DEPOSIT CS Ashok Tyagi E-130, Greater Kailash, New Delhi – 110048 Mobile: 9810070575

Acceptance of Deposits by Companies (Section 73) Companies shall not invite, accept or renew deposits from the public except in the manner provided in this Section. {Section 73(1)} Section not applicable on: Banking Companies, Non Banking Financial Company Housing Finance Company Other Company as central Government may specify. Note: Private Companies are now prohibited to accept Deposits only from Public – can accept deposit from members.

Conditions for Acceptance of Deposit Deposit can be accepted from Members subject to following conditions: Issuance of Circulars mentioning: Company’s financial position; Credit Rating; Total number of Depositors Amount due towards previous deposits. File a copy of circular within 30 days before the date of issuance of circular.:

Continued… Deposit with Scheduled Bank in Deposit Repayment Reserve Account, not less than 15% of deposit maturing in current and next Financial Year. (This account shall be used only for repayment of deposits.) Deposit insurance mandatory; No default in repayment of deposit and interest thereon in the past; Deposits to be secured by Property or Assets of the Company; Unsecured or partially secured deposits to be disclosed in every circular, advertisement, etc. related to deposits.

Continued… Deposit to be repaid as per agreed terms and conditions. No Demand Deposits and Rate of interest cap same as NBFC. Period of deposit 6 month to 36 month Short term requirement max upto 10% of Paid Up – 3 months; Private Company can accept or renew deposits upto 25% of paid up Capital plus reserves; Public eligible company can accept upto 10% from Members and upto 25% of Paid up capital and reserves from Others. Even Private company to issue circular to all its members and Advertisement in 2 newspapers?

Continued… Eligible Public company to issue circular to all its members and Advertisement in 2 newspapers plus website hoisting; Mandatory deposit insurance of at least Rs. 20K per depositor; Creation of full security on tangible assets except for members; Short term requirement max upto 10% of Paid Up – 3 months Failure to repay deposit: Depositor may apply to the Tribunal for repayment of Deposits or for any loss/damages incurred.

Repayment of Existing Deposits Section 74 Deposit which are Deposit within the meaning of Deposit commencement which are Deposits within the meaning of Deposit before commencement of the new Act. Repay within 1 year or balance term as per terms agreed. Penalty: Unpaid deposit and thereon, together with: Company : Fine of not less than 1 crore and not exceeding 10 crores; Officer in default- Imprisonment extending to 7 years or fine not less than 25 lakhs but not exceeding 2 crores, or both.

Acceptance of deposits from Public by certain Companies (Section 76) Eligible Companies – Public Companies having; Net worth not less than 100 crores, or Turnover not less than 500 crores. Credit Rating Mandatory. Fully Secured

Deposits Rules Deposit Rules does not apply to: Banks NBFC Housing Finance Companies. Deposits defined as per Section 2(31) of the Act: “ Deposit” includes any receipt of money by way of deposits or loan or in any other form by accompany, but does not include such categories of amount as may be prescribed in consultation with the RBI.

Deposit does not include: Money received from Commercial Paper and Inter Corporate Deposits State or Central Government Foreign Government Bank Public Financial Institutions Amount received pursuant to an offer for subscription: To an securities Share Application money, or Advance toward allotment f securities pending allotment

Continued… Provided amount mentioned in point 2 above i.e. subscription money shall be used for: Allotment within 60 days, or Refund within 15 days form the expiry of 60 days Adjustment for any other purpose not permitted. Amount received from Directors own sources. Fully secured Debentures/Bonds by first charge or pari passu charge on the asset of the company not exceeding the market value. Exception: Intangible Assets Compulsory convertible bonds/ debentures within five years.

Continued… Employee security deposit (maximum salary of 1 year) Not interest bearing amount received or held in trust. Amount received for the business of the company: Amount received from customers if adjusted within 365 days: Exception: Time limit of365 days not be applied on advance received under litigation. Amount received not repaid within 15 days form the due date considered deposits.

Continued… b) Advance against Property as per the terms of agreement. c) Security Deposit for goods or services. Advance received under long term project for supply of Capital Goods. Note: For the points a, b and d company should have permission to deal in goods or services or property, otherwise considered as deposits. Unsecured Loans form promoters =s or their relatives as per the stipulation imposed by Ban/FI. Nidhi Companies deposit subject to conditions.

Resolution Required Eligible Companies – Public Companies having: Net worth not less than 100 crores or Turnover not less than 500 crores, and Prior approval by way of Special Resolution in general meeting. Failure to repay can also attract fraud penalty under Section 447. Exception: Ordinary Resolution in case deposits are within the overall limit of Net worth section 180(1)(c). Section 73(2) requires only an Ordinary Resolution.

Return of deposits to be filed with the Registrar Every Company to which these rules apply, shall on or before the 30th day of June, of every year, file with the Registrar, a return in Form DPT-3 along with the fee and furnish the information contained therein as on the 31st day of March of that year duly audited by the audited by the auditors of the Company. (Rule 16 of Companies (Acceptance of Deposits) Rules, 2014).

Case Laws Under Section 74 (1) & (2) M/s Jaiprakash Associates Ltd - Company has filed the Application for seeking extension of time for repayment of deposit before the erstwhile CLB, New Delhi. In the circumstances, the Hon’ble President, NCLT vide order has deemed it fit to constitute a Special Principal Bench to deal with matter. Unitech Limited - Investors of realty major Unitech's fixed deposit scheme have filed an appeal with the National Company Law Tribunal (NCLT), demanding refund of double the principal amount invested by each investor and 20% interest per annum for the delayed period. Hence the Tribunal give the necessary direction to the director and Company in the favor of the depositors.

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