Deposits [73 to 76A] – Chapter 5

S.74 repayment of
Who can issue S.76A
Deposit deposits accepted
deposits Penalty
under 1956 Act

What is not 73 + 76
73 deposits Deposits
a deposit
from from public
Rule 2(1) of
members 
company
(Public / Eligible
(Acceptance
Private Company
of deposits)
Company)
Rules 2014

SEC: 2(31) DEPOSITS:

Deposit includes any receipts of money by a company by way of Deposit, loan or any other form.

What is NOT a deposit – Rule2(1)(c) of company (AOD) Rules 2014

1. Amount received from CG or SG, (or) any other source whose repayment is guaranteed by CG
or SG, (or) amount received from local authority or statutory authority.
2. Amount received from foreign bank, foreign govts, international banks, subject to FEMA
regulations.
3. Amounts received from banks, public financial institution as a loan facility, amount received
from other company (Inter corporate deposit / commercial papers)
4. Application money for subscription of securities up to 75th day (60+15) incase were allotment
pending and 45 day (30+15) where minimum subscription not received is not considered as
deposits, where money is not refunded within the 15 days, from 16th day these money will be
treated as deposits.
5. Money received from:
➢ Debenture holders or Bond (secured or unsecured or convertible or not)
➢ Listed non-convertible debentures without a charge on the assets
➢ From directors and relative of directors of private company.
➢ Security deposits received from employee without interest and not exceeding his
annual salary.
6. Amount held in trust. (non-interest bearing)
7. Promotors loan by way of unsecured loan due to stipulation imposed by lending institution and
loan by promoter and their relatives, this is not a deposit until the loan (loan from financial
institution) is repaid.
8. Amount accepted by:
➢ Collective investment scheme/alternative investment fund/Domestic venture capital
fund /Real estate infrastructure trust.
➢ Mutual fund registered with SEBI
➢ Startup company more than 25 Lakhs from a single person in a single tranche,
received as convertible into equity shares (or) repayable within 10 years from the date
of issue.
➢ Amount received chit fund or Nidhi company in accordance with provisions applicable
to them.
9. Trade advance received and apportioned against goods/services within 365 days. (i.e., advance
received in the course of business) – Note Below
10. Advance received for sale of immovable property and appropriated as per terms of contract or
advance received under a long term project for supply of capital goods. (Becomes deposit where
the money is refundable) – Note Below
11. Security deposits received for the performance of contract for supply of goods or service.
12. Advance received by any sectoral regulator or in accordance with direction CG or SG.
13. Advance for subscription towards publication to prints or electronic media to be adjusted
against receipt of such publication.
14. Advance towards consideration of future services in a form of warranty or maintenance contract
E.g. (AMC) as per the agreement where the period for provision of services does not exceed 5
years or period of service as per general trade practices w.e. lower.

Note

For Points 9 and 10 above, where the amount becomes repayable for reason such as the
company is not licensed to provide such service or supply such goods, then such amount now
becomes a deposit after expiry of 15 days from the date on which the amount is due.
Section 76 A – Penalty

Company Officer in default

In addition to payment of deposit & Imprisonment upto 7

AND 25 L to 2 Cr.
interest years

Min: 1 Cr (or) twice the amount of

deposit accepted by the company
(w.e. lower)

Max: - 10 Cr

Section 74: Repayment of deposits accepted before commencement of company Act

2013 (1/4/2014)
1. Where any deposits were accepted before commencement of this act (1/4/2014) and such
amount deposits or interest remains unpaid as on 1/4/2014 (or) becomes due any time thereafter
↓
2. The company shall within a period of 3 months from the date of commencement (or) from the
date on which such payment is due.
↓
3. File with registrar statement of all deposits accepted by the company, such statement shall
contain details such as, status of deposits and agreement made to repay.
↓
4. Repay within 3 years of commencement (or) before the expiry of the period for which deposits
are accepted w.e. Earlier.
↓
5. COMPANY can apply to the tribunal for additional time and tribunal shall grant the same if they
are satisfied with the financial position of the company.

