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Acceptance of deposits by a private company

Page no : 2

ARUN KUMAR MAITRA (Practicing Company Secretary)   (1009 Points)
Replied 03 March 2015

Can a Pvt. company or an Unlisted Public company accept/take loan from its directors and Members under the CA,2013?

CS Ankur Srivastava (Company Secretary & Compliance Officer)   (17821 Points)
Replied 05 March 2015

Only from other Company or Directors, otherwise the procedure of deposit need to be complied with.

CS Ankur Srivastava (Company Secretary & Compliance Officer)   (17821 Points)
Replied 05 March 2015

Exempted Deposits: Following amount shall not be considered as deposit and the rules shall not apply on them:

  1. Any amount received or guaranteed from Central Government or State Government or local government;
  2. Any amount received from any foreign Government or foreign or international bank pursuant to the fulfilment of FEMA regulations;
  3. Any loan or facility received from any banking company or from State Bank of India or its subsidiary bank or any other cooperative bank or any other bank notified by the Central Government;
  4. Any amount received from any public financial institution notified by the Central Government;
  5. Any amount received against issue of commercial paper or any other instrument;
  6. Any amount received by a Company from any other Company;
  7. Any amount received and held pursuant to an offer made, towards subscripttion 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 applied for;

Provided that it case the securities cannot be allotted within 60 days and the amount is not returned within 15 days thereafter, such amount shall be treated as deposit.

  1. Any amount received from the Director of the Company;
  2. Any amount raised by issue of bond or debenture secured by the first charge ranking pari passu or any bond or debenture compulsorily convertible into shares within 5 years;
  3. Any amount received from the employee of the company not exceeding his annual salary in the nature of non interest bearing security deposit;
  4. Any non interest bearing amount received or held in trust;
  5. Any amount received in the course of or for the purpose of business of the company:
    1. As an advance for the supply of goods or supply of service provided such advance is appropriated against supply of goods or services within 365 days;
    2. As advance received in connection with consideration for property under an agreement or arrangement;
    3. As security deposit for performance of contract for supply of goods or services;
    4. As advance received under long term projects for supply of capital goods

Provided that if the amount received above a, b, d becomes refundable due to reasons the company does not have necessary approvals or permissions to deal in goods or services, such amount shall be considered as deposit after expiry of 15 days from the day they becomes refundable.

  1. Any amount brought in by the promoters of the company by way of unsecured loan in pursuance of the stipulation of the lending institution or bank subject to fulfilment of following conditions:
    1. The loan is brought in pursuance of the stipulation imposed on the promoters to contribute such finance;
    2. The loan is provided by the promoters themselves or by their relatives or by both;
    3. The exemption under this sub clause shall be available only till the loan is repaid and not thereafter.
  2. Any amount received by the Nidhi Company in accordance with the rules made under section 406 of the Act.

CS Ankur Srivastava (Company Secretary & Compliance Officer)   (17821 Points)
Replied 05 March 2015

Procedure of deposit from members:

Deposit from Members: (other than Eligible Companies)

  1. Circular is to be approved by the Majority of Directors and to be filed with ROC;
  2. After 30 days of such filing, circular is to be issued to the members, by way of courier or electronic means;
  3. Circular will be valid until the expiry of 6 months from the date of closure of the financial year in which it is issued or until the date on which financial statements are laid before the Company in AGM whichever is earlier. And a fresh circular is to be issued every year for inviting or accepting deposits.
  4. Optional publication of circular in the English and vernacular language newspaper in English language and vernacular language;
  5. Credit Rating is to be obtained every year and publish the rating on the circular;
  6. Every company shall enter into a contract for providing deposit insurance at least 30 days before the issue of circular;

Provided that the company may accept deposits without deposit insurance upto 31.03.2015.

  1. In case of Secured deposits: Charge is to be created to provide security to the deposits. Provided that in case of deposits from members by other than eligible companies, companies may accept unsecured deposit in such case deposit shall be referred as unsecured deposits. In case of secured deposit, Deposit trustee is also to be appointed for creating security for the deposits and deposit trust deed shall be executed atleast 7 days before issuing circular.
  2. The company shall maintain Deposit Repayment reserve account and shall keep upto 30 April of every year 15% of the amount of deposit maturing during a financial year and the next following financial year.
  3. Every company shall file a return on deposit on or before 30th June, every year and furnish the information to the Registrar as on 31st March that year duly certified by the Auditors.

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