PROHIBITION ON ACCEPTANCE OF DEPOSIT FROM PUBLIC (S. 73)
Dear Readers,
As we all know that the companies cannot accept deposit from public as per Companies Act 2013 but in this section many amendments have been made and we know that in 2015 this section has been amended again.
Latest amended provisions of this section along with provisions of Companies (Acceptance of Deposit) Rule 2014 are given below for your ready reference.
(Blue ink denotes exclusionary/modified/adapted
provisions, brown ink denotes substituted provisions, green ink denotes inserted provisions).
Deposit:-
As per
Section 2(31) of companies act 2013 ‘Deposit’ includes
- · Any receipt of money by way of deposit or loan or in any other form by the companies,
- · But doesn’t include such categories of amounts as may be prescribed in consultation with RBI
Section
2(31) of companies act 2013, should be read with rule 2(c) of Companies ( Acceptance of Deposits ) Rule, 2014, which specifies some amount received by companies which
shall not be treated as deposits.
73. (1) On and after the commencement of
this Act, no company shall invite, accept or renew deposits under this Act from the public except
in a manner provided under this Chapter:
Provided that nothing in
this sub-section shall apply to a banking company and non-banking financial
company as defined in the Reserve Bank of India Act, 1934 (2 of 1934) and to
such other company as the Central Government may, after consultation with the
Reserve Bank of India, specify in this behalf.
(2)
A company may, subject to the passing of
a resolution in general meeting and subject to such rules as may be prescribed in consultation with the Reserve Bank
of India, accept deposits from its
members on such terms and conditions, including the provision of security,
if any, or for the repayment of such deposits with interest, as may be agreed
upon between the company and its members, subject to the fulfillment of the
following conditions, namely:—
1[(a) issuance of a circular to its members including
therein a 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 and such
other particulars in such form and in such manner as may be
prescribed;
(b)
filing a copy of the circular along with such statement with the Registrar
within thirty days before the date of issue of the circular;
(c)
depositing such sum which shall not be less than fifteen per cent of the amount
of its deposits maturing during a financial year and the financial year next
following, and kept in a scheduled bank in a separate bank account to be called
as deposit repayment reserve account;
(d)
providing such deposit insurance in such manner and to such extent as may be
prescribed;
(e)
certifying that the company has not committed any default in the repayment of
deposits accepted either before or after the commencement of this Act or
payment of interest on such deposits; and]
(f)
providing security, if any for the due repayment of the amount of deposit or
the interest thereon including the creation of such charge on the property or
assets of the company:
Provided that in 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 so quoted in every circular, form,
advertisement or in any document related to invitation or acceptance of
deposits.
(3)
Every deposit accepted by a company under sub-section (2) shall be repaid with
interest in accordance with the terms and conditions of the agreement referred
to in that sub-section.
(4)
Where a company fails to repay the deposit or part thereof or any interest
thereon under sub-section (3), the depositor concerned may apply to the Tribunal for an order directing the company to
pay the sum due or for any loss or damage incurred by him as a result of such
non-payment and for such other orders as the Tribunal may deem fit.
(5)
The deposit repayment reserve account referred to in clause (c) of sub-section
(2) shall not be used by the company for any purpose other than repayment of
deposits.
Exception/ Modification/
Adaptation
1.
In case of private company - Clause (a) to (e) of
Sub-section 2 of Section 73 shall not apply to private Companies which accepts from its members monies not
exceeding one hundred per cent, of aggregate
of the paid up share capital and free reserves, and such company shall file
the details of monies so accepted to the Registrar in such manner as may be
specified. - Notification dated 5th June, 2015.