Note: Penalty same as S. 76A except that “Twice of deposit accept amount” part is removed
 KEY SUMMARY TABLE

S.73 S.76+73 Eligible govt company

Private Company Public

Non-Eligible Eligible

100 %
Members 35% 10%
(Note 2)
35%
In any ratio
Public 25%

The Amount of Deposit together with the amount of Deposit already outstanding
SHOULD NOT Exceed the above % of [PSC+ FR+SP] as the case may be.

Note 1: (Common Note)

Time limit of issue of deposit:
Min: 6 months Max: 36 Months and such deposits shall not be repayable on demand For
S.73
Exception: Short term requirements +
Period: >3 Months < 6 Months S.76
Limit: 10% Agg [PSC+FR+SP]

Note 2: In case of private company: certain class of company can issue deposits without any limits (Any
amount they can issue, more than 100%].
a) A startup private company for 10 years from the date of commencement (or)
b) Company shall fulfill all the conditions below:
➢ Such company is not an associate or subsidiary of any other company and
➢ Borrowings of such company from banks (or) any other body corporate is less than twice
of its paid-up share capital (or) 50 crores whichever is less and
➢ Company has not defaulted in repaying borrowings subsisting at the time of accepting
the deposits and
➢ Company has not defaulted in filing annual return and financial statements and has to file
details of money collected to registrar.
Note 3 what is an Eligible company?
1. It is a public company +
2. Company should have net worth > 100 crores or turnover > 500 crores. +
3. The Company has obtained from the members consent by passion a Special resolutionand filed the
same with the registrar before making such invitation of deposits, However an ordinary resolution
is sufficient if the limits of deposits are within the range specified in 180(1)(c)

Section 73: Acceptance deposits from members.

(Unique Points, also read the Common points available in the end of the chapter)

1. Company may accept deposits from its members on such terms and conditions between the
Company and the members
2. Pass ordinary resolution in general meeting
3. Company shall certify that it has not defaulted in repayment of any deposits or interest there on,
such certificate shall be issued by the auditors. If it has defaulted in repayment of deposits then
Company can issue the deposits only after the period of 5 years from when default has been made.
4. The Company may provide securities for due repayment of deposits and interest payable there on
by creating a charge on its assets.
5. If the Company fails to repay deposits or interest then the depositor
➢ Shall make an application to the tribunal and the tribunal shall pass an order after
hearing the case
➢ Such order shall include asking the company to pay to the depositor
• Any sum which is due to him
• Any loss or damage incurred by him

Note: remember to read common points of section 73 and key points mentioned in summary chart

Section 76: Acceptance of deposits from public

(Unique Points, also read the Common points available in the end of the chapter)
1. Only an eligible company can accept deposits from public (Note 3 above)

2. Obtain credit rating from the recognized credit rating agency (rating on net worth, liquidity,
ability to pay deposits on due date) Such rating has to be obtained every year during the tenure
of the deposits and has to be filed along with return of deposits.

3. Every company which accepts security deposits from public shall within the period of 30 days of
such acceptance create a charge on its assets. The amount of charge created shall only on tangible
assets in favor of the deposit holders (for safety reasons)

4. The amount of charge created shall not be less than the number of deposits accepted and the
same has to be valued by a registered valuer.
Common points for section 73 and 76
1. Company has to create a DRR (deposit repayment reserve) and transfer at least 20% of deposits
matured during the following financial year to a separate bank account before 30th Apr of each
financial year.
↓

Balance in DRR shall not fall below 20% of deposits matured during financial year

2. Company has to appoint a deposit trustee:

Company has to appoint one or more deposit trustees for depositors and obtain and written consent
from the trustees before their appointment
↓

Mention a statement in the circular or advertisement that company has appointed at a deposit trustee
and obtained his consent.
↓

Execute trust deed at least 7 days before issuing a circular or circular in the form of advertisement.

3. Who cannot be the deposit trustee:

a) Director, KMP or any other officer or employee of company / Associate, holding and subsidiary or
depositor of the company.
b) Indebted to company, holding, subsidiary or associates (or) co-subsidiary (subsidiary of such
holding company).
c) Has any material pecuniary relationship with the company.
d) Has enter into any guarantee agreement in respect of any principle debts secured by the deposits
or interest thereon.
e) Party related to any of the persons specified in (a) to (d) above.
↓
No trustee shall be removed from the office after the issue of circular (or) advertisement and
before the expiry of this term without the consent of all directors, present in a meeting.
(If company has independent directors at least one independent director has to be present in the
meeting).

