- Deposit insurance contract
- Copy of trust deed
- Copy of instrument creating charge
- List of depositors including name, address, amount deposited, repaid during the year and outstanding, interest due, paid and payable as at the close of Financial Year and separately stating deposits not yet matured, claimed and paid and matured, claimed but not paid and matured but not claimed for payment.
- List of deposits matured; cheques issued but not yet cleared to be shown separately
- Any optional attachment as may deem fit.
- Maintain one or more separate registers for deposits accepted or renewed, wherein entries shall be made within 7 days from the date of issuance of receipt duly authenticated by a director or secretary of the company or by any other officer authorized by the Board for this purpose, at its registered office.
- Such receipt shall be signed by a company’s officer duly authorized by Board on this behalf.
- Such receipt shall specify the date of deposit, name, and address of the depositor, amount so received by the company as deposit, the interest rate payable thereon, and date on which the deposit is repayable.
- Amount so deposited in the Deposit Repayment Reserve Account shall not be utilized for any purpose other than for repayment of deposits and shall not at any time fall below 20% of the amount of deposits maturing during the financial year.
- Such register of deposits shall be preserved for a period of not less than 8 years from the financial year in which latest entry is made in the register.