Rule 2(c) of Companies ( Acceptance of Deposits ) Rule, 2014
(c) "deposit" includes any receipt of money by way of deposit or loan or in any other form,
by a company, but does not include -
(i) any amount received from the Central Government or a State Government,
or any amount received from any other
source whose repayment is guaranteed by the Central Government or a State
Government, or any amount received from a local authority, or any amount received from a statutory authority constituted under an Act of Parliament or a State
Legislature ;
(ii) any amount received from foreign Governments, foreign or international
banks, multilateral financial institutions (including, but not limited to,
International Finance Corporation, Asian Development Bank, Commonwealth
Development Corporation and International Bank for Industrial and Financial
Reconstruction), foreign Governments owned development financial institutions,
foreign export credit agencies, foreign collaborators, foreign bodies corporate
and foreign citizens, foreign authorities or persons resident outside India
subject to the provisions of Foreign Exchange Management Act, 1999 (42 of 1999)
and rules and regulations made there under;
(iii) any amount received as a loan or facility from any banking company
or from the State Bank of India or any of its subsidiary banks or from a
banking institution notified by the Central Government under section 51 of the
Banking Regulation Act, 1949 (10 of 1949), or a corresponding new bank as
defined in clause (d) of section 2 of the Banking Companies (Acquisition and
Transfer of Undertakings) Act, 1970 (5 of 1970) or in clause (b) of section (2)
of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980
(40 of 1980) , or from a co-operative bank as defined in clause (b-ii) of
section 2 of the Reserve Bank of India Act, 1934 (2 of 1934) ;
(iv) any amount received as a loan or financial assistance from Public
Financial Institutions notified by the Central Government in this behalf in
consultation with the Reserve Bank of India or any regional financial institutions or Insurance Companies or Scheduled
Banks as defined in the Reserve Bank of India Act, 1934 (2 of 1934);
(v) any amount received against issue of commercial paper or any other
instruments issued in accordance with the guidelines or notification issued
by the Reserve Bank of India;
(vi) any
amount received by a company from any other company;
(vii) any amount received and held pursuant to an offer made in
accordance with the provisions of the Act towards subscription to any securities, including share application money or
advance towards allotment of securities pending allotment, so long as such
amount is appropriated only against the amount due on allotment of the
securities applied for;
Explanation.- For the purposes of this sub-clause,
it is hereby clarified that -
(a) Without prejudice to any other
liability or action, if the securities
for which application money or advance for such securities was received cannot
be allotted within sixty days from the date of receipt of the application money or
advance for such securities and such application money or advance is
not refunded to the subscribers within fifteen days from the date of completion
of sixty days, such amount shall be treated as a deposit under these rules.
1[Provided that unless otherwise
required under the Companies Act, 1956 (l of 1956) or the Securities and
Exchange Board of India Act, 1992 (15 of 1992) or rules or regulations made
thereunder to allot any share, stock, bond, or debenture within a specified
period, if a company receives any amount by way of subscriptions to any shares,
stock, bonds or debentures before the lst April,2014 and disclosed in the
balance sheet for the financial year ending on or before the 3lst March,2014
against which the allotment is pending on the 3lst March,2015, the company
shall, by the lst June 2015, either return such amounts to the persons from
whom these were received or allot shares, stock, bonds or debentures or comply
with these rules]
(b) any adjustment of the amount for any other purpose shall not be treated
as refund.
5[(viii) 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:
Provided that the director
of the company or relative of the director of the private company, as the
case may be, from whom money is
received, furnishes to the company at the time of giving the money, a
declaration in writing to the effect that the amount is not being given out of
funds acquired by him by borrowing or accepting loans or deposits from
others and the company shall disclose the details of money so accepted in
the Board's report;".]
