The company raises funds by accepting deposits from the public and its own members. In other words, it is a short-term loan taken by the company. The company can collect deposits on certain terms and conditions laid down by the Companies Act 2013. They are as follows:
(i) Amount of Deposit:
Different types of companies have different terms and conditions for accepting deposits.
The following table shows the percentage o
| Companies | Acceptance of Deposits (%) |
| (i) Private Company | Up to 100% of the aggregate of paid-up share capital and free reserves |
| (ii) Public Company | Should not exceed 25% of the aggregate of paid-up capital and free resources |
| (iii) Eligible Public Company | Should not exceed 25% of the aggregate paid-up capital and free reserves in case of the public. Should not exceed 10% of the aggregate paid-up capital and free reserves in case of members. |
| (iv) Government Company | Should not exceed 35% of the paid-up share capital and free reserves. |
f acceptance of deposits.
(ii) Period/Tenure of Deposit:
- The tenure of deposit should be more than six months but less than thirty-six months.
- Under certain circumstances only, the company can accept deposits for 3 months.
- The company can make premature repayment of deposits after a minimum of 3 months.
(iii) No demand deposit:
The company cannot accept or renew deposits repayable on demand.
(iv) Secured or Unsecured Deposit:
- A company can accept secured or unsecured deposit if it is mentioned in the circular or advertisement.
- A company offering secured deposits has the right to create a charge on its tangible assets within 30 days of acceptance of deposits.
(v) Application Form:
- A prescribed application form is to be filled by the applicant.
- This application form is given by the company.
- It includes a declaration made by the applicant that the deposit he is making is not borrowed from any person.
(vi) Joint names:
The company can accept deposits in joint names of depositors. But there should not be more than three names.
(vii) Nomination:
- Every depositor has to nominate at least one person.
- Nominee enjoys all the benefits in the event of death of the depositor.
(viii) Circular or Advertisement:
- If a company invites deposits from its members, it issues a circular. But if it invites deposits from the public, the company has to issue an advertisement.
- A copy of the circular or advertisement signed by all directors must be filed with the Registrar of Companies.
- Issue of Circular or Advertisement:
- The company has to publish the advertisement in one English newspaper and one vernacular/regional newspaper.
(ix) Appointment of Deposit Trustee:
- Deposit Trustee is appointed by the public companies and eligible public companies.
- One of the more deposit trustees is appointed if secured deposits are issued.
- A contract ‘Trust Deed’ is signed between the company and deposit trustee.
(x) Create charge on assets:
The company secured deposits create a charge on its tangible assets within 30 days of acceptance.
(xi) Deposit Insurance:
- A company needs to take Deposit Insurance at least 30 days before the issue of circular or advertisement.
- Deposit insurance is necessary only when the deposit amount plus interest is up to ₹ 20,000.
(xii) To obtain a credit rating:
- The company obtains credit ratings for deposits on the basis of the net worth of the company, liquidating position, ability to repay deposits on time, etc.
- Credit rating for deposits is given by credit rating agencies.
- The rating is done every year during the tenure of deposits.
(xiii) Open Deposit Repayment Reserve Account:
- A Deposit Repayment Reserve Account is opened in a scheduled bank for accepting deposits.
- The company has to deposit an amount up to 15% of the number of deposits maturing during the current year and following the financial year on or before 30th April.
- This account is used only for repaying deposits only.
(xiv) Deposit Receipt:
- Deposit Receipt is to be issued to the depositors within 21 days from the date of receipt of money or realization of cheque.
- The receipt has to be signed by the officer duly authorized by the Board of Directors.
- The Receipt contains the name and address of the depositor, amount of deposit, rate of interest payable, and date on which it is repayable.
(xv) Register of Deposit:
- Register of Deposit is to be maintained by the company at its registered office.
- The details of the deposit accepted and renewal of the deposits are recorded and depositors are recorded in the Register of Deposits.
- Deposit Receipt should be issued within 7 days from the date of issue.
(xvi) Return of Deposit:
- A Return of Deposit should be recorded with the company on or before 30th June every year.
- The return includes details of deposit with the company as of 31st March of that year.
(xvii) Interest:
- Reserve Bank of India decides the rate of interest on deposits.
- The rate of interest changes from time to time.
- In case of premature repayment of deposits, the company can deduct 1% interest from the rate of interest.
- If the deposits matured and are claimed but remain unpaid by the company, the company will be liable to pay a penal rate of interest at the rate of 18%.
(xviii) Right to alter the Terms and Conditions:
A company cannot directly or indirectly alter the terms and conditions of the Deposit, Deposit Trust Deed, and Deposit Insurance, once the circular or advertisement is issued and deposits are accepted.
(xix) Disclosure in financial statements:
Deposit money received by the company from the Directors or the relatives of the Directors (in the case of a private company) should be disclosed in the company financial statement.
(xx) Punishment:
- As per the Companies Act, an officer of the company will be liable for punishment if found guilty / not fulfilling the provisions of the Act.
- The Maharashtra Protection of Interest of Depositors (in Financial establishments) Act, 1999 has the right to take action against companies and also punish if found guilty.
- Companies in Maharashtra will be punished for contravening the provisions of this Act also.