4. The trustee shall call for a meeting of depositholders in the following cases;
A. On receipt of requisition in writing signed by atleast 1/10th of the depositors in Value for the time
being outstanding;
B. Or an happening of any event which affects the interest of the depositors.
5. Register of Deposits:
Company has to maintain register of deposits at the registered office.
a) Name, address, PAN of the deposit holder
b) In case of minor, guardian name
c) Details of nominee
d) Deposit receipt number
e) Date and amount of each deposit
f) Duration of Rate of interest
g) Due date for interest and when it will be paid.
h) Particulars of security etc.

↓
Entries has to made in the register deposits within 7 days from the issuance of deposits receipts
authenticated by director or secretary or officer authenticated by BOD
Preserve for 8 years, the register of deposits from the financial year in which the last entries are made.

6. Pre-mature repayment of deposits:

After expiry of 6 months but before the actual date of maturity company can close the deposits and
repay the deposits after reducing 1% from the actual rate of interest for the actual period.
Exception: In certain cases, 1% reduction not allowed.
1. Deposits is pre-matured to comply with prescribed limits.
2. Pre-matured to provide for war risks or other related benefits to army/navy or air force during
the period of emergency.

7. Company can pay any rate of interest or brokerage:

a) Rate cannot exceed maximum rate specified by RBI for NBFC’s
b) Brokerage to be paid only to persons who are authorized by the company in writing to solicit
deposits on its behalf and through whom deposits are actually procured.

8. Company shall accept deposits only when depositors submit the application (offer) and also state that
deposits is made from money which is not borrowed from any other person.

9. Company can accept → joint deposits not exceeding 3 members.

Jointly/ either (or) survivor/ first named (or) survivor/ anyone (or) survivor
1. Paid to all the joint holder equally or in proportion (Jointly)
2. Paid to either of party’s name mention or survivor (either (or) survivor)
3. Paid to deposit holder whose name is first mention or survivor (first named (or) survivor)
4. Paid to anyone at the discretion of the company or survivor (anyone (or) survivor)

10. Deposit holder can give details nomination (whom to pay in case of death of deposit holder)
11. Company shall issue deposit receipt within 21 days from the date of receipt of money or realization
of cheque to the deposit holder or its authorized agent.
Deposit receipt should contain details such as:
➢ Name & address
➢ Amount paid
➢ Rate of interest
➢ Sign of officer
➢ Maturity date etc.

12. File audited return of deposits in form DPT – 3 before 30th June after end of every financial year
containing details as on 31st March.

13. Disclose in the financial statement details of deposits received from directors, private company and
relatives of directors.

14. Failure to repay the deposits on time company has to penalty rate of interest of 18%

15. If the company or the officer contrivance any deposits rules where not punishment is given in the act
then the punishment follows: -
↓ ↓
Fine up to ` 5000 ` 500 per day in case of continuing offence
Circular to Member (OR) To public – circular to be issued in the form of advertisement -
(Common point)

A B C D E

Company has to Publishing

Filing of circulars Circular in the form
issue circular to Circular to be issued newspaper in the
and statement with of advertisement
members or to all members in location of
registrar atleast 30 shall be placed in
public and registered post with registered office of
days before the the websites of the
statement acknowledgement the company
issue of circular and company if any.
containing or speed post or (English +
it shall be signed by
following details electronic mode vernacular having
majority of
vide circulation)
directors who
approved it (or)
person authorised
• Financial position
by the BOD
the company
• Credit rating
obtained by the
company
• Details of deposits
and amount due in For company U/s 76
respect of
previous deposits
if any

Validity of advertisement:

Up to 6M from closure of (or) Date of AGM where (or) Where no AGM is held last date
financial year where it is financial statements are when the AGM should have
issued laid been held

w.e. earlier

Note: Such Circular or Advertisement shall be filed with with registrar atleast 30 days before the issue
of circular or advertisement duly signed by a majority of directors who approved the same

73 to 76 → Procedure → NA
1. Banking company
2. NBFC
3. Housing finance company registered by housing finance
4. Other company as specified by CG in consultation with RBI.