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02 Dec 2024

Overview-of-Company-Deposits-Provisions-and-Compliance-under-Sections-73-76-of-the-Companies-Act-2013

Overview-of-Company-Deposits-Provisions-and-Compliance-under-Sections-73-76-of-the-Companies-Act-2013

Overview of Company Deposits: Provisions and Compliance under Sections 73-76 of the Companies Act, 2013

Company deposits are a significant source of short-term and medium-term financing for companies. To ensure transparency, accountability, and investor protection, the Companies Act, 2013 governs the acceptance, utilization, and repayment of deposits. This article provides an overview of the key provisions, conditions, and compliance requirements under Sections 73-76 of the Act.

Applicability and Exemptions

Exemptions (Section 73)

The provisions of Section 73, which regulate the acceptance of deposits, are not applicable to the following entities:

  • Banking Companies
  • Housing Finance Companies (HFCs)
  • Non-Banking Financial Companies (NBFCs)

These entities are governed by their respective regulatory frameworks established by the Reserve Bank of India (RBI) or other statutory bodies.

Eligible Company

An eligible company refers to a public company that meets the following criteria:

  1. Net Worth: Not less than Rs. 100 crores; or
  2. Turnover: Not less than Rs. 500 crores; and
  3. Has obtained approval from its shareholders through a special resolution (SR).

Conditions for Acceptance of Deposits from Members [Section 73(2)]

Companies accepting deposits from their members must comply with these conditions:

  1. Issuance of Circular: A company must issue a circular or statement to its members detailing the terms of deposits.
  2. Filing with the Registrar of Companies (RoC): Such a circular must be filed with the RoC at least 30 days before issuance.
  3. Deposit Repayment Reserve (DRR): The company must maintain a DRR account and transfer at least 20% of the total deposits due for repayment at the end of each financial year.
  4. Credit Rating: Eligible companies are required to obtain a credit rating annually and file it with the RoC using Form DPT-3.

Term for Acceptance of Deposits

  1. Standard Term: Deposits must have a minimum tenure of 6 months and a maximum of 36 months.
  2. Exceptions: Deposits may be raised for a tenure of less than 6 months but not less than 3 months, subject to certain regulatory constraints.
  3. Premature Payment: In case of premature repayment, a 1% reduction in the interest rate shall be applicable.

Limits on Deposits

The permissible limits for accepting deposits vary based on the type of company:

  1. Eligible Company: Up to 10% of paid-up share capital (PUC), free reserves (FR), and securities premium reserve (SPR).
  2. Public Company: Up to 25% of PUC, FR, and SPR.
  3. Companies under Section 73(2): Up to 35% of PUC, FR, and SPR.
  4. Specified IFSC Public Company: Up to 100% of PUC, FR, and SPR.
  5. Private Company: Up to 100% of PUC, FR, and SPR.

Exemptions from Maximum Limit

The following private companies are exempt from the maximum limit:

  • Start-ups: A start-up company can accept deposits without the restriction of maximum limits.
  • Other Private Companies:
    • Must not be an associate or subsidiary of another company.
    • Borrowings must be less than twice the paid-up capital or ?50 crores, whichever is lower.
    • Must not have defaulted in the repayment of deposits.

Additionally, an amount of ?25 lakh or more received by a start-up company in a single tranche shall not be considered as a deposit.

Mandatory Compliance Requirements

Filing Form DPT-3

  • All companies accepting deposits must file Form DPT-3 as a return of deposits annually.
  • The due date is 30th June of each financial year.

Liquid Asset Maintenance

  • By 30th April of each year, companies must maintain at least 15% of the amount maturing during the financial year in the form of liquid assets.

Interest on Overdue Deposits

  • In case of overdue deposits, a penalty interest rate of 18% per annum applies.

Forms for Deposits

  • Form DPT-1: Used to circulate details of the deposit scheme to members.
  • Form DPT-2: Deposit Trust Deed, to secure the deposits.

Conclusion

The provisions under Sections 73-76 of the Companies Act, 2013 are designed to ensure companies maintain financial discipline while accepting deposits. These rules protect depositors by enforcing strict compliance requirements, including limits on amounts, tenures, and the creation of reserves. Non-compliance can lead to penalties and loss of trust among stakeholders, emphasizing the importance of adherence to these legal provisions.

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Article Compiled by:-

~Neel Lakhtariya

(LegalMantra.net Team)

Disclaimer: Every effort has been made to avoid errors or omissions in this material in spite of this, errors may creep in. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of in the next edition In no event the author shall be liable for any direct indirect, special or incidental damage resulting from or arising out of or in connection with the use of this information Many sources have been considered including Newspapers, Journals, Bare Acts, Case Materials , Charted Secretary, Research Papers etc.