(ix) any amount raised by the issue of bonds or debentures secured by a
first charge or a charge ranking pari passu with the first charge on any assets
referred to in Schedule
III of the Act excluding intangible
assets of the company or bonds or debentures compulsorily convertible into
shares of the company within 6[Ten years]:
Provided that if such bonds or
debentures are secured by the charge of any assets referred to in Schedule
III of the Act, excluding intangible
assets, the amount of such bonds or debentures shall not exceed the market
value of such assets as assessed by a registered valuer;
7[“(ixa) any amount raised by issue of non-convertible debenture not constituting a charge on the
assets of the company and listed on a
recognised stock exchange as per applicable regulations made by Securities
and Exchange Board of India.”;]
(x) any amount received from an employee of the company not exceeding his
annual salary under a contract of employment with the company in the nature of non-interest bearing security
deposit;
8[(xi) any non-interest bearing amount received and held in trust;]
(xii) any amount received in the course of, or for the purposes of, the business of the company,-
(a) as an advance for the supply of goods or provision of services
accounted for in any manner whatsoever provided
that such advance is appropriated against supply of goods or provision of
services within a period of three
hundred and sixty five days from the date of acceptance of such advance:
Provided that in case of any advance which is subject
matter of any legal proceedings before any court of law, the said time limit of
three hundred and sixty five days shall not apply:
(b) as advance, accounted for in any
manner whatsoever, received in connection with 2[consideration for an immovable property] under an agreement or
arrangement , provided that such advance is adjusted 3[against such property] in accordance with the terms of agreement or
arrangement;
(c) as security deposit for the performance of the contract for supply
of goods or provision of services;
(d) as advance received under long term projects for supply of capital
goods except those covered under item (b) above:
9[(e) as an advance towards consideration for providing future services in the form of a warranty or maintenance contract as per written agreement or
arrangement, if the period for
providing such services does not exceed
the period prevalent as per common business practice or five years, from
the date of acceptance of such service whichever is less;
(f) as an advance received and as allowed
by any sectoral regulator or in accordance with directions of Central or
State Government;
(g) as an advance for subscription
towards publication, whether in print or in electronic to be adjusted against
receipt of such publications;“]
Provided that if the amount
received under items (a), (b) and (d) above becomes refundable (with or
without interest) due to the reasons that the company accepting the money does
not have necessary permission or approval, wherever required, to deal in the
goods or properties or services for which the money is taken, then the amount received shall be deemed to
be a deposit under these rules:
Explanation.- For the purposes of this sub-clause the amount 4 &10[Omitted] shall be deemed to be deposits on the expiry of
fifteen days from the date they become due for refund.
(xiii) any amount brought in by the promoters of the
company by way of unsecured loan in
pursuance of the stipulation of any
lending financial institution or a bank subject to fulfillment of the
following conditions, namely:-
(a) the loan is brought in pursuance of the stipulation imposed by the
lending institutions on the promoters to contribute such finance;
(b) the loan is provided by the promoters themselves or by their relatives or
by both; and
(c) the exemption under this sub-clause shall be available only till the loans of financial institution or bank are repaid and not thereafter;
(xiv) any amount accepted by a Nidhi company in accordance with the rules made
under section
406 of the Act.
Explanation.- For the purposes of this clause, any amount.-
(a) received by the company, whether
in the form of installments or otherwise, from a person with promise or offer
to give returns, in cash or in kind, on completion of the period specified in
the promise or offer, or earlier, accounted for in any manner whatsoever, or
(b) any additional contributions,
over and above the amount under item (a) above, made by the company as part of
such promise or offer,
11[shall be considered as deposits unless specifically
excluded under this clause]
12[(xv) any amount received by way of subscription in respect of a chit under
the Chit Fund Act, 1982 (40 of 1982);
(xvi)
any amount received by the company under any collective investment scheme in compliance with regulations framed by the Securities and Exchange Board
of India;
(xvii)
an amount of twenty five lakh rupees 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.
Explanation.- For the purposes of this sub-clause,-
I.
