Arjuna (Fictional Character): Krishna, many companies are worried, as they will have to submit new return about deposits and loans before 30th June 2014, as stated in New Companies Act 2013. It is said that there are very strict provisions and rules in new companies act.
Krishna (Fictional Character): Arjuna, change is todays need. Many provisions of Companies Act 1956 were needed to be changed. Further day by day business and professions are growing and thereby numbers of companies are also growing. Due to all these reasons Government came up with Companies Act 2013. As per new Companies Act, specified companies will have to file the return of deposit and loans (other than from directors) as on 31st March 2014 before 30th June 2014.
Arjuna: What care is need in case of deposits and loans in new Companies Act?
Krishna: Arjuna, In Companies Act 1956 the definition of deposits is very broad, in that company was able to take loans from the shareholders, relatives. But as per New Companies Act, private limited company and non-eligible public companies cannot take loans or deposits from anyone other than the directors.
1. As above provision is stated in new companies act, companies will have to mention in the return all deposits accepted by the company.
2. Share application money received but not allotted within 60 days will be treated as deposits.
3. Any money received as advance in the course of ordinary business shall be treated as deposit if goods or services are not provided within 365 days of receipts.
Arjuna: Krishna, Which receipts will not be counted as deposits?
Krishna: Arjuna, broadly following money received will not be treated as deposits:
1. Money received from central or state Government.
2. Loans taken from bank
3. Any amount received from any other company
4. Amount received from Public Financial Institutions
5. Amount received as security deposit for the performance of the contract for supply of goods or provision of services.
Arjuna: Krishna, if the company is having deposits which does not fit in the definition of deposits as stated in new companies act then what they should do?
Krishna: Arjuna, if any new act or rules comes in force government gives sufficient time to change. For these deposits government has given time up to March 2015. The Companies should repay the deposits which do not fit in the definition before March 2015. For e.g. if a company is having loan from the relative of director of Rs. 10 Lakh as on March 2014 then it should be repaid before March 2015. This provision will create financial problem for many companies. Further those who have taken entries will also suffer.
Arjuna: Krishna, what will happen if these deposits are not repaid before March 2015?
Krishna: If these deposits or loans are not repaid then fine may range from Rs. 1 Cr to 10 Cr. Further the officer in default may be fined with Rs. 25 Lakh to Rs. 2 Cr. or 7 years’ imprisonment or both.
Arjuna: Krishna, What one should learn from these provisions of New Companies Act?
Krishna: Arjuna, many companies have taken loans or deposits from the relatives, shareholders. Further some companies have taken loans or deposits and disappeared. To restrict these practices these provisions has arrived. In today’s world many shows need of money to other and takes money and doesn’t refund it easily. The one who gives loan suffers than the one who takes the loan. To control these practices these strict provisions are initiated as now companies can take loans from the directors only. It means one should demand money looking at his capacity only. We have the live example of a big company accepting loans and deposits, and now facing legal issues in Supreme Court. Hence one should always accept money from others after due care, otherwise relations will get spoil. Excessive Loans and Deposit are like Cancer, they will destroy business and then the entrepreneur.
Tags Corporate Law