Deposits under Companies Act, 2013
Deposits
& Borrowing:
A.
Private Limited
Company: As per definition of Private
limited Company as given under section 2 clause 68 of Companies Act, 2013.
Private Company means a Company which by its articles prohibits any invitation
to the public to subscribe for any securities of the company.
Source of
receiver of Money for Private Limited Company:
The
Principal Rule 2(1) (c) of Companies (Acceptance of Deposits) Rules, 2014 lists
out the “exempted deposits” under the applicable provisions of the Companies
Act, 2013. Let’s discuss in brief here, then will discuss below:
1.
Receiving of
Money from any Company. Or;
2.
Receiving of
Money from Directors. or;
3.
Receiving of
Money from Relative of Directors. or;
4.
Receiving of
Money from State Government & Central Government. ETC.
5.
Receiving of
money from the Members subject to compliance of provision of Section 73 read
with rules.
B.
Public Company: There is no such restriction for the Public
Company to accept deposit from the public.
Source of
receiver of Money for Public Limited Company:
The
Principal Rule 2(1) (c) of Companies (Acceptance of Deposits) Rules, 2014 lists
out the “exempted deposits” under the applicable provisions of the Companies
Act, 2013. Let’s discuss in brief here, then will discuss below:
1.
Receiving of
Money from any Company. Or;
2.
Receiving of
Money from Directors. or;
3.
Receiving of
Money from State Government & Central Government. ETC.
4.
Receiving of
money from the public subject to compliance of provision of Section 73 read
with rules.
LIST OF PERSONS TO WHOM COMPANY CAN ACCEPT LOAN-
WITHOUT FOLLOW THE PROVISION OF SECTION – 73
S.
No.
|
Loans
from
|
Public
Limited
|
Private
Limited Company
|
Director
|
Rule
3(1)(viii)
Yes,
can accept, but the director will give a Declaration in writing that money is
not given out of borrowed funds and company will disclose it in the Board's
report.
|
Rule
3(1)(viii)
Yes,
can accept, but the director will give a Declaration in writing that money is
not given out of borrowed funds and company will disclose it in the Board's
report.
|
|
Relatives of Director
|
No can’t Accept
|
Rule
3(1)(viii)
[2]Yes, can accept, but the relative will give a
Declaration in writing that money is not given out of borrowed funds and
company will disclose it in the Board's report.
|
|
Employee
|
Yes, can accept up to the employee’s annual
salary (there should be a contract of employment with the company) in the
nature of non- interest bearing security deposit.
|
Yes, can accept up to the employee’s annual
salary (there should be a contract of employment with the company) in the
nature of non- interest bearing security deposit.
|
|
Any
other Individual
|
Can accept after follow the compliances of
Section 73 read with relevant rules
|
Can’t accept because it is prohibited by the
definition of Private Company.
|
|
Proprietorship Firm ;
|
Can accept after follow the compliances of
Section 73 read with relevant rules
|
Can’t accept because it can’t be director, Member
or relative of Director.
|
|
HUF
|
Can accept after follow the compliances of
Section 73 read with relevant rules
|
Can’t accept because it can’t be director, Member
or relative of Director.
|
|
Partnership Firm
|
Can accept after follow the compliances of
Section 73 read with relevant rules
|
Can’t accept because it can’t be director, Member
or relative of Director.
|
|
Any Company
|
Yes, can accept.
|
Yes, can accept.
|
|
Banks
|
Yes, can accept.
|
Yes, can accept
|
|
Trust
|
Yes, can accept.
|
Yes, can accept, but loan received should be non-
interest bearing.
|
|
Outside India
|
Yes, can accept.
|
Yes, can accept, but subject to the provisions of
the Foreign Exchange Management Act, 1999 and rules and regulations made
there under.
|
|
Govt. organization
(eg. SIDBI)
|
Yes, can accept.