“start-up company” means a private
company incorporated under the Companies Act, 2013 or Companies Act, 1956 and recognised as such in accordance with notification number G.S.R. 180(E) dated
17th February, 2016 issued by the Department of Industrial Policy and
Promotion, Ministry of Commerce and Industry;
II.”convertible note” means an instrument evidencing receipt of money initially as a
debt, which is repayable at the
option of the holder, or which is convertible
into such number of equity shares of the start-up company upon occurrence of specified events and as
per the other terms and conditions agreed to and indicated in the instrument.
(xviii) any amount received by a company from Alternate Investment Funds, Domestic
Venture Capital Funds and Mutual Funds registered with the Securities and
Exchange Board of India in accordance with regulations made by it.”.]
Amendments
1. Inserted by the Notification Companies
(Acceptance of Deposits) Amendment Rules, 2015 Dated 31st March 2015.
2. Substituted by the Notification Companies
(Acceptance of Deposits) Amendment Rules, 2015 Dated 31st March 2015.
For
the words "consideration for
property", the words "consideration for an immovable property; shall
be substituted.
3. Substituted by the Notification Companies
(Acceptance of Deposits) Amendment Rules, 2015 Dated 31st March 2015.
For
the words "against the property", the
words "against such property" shall be substituted.
4. Substituted by the
Notification Companies (Acceptance of Deposits) Amendment Rules, 2015 Dated
31st March 2015
For
the words "referred to in the first
proviso", the words "referred to in the
proviso" shall be substituted.
5. Substituted by Notification Companies
(Acceptance of Deposits) Second Amendment Rules, 2015 Dated 15th September, 2015.
In
sub-rule (1), in clause (c), for sub-clause (viii),
"Any amount received from a
person who, at the time of the receipt of the amount, was a director of the
company:
Provided that the director from whom
money is received, furnishes to the company at the time of giving the money, a
declaration in writing to the effect that the amount is not being given out of
funds acquired by him by borrowing or accepting loans or deposits from
others;"
the
following shall be substituted, namely:-
"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:
Provided
that the director of the company or relative of the director of the private
company, as the case may be, from whom money is received, furnishes to the
company at the time of giving the money, a declaration in writing to the effect
that the amount is not being given out of funds acquired by him
by borrowing or accepting loans or deposits from others and the company
shall disclose the details of money so accepted in the Board's report;".
6. Substituted
by the Notification Companies (Acceptance of Deposits) Amendment Rules, 2016
Dated 29th June, 2016.
In
rule 2, in sub-rule (1), in clause (c),- In sub-clause (ix), for the words “five years” the
words “ten years” shall be substituted;
7. Inserted by the
Notification Companies (Acceptance of Deposits) Amendment Rules, 2016 Dated
29th June, 2016.
8. Substituted by the Notification Companies (Acceptance
of Deposits) Amendment Rules, 2016 Dated 29th June, 2016.
In
rule 2, in sub-rule (1), in clause (c),- For
sub-clause (xi),
(xi) any non-interest bearing amount
received or held in trust;
the
following sub-clause shall be substituted, namely:-
“(xi)
any non-interest bearing amount received and held in trust;”;
9. Inserted
by the Notification Companies (Acceptance Of Deposits) Amendment Rules, 2016
Dated 29th June, 2016.
10. Omitted by the
Notification Companies (Acceptance of Deposits) Amendment Rules, 2016 Dated
29th June, 2016.
In rule 2, in sub-rule (1), in clause
(c),- In
sub-clause (xii), in the Explanation,
Original
Omitted Content - “referred to in the proviso”
11. Substituted by the Notification Companies (Acceptance
of Deposits) Amendment Rules, 2016 Dated 29th June, 2016.
Companies (Acceptance of
Deposits) Amendment Rules, 2016
In
rule 2, in sub-rule (1), in clause (c),- In the Explanation, after
sub-clause (xiv), for the words “shall be treated as deposits”, the
words “shall be considered as deposits unless specifically excluded under this
clause” shall be substituted;
12. Inserted by the
Notification Companies (Acceptance of Deposits) Amendment Rules, 2016 Dated
29th June, 2016.
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