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Pvt ltd company accepting deposits / loans from its members (Corporate Law)

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( Author )
30 May 2012

It is by now well known fact that a Private Ltd company can accept deposits or unsecured loans from its members. In some of the experts' answer, there is no limitation i.e., no ceiling in accepting deposit / loan amount say even if the Share Capital is Rs. 1 Crore, and the members can afford, they can deposit with the pvt ltd Rs. 100 Crores - Is it correct?

If such be the case, what will be the effect of sub Rule (4) of Rule 3 of Deposit Rules, 1975. For ready reference the same is reproduced herewith.

(4) On and from the 1st day of April, 1978, where a company has any outstanding loans which were excluded from deposits by virtue of Explanation 1 as it stood immediately before the said date, then such company shall, before the 1st day of April, 1981, repay or bring such loans down to an amount, which along with other outstanding deposits, is within the limits specified in this rule.

[ please note the following words in the above sub rule (4) "which were excluded from deposits by virtue of Explanation 1"

(i) Next, what will be format of receipt to be issued to its member - if the amount received from its member is not a deposit.

(ii) Further, if it is not a deposit, then what it is?

(iii) What is the minimum and maximum period up to which the so called deposits can be taken?

(iv) If Rule 3 is not applicable to Private companies, the limits of rates of interest payable on deposits shall also not applicable.

In the above back drop, the following further questions emerge:

1. The sub rule (2) of Rule 3 starts with " No company shall.... accept

(i) xxxxxxx any deposit from a shareholder ........ if the amount of any such deposit together with ..... exceeds ten percent of ...........

Read the above limit with the above mentioned sub rule (4) of Rule 3 - Whether conjoint reading of these two subrules limit the borrowing or accepting deposits from its members ?

The above sub-rule (2), starts with " No company" . company includes both Public as well as Private. If private companies are exempted, then why sub rule 2 shall not start with "No public company" or "No company other than private company.."

(v) Can a private limited company use the form of deposit prescribed under Rule 6 of Deposit Rules 1975?

(vi) is it necessary the form prescribed under Rule 5 has to be used to collect deposits from its members by a pvt ltd company.

(vi) If not, how to intimate the member/shareholder about the period and maturity value?

(vi) Can a private limited company can accept the deposit from its members for more than 36 months period?

Regards
Ramesh



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