• Pratham Dave

COMPANIES ACT 2013: ACCEPTANCE OF DEPOSITS FROM THE PUBLIC BY CERTAIN COMPANIES AND PUNISHMENT

Updated: Oct 3


ACKNOWLEDGEMENT OF DEPOSITS:


Deposits are one of the options open to the company for raising funds to meet its short-term and long-term funding needs.


The invitation and acceptance of deposits are governed by Section 73 to 76 of the Companies Act 2013 (hereafter referred to as the Act) and Rules adopted under Chapter V of the Companies Act, 2013.


According to the Companies Act 2013, a "deposit" is any money received by a company in the form of a deposit, loan, or other forms, but does not include amounts prescribed by Rule 2(c) of the Companies (Acceptance of Deposit) Rules, 2014.


EXEMPTIONS:

  • Amount received by a firm from another company (also known as Inter Corporate Deposits (ICD)).

  • Any loan or facility received from a bank or financial institution.

  • Funds brought in by promoters as borrowed money in accordance with the terms of any lending Financial Institution or Bank, subject to the following conditions:

  • (a) The loan is brought in response to a lending institution's need for the promoter to provide such funds; and

  • (b) Exemption is allowed only until the loans are paid off, not after.

  • Amount received as part of an offer to subscribe to any securities, comprising share application money or an advance, that is pending allotment.

  • Exception: If the securities are not allocated within 60 days after receipt of the application money or advance, and the money or advance is not reimbursed to the subscribers within 15 days of the expiration of the 60 days,


APPLICABILITY:


All firms are subject to the provisions of sections 73 to 76 of the Companies Act 2013 and the Companies Acceptance of Deposits Rules, 2014.

  • Banking Companies

  • NBFCs with RBI registration

  • Companies that have been notified by the central government after consultation with the RBI.

In accordance with section 73 to 76 of the Companies Act 2013, the company can receive deposits from both members and the general public.


PUNISHMENT FOR SECTION 73 AND 76:


If a company accepts, invites, allows, or causes another person to acknowledge or invite a deposit on its behalf in violation of the manner or conditions prescribed under section 73 or section 76 or rules made thereunder, or fails to repay the deposit or any part thereof, or any interest due thereon, within the time specified in section 73 or section 76 or rules made thereunder, or such additional time as the Tribunal may allow under section 73,


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