In March 21, 2013, Ministry of Corporate Affairs (MCA) has made amendments in provision of Rule 2 of the Companies (Acceptance of Deposits) Rules, 1975, by way of Notifications. The amendments made by MCA by way of Notifications are given below in a simple terms.
In terms of the provisions of rule 2 clause (b) under sub-clause (x) of the Companies (Acceptance of Deposits) Rules, 1975, any deposit or money borrowed through Subscription against bonds, debentures, etc. secured by mortgage with or without option to convert into shares will not be covered under the terms of deposit. The said secured bond or debentures issued by the company against any fixed or intangible assets will not be treated as deposits under the said rules.
Before the amendments made by the MCA, the rule 2 clause (b) under sub-clause (x) was read as given:
“Any amount received with applications for bonds and debentures pending allotment by the company. The bonds and debentures, referred to herein, should be secured by a mortgage of any immovable property of the company. Amount received in respect of fully convertible debentures and convertible portion of partly convertible debentures are also not deposits. The amount of said bonds and debentures shall not exceed the market value of such bonds and debentures. “
The Ministry of Corporate Affairs (MCA) on March 21, 2013 has made amendments in provision of Rule 2 by Companies (Acceptance of Deposits) Rules, 2013. In rule 2, in clause (b) for sub-clause (x), the following sub-clauses has been substituted:
“any amount raised by the issue of bonds or debentures secured by the mortgage of any fixed assets referred to in Schedule VI of the Act excluding intangible assets of the company or with an option to convert them into shares in the company:
Provided that in the case of such bonds or debentures secured by the mortgage of any fixed assets referred to in schedule VI of the Act excluding intangible assets the amount of such bonds or debentures shall not exceed the market value of such fixed assets,,;
Earlier this amendments if any company receive any amount against issue of bonds or debentures then it covers all assets whether fixed or intangible assets, but after this amendment , any company who raise any amount by issue of bonds or debentures secured by mortgage of any fixed assets as given in Schedule VI of the Companies Act, 1956 excluding intangible assets and such bond or debentures have an option to convert them into shares will not be treated as deposits and the provisions of section 58A of the Companies Act, 1956 will not apply.
The Ministry of Corporate Affairs (MCA) vide Notification No. SO 447(E) dated February 28, 2011 has introduced revised Schedule VI and the said Schedule VI is applicable w.e.f 01.04.2011. As per this Schedule, the Fixed Assets is classified as under:
(i) Tangible Assets
(ii) Intangible Assets
(iii) Capital Work in progress
(iv) Intangible assets under developments.
In today scenario, if a company raise any money against issued of bond or debentures secured by mortgage of fixed assets referred under (i) and (iii) of Schedule VI, then it will not be treated as deposits. The MCA has not issued any clarification that any bond or debentures issued by the company for raising money which is secured by mortgage of Intangible assets under developments will be treated as deposit or not.
CS Ajay Mishra
Tags Corporate Law