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Chapter Overview

Prohibition On Repayment of Acceptance of

acceptance Deposits Deposits from public Punishment
(Section 73) (Section 74) (Section 76) (Section 76 A)

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 INTRODUCTION

• Acceptance of deposits from the members as well as public at large is an important

source of finance for the corporate sector.

• It is therefore necessary to control the companies which invite deposits in order to

safeguard the general and wider interest of all those persons who offer deposits
out of their precious savings.

• The statutory provisions as contained in section 73 to 76A of the “Companies Act

2013’’ and the ‘’Companies (Acceptance of Deposits) Rules 2014’’ govern the
acceptance of deposits and also renewal thereof.

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 CERTAIN IMPORTANT TERMS
Deposit Section 2(31)

• Definition : ‘’Deposit includes any receipt of money by way of deposit or loan or in any other form
by a company but does not include such categories of amount as may be prescribed in consultation
with Reserve Bank Of India”
• Definition of deposit is inclusive one. It includes any money received by way of
(a) Deposits or
(b) Loan or
(c) in any other form
• Repayment of ‘’deposit’’ is time bound
• It can be either secured or unsecured
• It does not include prescribed categories of amounts (given under the Rules)
• A private company can accept deposits from its members only
• A public company can accept deposits form its members and also form the public if its fulfills certain
parameters.

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 Deposits 2(31)

But does not include such categories

Includes any receipts of money by
of amount as may be prescribed in
way of deposits or loan or in any
consultation with Reserve Bank of
other form by a company
India

It can be of two types

Secured Deposits
Amounts not considered as deposits as
(Secured by creating Unsecured Deposits
per Companies (Acceptance of
charge on tangible (No security available)
Deposits) Rules,2014 [Rule 2 (1) (c)]
assets)

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Amounts Not Considered as Deposit, Companies (Acceptance of Deposits) Rules, 2014 [Rule 2 (1)(c)

(i)
Any amount received from the Central Government or a State Government or from any
Amount received or
other source whose repayment is guaranteed by the Central Government or a State
Guaranteed by
Government, or any amount received from a local authority or any amount received from a
CG/SG/ Local
statutory authority constituted under an Act of Parliament or State Legislature.
Authority

(ii)
Amount received Any amount received from Foreign Governments, Foreign or International Banks,
from Foreign Multilateral Financial institutions etc.
Government

(iii)
Any amount received as a loan or facility form any banking company or from State Bank of
Amount Received as
India or its Subsidiary banks or form notified banking institution or form any Co-oprative
Bank loan or other
bank.
facility

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 (iv)
Loan from Public
Any amount received as a loan or financial assistance form Public Financial Institutions.
Financial
Institutions (PFI)

(v) Any amount received against issue of commercial paper or any other instruments issued in
Commercial Paper accordance the guidelines or notification issued by the Reserve Bank of India.

(vi)
Amount received Any amount received by a company from any other company.
from other company

(vii)
Amount received Any amount received by issue of shares (including share application money or advance
against Offer of towards allotment of securities, pending allotment)
securities

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Application or Whether Allotment is made Treated as
Advance money within 60 days form received of Share Capital of
received Amount ? the company

Whether Such amount refunded Note: Any adjustment of the amount

within 15 days after expiry of 60 for any other purpose shall not be
days? treated as refund.

Such amount shall be treated as a

deposit under Companies (Acceptance
of Deposits ) Rules 2014

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 • Any amount received form a person who, at the time of the receipt of the amount was a
director of the company or a relative of the director of the private company.

(viii) • However the Director of the company or relative of the director of the private company
Amount received from whom money is received is required to furnish to the company at the time of giving
form Director Or the money
Relative of Director - A declaration in writing
- stating that the amount is not being given out of funds acquired by him by borrowing
or accepting loans or deposits from others
- the company shall disclose the details of money so accepted in the Board’s Report.
• Any amount raised by the issue of bonds or debentures secured by a first charge or a
charge ranking pari passu with the first charge on any assets referred to in Schedule
(ix)
III of the Act excluding intangible assets of the company or bonds or debentures
Amount raised by
compulsorily convertible into shares of the company within 10 years.
issue of debentures
or bonds secured by
• However, if such bonds or debentures are secured by the charge of any assets referred to
charge compulsorily
in Schedule III of the Act, excluding intangible assets, the amount of such bonds or
convertible into
debentures shall not exceed the market value of such assets as assessed by a registered
shares
valuer.