|
Yes, can accept
|
FAQ’s on Acceptance of Deposit and
Borrowing
(Without compliance of section 73
and relevant rules):-
Types of Debentures and to whom allowed to issue or Not
S. No.
|
Situations of
issue of Debentures
|
To Whom Allowed
to Issue
|
|
Director/ Company/ [3]Foreigner/
Relative of Director
|
Others
|
||
1.
|
Unsecured Non Convertible Debentures
(unsecured NCD)
|
Allowed
|
Not allowed
|
2.
|
Secured
Non Convertible Debenture
(Secured
NCD)
|
Allowed
|
Allowed
|
3.
|
Unsecured Debentures convertible into
shares after 10 year before 13 years
|
Allowed
|
Not Allowed
|
4.
|
Fully
secured Debenture convertible into shares after 10 years before 15 years
(Secured
FCD)
|
Allowed
|
Allowed
|
5.
|
Fully secured debentures convertible
into shares within 10 year of issue of Debentures.
|
Allowed
|
Allowed
|
6.
|
Unsecured
fully convertible Debentures
(unsecured
FCD)
|
Allowed
|
Allowed
|
7.
|
Unsecured optionally/Partly
convertible Debentures
|
Allowed
|
Not Allowed
|
8.
|
Secured
optionally/Partly convertible Debentures
|
Allowed
|
Allowed
|
9.
|
[4]Listed unsecured NCD
|
Allowed
|
Allowed
|
Whether
Company can accept deposit from the Members?
[5]Private Limited Company Clause (a) to (e) of Section 73(2) will not
be applicable on Private Limited Company if deposit is up to 100% of paid up
share capital, Free Reserve and security premium account.
If Company wants to accept deposit from the
members more than 100% of paid up share capital, Free Reserve and security
premium account. Then Company has to follow complete section 73 read with
relevant rules.
Private Limited Company No eligible company shall accept
or renew- (a) any deposit from its members, if the amount of such deposit
together with the amount of deposits outstanding as on the date of acceptance
or renewal of such deposits from members exceeds ten per cent. of the aggregate
of the paid-up share capital and free reserves of the company;
Question
|
Private Limited
|
Public Limited
(Yes= only if not required to follow Section 73)
|
|
1.
|
Whether LLP can give Loan to Company under this
exemption
|
NO,
LLP can’t give loan to Private
Limited Company under this Clause. Because this clause cover only Company not
Body Corporate
|
No,
LLP can’t give loan to Company
under this Clause. Because this clause covers only Company not Body Corporate.
|
2.
|
If deposit in the joint name of director and other
person then how it will be treated? -
|
Allowed.
A deposit in joint
names of director and another person, who may or may not be director, should
be permissible, if name of director is first depositor, though there is no
specific provision.
|
Allowed.
A deposit in joint
names of director and another person, who may or may not be director, should
be permissible, if name of director is first depositor, though there is no
specific provision.
|
3.
|
If a person ceases or resign from the post of director
after giving loan then such loan will be considered as deposits or not?
|
Not.
Requirement of director will be check
at the time of receipt of amount. Thus, later he may cease to be a director.
|
Not.
Requirement of director will be check
at the time of receipt of amount. Thus, later he may cease to be a director.
|
4.
|
Loan from HUF?
|
NO,
HUF can’t give loan to Private Limited. Because its
neither Company nor relative of director.
|
No,
HUF can’t give loan to Company.
|
5.
|
Loan from HUF?
|
NO,
Partnership Firm can’t give loan
to Private Limited. Because its neither Company nor relative of director.
|
No,
Partnership Firm can’t give loan
to Company.
|
6.
|
Loan from Non Relatives?
|
Can’t Accept.
|
Accept only after compliance of
provisions of Section 73.
|
Disclosures in the Financial Statement
This is a new insertion in the form of Rule 16A. The
following disclosure by a company in its financial statement by way of notes is
now mandatory:
S. No.
|
To be disclosed by
|
Disclosure Particulars
|
1.
|
Every Company
|
Amount Received
from Director
|
2.
|
Every Private Company
|
Amount Received from Relative of
Director
|
Requirement of Obtaining Deposit Insurance
This amendment is made to rectify the inconsistency. The
provisions of Section 73(2)(d) of CA 2013 read with the Principal Rule 5
provides that companies accepting deposits shall enter into a contract for
providing deposit insurance in the manner stipulated therein.
