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vikas

vikas (Querist)
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01 June 2009 Exemptions For Acceptance Of Deposits From Private Parties Other Than Members

Ankur Garg

Ankur Garg (Expert)
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03 June 2009 Hi Vikas,

Not able to understand your question properly. Please elaborate.

Regards

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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23 July 2025 Under Section 58 of the Companies Act, 1956 (now under Section 73 of the Companies Act, 2013), the acceptance of deposits by a company is regulated to ensure that companies are not raising funds from the public in an unlawful or unsafe manner. However, there are exemptions provided for certain types of deposits that can be accepted by private companies without attracting the provisions for public deposits.

Key Provisions on Acceptance of Deposits from Private Parties Other Than Members:
Section 73 of the Companies Act, 2013 regulates the acceptance of deposits by companies. The provisions are largely applicable to public companies but have specific exemptions for private companies.

Exemptions for Acceptance of Deposits:
Private companies are allowed to accept deposits under certain conditions:

Deposits from Directors: A private company may accept deposits from its directors or their relatives without attracting the provisions of Section 73, as long as the company is not a public company. However, this should still comply with any applicable provisions, including Board approval.

Deposits from Members: A private company can accept deposits from its members (shareholders) without falling under the regulatory provisions of Section 73. This is one of the key exemptions granted to private companies.

Deposits from Non-Members: Private companies are not generally allowed to accept deposits from non-members, unless they comply with specific conditions, such as:

Filing with the Registrar: The company must file a return of deposits with the Registrar of Companies (ROC), including details of the deposits.

Compliant with Rules and Conditions: Certain rules or conditions must be met, including the terms of the deposit, the interest rate, and the use of the deposit.

General Restrictions:

No Advertisement for Public Deposits: Unlike public companies, a private company cannot advertise or publicly solicit deposits. This would automatically make the company subject to the provisions of Section 73.

Repayment of Deposits: The private company must ensure timely repayment of deposits, as failure to do so can attract penalties under the Companies Act, 2013.

Other Exemptions under Section 73:

Small Companies: The provisions under Section 73 (dealing with public deposits) do not apply to small companies (as defined under the Companies Act, 2013), which meet certain criteria (like total capital being below a threshold).

Exemptions for Certain Types of Companies: If the private company has borrowed from financial institutions or has other arrangements in place for raising funds, then the restrictions under Section 73 may not apply.

Key Conditions for Deposits from Non-Members:

If a private company wishes to accept deposits from non-members, it has to comply with the following:

File a deposit return with the ROC on a quarterly or annual basis (depending on the amount).

Ensure that the terms and conditions for deposits are in line with the prescribed limits and interest rates as specified under the rules.

A private company can also accept secured deposits from non-members under certain conditions laid out by the Ministry of Corporate Affairs (MCA).

Summary of Exemptions for Private Companies:
A private company can accept deposits:

From its members without following the full procedure under Section 73 of the Companies Act.

From its directors or their relatives, subject to certain conditions.

A private company cannot:

Accept deposits from non-members (unless certain conditions and filings are met).

Advertise or publicly solicit deposits.

What Happens If a Private Company Violates These Rules?
If a private company accepts deposits without complying with these provisions (or accepts deposits from non-members without the required filings), it may face penalties under the Companies Act, and the deposits may be considered invalid or subject to legal challenges.

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