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 (ix a)
Amount raised by
issue of debentures • Any amount raised by issue of non-convertible debenture not constituting a charge on the
not secured by assets of the company and listed on a recognized stock exchange as per applicable
charge non regulations made by Securities and Exchange Board of India.
convertible into
shares

(x) • Any amount received from an employee of the company not exceeding his annual salary
Amount received under a contract of employment with the company in the nature of non-interest bearing
form an employee security deposit.

(xi)
Non interest bearing
• Any non- interest bearing amount received or held in trust.
amount received or
held in trust

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 • Any amount received in the course of or for the purposes of, the business of the company

a) As an advance for the supply of goods or provision of the services accounted for in any
manner whatsoever provided that such advance is appropriated against supply of goods
or provision of service within a period of three hundred and sixty five days (365 days)
form the date of acceptance of such advance.
However, in case of any advance which is subject matter of any legal proceedings before
court of law, the said time limit of three hundred and sixty five days(365 days) shall not
(xii)
apply.
Amount received in
course of or for the
b) As advance, accounted for in any manner whatsoever, received in connection with
purpose of business
consideration for an immovable property under an agreement or arrangement, provided
of company
that such advance is adjusted against such property in accordance with the terms
of agreement or arrangement.

c) As security deposit for the performance of the contract for supply of goods or provision
of services

d) as advance received under long term projects for supply of capital goods except those
covered under item (b) above
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(e) As an advance towards consideration for providing future services in the form of a
warranty or maintenance contract as per written agreement or arrangement, if the
period for providing such services does not exceed the period prevalent as per common
business practice or five(5) years , from the date of acceptance of such service
whichever is less.

(f) As an advance received and as allowed by any sectoral regulator or in accordance with
directions of Central or State Government.

(g) As an advance for subscription towards publication, whether in print or in electronic to

be adjusted against receipt of such publications

However it is clarified that if the amount received under (a) (b) and (d) above become
refundable (with or Without interest) due to the reasons that the company accepting
the money does not have necessary permission or approval wherever required, to deal in
the goods or properties or service for which the money is taken then the amount
received shall be deemed to be a deposit under these rules.

Further, by way of Explanation it is clarified that for the purpose of this sub clause the
amount shall be deemed to be deposits to be deposits on the expiry of fifteen days from
the date they become due for refund.
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 Amount received in course of or for the purpose of business of company

(a) Advance for the supply of goods or provision of services

When (a) (b) and (d) become refundable with or
(b) Advance in connection for an immovable property without interest due to reasons that the
company accepting the money does not have
(c) Security Deposit for the performance of the contract necessary permission or approval wherever
required to deal in the goods or properties or
services for which the money taken shall be
(d) Advance received under long term projects for supply of
capital goods

(e) Advance towards consideration for providing future DEEMED DEPOSIT

services in the form of a warranty or maintenance
contracts.

(f) Advance received and as allowed by any sectoral

Note : Amount shall be deemed to be deposits on
regulator in accordance with directions of Central or
the expiry of 15 days from the date they become
State Government.
due for refund.
(g) Advance for subscription towards publication

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 • Any amount brought in by the promoters of the company by way of unsecured loan in
pursuance of the stipulation of any lending financial institution or a bank subject to the
(xiii)
fulfillment of following conditions
Amount brought in
by the promoters by
a) the loan is brought because of the stipulation imposed by the lending institutions on
way of unsecured
the promoters to contribute such finance.
loan
b) the loan is provided by the promoters themselves or by their relatives or by both and
c) such exemption shall be available only till the loans of financial institution or bank are
repaid and not thereafter
(xiv)
• Any amount accepted by a Nidhi company in accordance with the rules made under section
Nidhi Company
406 of the Act.

(xv)
• Any amount received by way of subscription in respect of a chit under the Chit Fund
Chit Fund
Act, 1982.

(xvi) • Any amount received by the company under any collective investment scheme in
Collective compliance with regulations framed by the Securities and Exchange Board of India
Investment Scheme (SEBI)

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 (xvii) • An amount of twenty-five lakh rupees(25 lakhs Rs.) or more received by a start-up
Convertible note company, by way of a convertible note (convertible into equity shares or repayable within a
period not exceeding ten years from the date of issue) in a single tranche, from a person.

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 (xviii)
Amount received • Any amount received by a company from
from Alternate - Alternate Investment Funds,
Investment Funds/ - Domestic Venture Capital Funds,
Domestic Venture/ - Infrastructure Investment Trusts,
Capital Funds/ - Real Estate Investment Trusts and
Infrastructure - Mutual Funds registered with the Securities and Exchange Board of India in accordance
Investment Trusts/ with regulations made by it.
Real State Trusts

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