However, as of now, deposit insurance product is not
available. Hence, in order to plug the gap, the Amendment Rules extend the time
limit for obtaining deposit insurance till 31st March, 2017 or till availability
of a deposit insurance product, whichever is earlier.
Date Chart for the Dates of applicability of provisions
of Borrowings and Deposits.
S. No.
|
Section
|
Provision
|
Section Effective
|
Exemption
|
|
1
|
179(3)
|
Borrow any amount of Money Need Board Resolution
|
01.04.2014
|
||
2
|
180(1)C
|
If borrowing more than
100% of paid up share capital + Free reserve then Need Special
Resolution
|
12.09.2013
|
05.06.2015
|
This Section
not applicable on Private limited Company from 05.06.2015
|
3
|
185
|
Certain Conditions where loan can’t be Received
|
12.09.2013
|
05.06.2015
|
Exemption
only when three conditions fulfilled
-No Body Corporate Shareholder - Not borrowed money from Bank/ Financial Institution/ Body Corporate exceeding lower of the following:- i. Twice it’s Paid up capital ii. Rs. 50 crore - No repayment default subsisting of such borrowings at time of giving loan |
EXEMPTED
DEPOSIT
|
|||||
Source
|
Before
01.04.2014
|
After
01.04.2014 to 05.06.2015
|
After 01.04.2014
to 15.09.2015
|
After
05.06.2015
|
|
1
|
Members
|
Any No. of amount before 01.04.2014
|
Cant receive in this period
|
No Relevance
|
upto 100% of
paid up share capital and free reserve
After 29.06.2016
Upto 100% of
paid up share capital, free reserve and Security Premium Account.
|
2
|
Directors
|
Allowed any amount
|
Allowed any amount
Condition money must be belonging to director only. Not borrowed fund |
No Relevance
|
Allowed any
amount
Condition money must be belonging to director only. Not borrowed fund |
3
|
Relative of Directors
|
Allowed any amount
|
Not allowed
|
Allowed any amount
Condition money must be belonging to relative only. not borrowed fund |
Allowed any
amount
Condition money must be belonging to relative only. not borrowed fund |
4
|
Other Company
|
Allowed any amount.
|
Allowed any amount.
But check relation of section 185. |
No Relevance
|
No Relevance
|
Link of Other Related Articles:
_________________________________________________________________________________
Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness and reliability of the information provided, I assume no responsibility therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not a professional advice and is subject to change without notice. I assume no responsibility for the consequences of use of such information. IN NO EVENT SHALL I SHALL BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM, ARISING OUT OF OR IN CONNECTION WITH THE USE OF THE INFORMATION. This is only a knowledge sharing initiative and author do not intend to solicit any business or profession.
[1]
My further articles on Source of Funding series no. 132- http://www.csdiveshgoyal.info/2016/04/sources-of-funding-private.html
2. My another article on Deposits series No. 148 http://www.csdiveshgoyal.info/2015/09/acceptance-of-deposit-from-members-in.html
[2]
The Companies (Acceptance of Deposit) second amendment Rules,
2015’ dated 15th September, 2015 G.S.R. 695(E)
[3]foreign
Governments, foreign or international banks, multilateral financial
institutions foreign Governments owned development financial institutions, foreign export credit agencies, foreign collaborators,
foreign bodies corporate and foreign citizens, foreign authorities or persons
resident outside India subject to the provisions ofForeign Exchange Management
Act, 1999.
[4]
Companies (Acceptance of Deposits) Amendment
Rules, 2016 on 29th June, 2016.
[5]
Complete process is given under article series no. 148 written by CS Divesh
Goyal.
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