ICAI Notes: Acceptance of Deposits by Companies | Corporate & Other Laws for CA Intermediate PDF Download

 Page 1


LEARNING OUTCOMES 
a
    
 
CHAPTER 
5 
 
0 
ACCEPTANCE OF 
DEPOSITS BY 
COMPANIES 
 
 
 
 
At the end of this chapter, you will be able to: 
?
Explain the meaning of the term ‘Deposit’. 
?
Comprehend the requirements for and restrictions on 
acceptance of deposits from members and public. 
?
Grasp the concept of ‘eligible companies’ which can accept 
deposits from public in addition to their members. 
?
Identify the punishment for contravention of the provisions 
relating to acceptance of deposits by companies. 
  
© The Institute of Chartered Accountants of India
Page 2


LEARNING OUTCOMES 
a
    
 
CHAPTER 
5 
 
0 
ACCEPTANCE OF 
DEPOSITS BY 
COMPANIES 
 
 
 
 
At the end of this chapter, you will be able to: 
?
Explain the meaning of the term ‘Deposit’. 
?
Comprehend the requirements for and restrictions on 
acceptance of deposits from members and public. 
?
Grasp the concept of ‘eligible companies’ which can accept 
deposits from public in addition to their members. 
?
Identify the punishment for contravention of the provisions 
relating to acceptance of deposits by companies. 
  
© The Institute of Chartered Accountants of India
a
 
 
 
CORPORATE AND OTHER LAWS 5.2 
?  
 
 
1. INTRODUCTION 
Chapter V Consists of sections 73 to 76A as well as the Companies 
(Acceptance of Deposits) Rules, 2014. 
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 sections 73 to 76A of the Companies Act, 
2013 (hereinafter referred to as ‘the Act’) and the Companies (Acceptance of 
Deposits) Rules, 2014 (hereinafter referred to as ‘the Rules’) govern the acceptance 
of deposits and also renewal thereof.  
2. CERTAIN IMPORTANT TERMS EXPLAINED 
A. DEPOSIT   
Definition: According to section 2 (31) of the Act, the term 
‘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 the Reserve bank 
of India.  
Acceptance of Deposits
Prohibition on Prohibition on 
acceptance acceptance acceptance 
[Sec. 73]
Repayment of Repayment of 
deposits deposits deposits 
[Sec. 74]
Acceptance of Acceptance of 
deposits from deposits from deposits from 
public public public
[Sec. 76]
Punishment for Punishment for 
contravention contravention contravention 
[Sec. 76A]
CHAPTER OVERVIEW 
 
© The Institute of Chartered Accountants of India
Page 3


LEARNING OUTCOMES 
a
    
 
CHAPTER 
5 
 
0 
ACCEPTANCE OF 
DEPOSITS BY 
COMPANIES 
 
 
 
 
At the end of this chapter, you will be able to: 
?
Explain the meaning of the term ‘Deposit’. 
?
Comprehend the requirements for and restrictions on 
acceptance of deposits from members and public. 
?
Grasp the concept of ‘eligible companies’ which can accept 
deposits from public in addition to their members. 
?
Identify the punishment for contravention of the provisions 
relating to acceptance of deposits by companies. 
  
© The Institute of Chartered Accountants of India
a
 
 
 
CORPORATE AND OTHER LAWS 5.2 
?  
 
 
1. INTRODUCTION 
Chapter V Consists of sections 73 to 76A as well as the Companies 
(Acceptance of Deposits) Rules, 2014. 
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 sections 73 to 76A of the Companies Act, 
2013 (hereinafter referred to as ‘the Act’) and the Companies (Acceptance of 
Deposits) Rules, 2014 (hereinafter referred to as ‘the Rules’) govern the acceptance 
of deposits and also renewal thereof.  
2. CERTAIN IMPORTANT TERMS EXPLAINED 
A. DEPOSIT   
Definition: According to section 2 (31) of the Act, the term 
‘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 the Reserve bank 
of India.  
Acceptance of Deposits
Prohibition on Prohibition on 
acceptance acceptance acceptance 
[Sec. 73]
Repayment of Repayment of 
deposits deposits deposits 
[Sec. 74]
Acceptance of Acceptance of 
deposits from deposits from deposits from 
public public public
[Sec. 76]
Punishment for Punishment for 
contravention contravention contravention 
[Sec. 76A]
CHAPTER OVERVIEW 
 
© The Institute of Chartered Accountants of India
 
 
ACCEPTANCE OF DEPOSITS BY COMPANIES 
 
5.3 
 
a
    
 
5.3 
Features: 
 
(i) The above definition of ‘deposit’ is inclusive one.
(ii) It includes any money received by way of: 
a) deposit; or 
b) loan; or 
c) in any other form. 
(iii) Repayment of ‘deposit’ is time-bound.
(iv) It can be secured or unsecured.
(v) It does not include prescribed categories of 
amounts (as stated in the ‘Acceptance of Deposits’ 
Rules). 
(vi) It may be accepted in joint names not exceeding 
three persons.
(vii) A depositor may nominate any person at any 
time.
(viii) Every deposit accepted by the company shall be 
repaid with interest.
(ix) Premature repayment of a deposit can be made by 
the company. 
(x) A private company can accept deposits from its 
members only.
(xi) A public company can accept deposits from its 
members and also from the public if it fulfills certain 
parameters.
© The Institute of Chartered Accountants of India
Page 4


LEARNING OUTCOMES 
a
    
 
CHAPTER 
5 
 
0 
ACCEPTANCE OF 
DEPOSITS BY 
COMPANIES 
 
 
 
 
At the end of this chapter, you will be able to: 
?
Explain the meaning of the term ‘Deposit’. 
?
Comprehend the requirements for and restrictions on 
acceptance of deposits from members and public. 
?
Grasp the concept of ‘eligible companies’ which can accept 
deposits from public in addition to their members. 
?
Identify the punishment for contravention of the provisions 
relating to acceptance of deposits by companies. 
  
© The Institute of Chartered Accountants of India
a
 
 
 
CORPORATE AND OTHER LAWS 5.2 
?  
 
 
1. INTRODUCTION 
Chapter V Consists of sections 73 to 76A as well as the Companies 
(Acceptance of Deposits) Rules, 2014. 
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 sections 73 to 76A of the Companies Act, 
2013 (hereinafter referred to as ‘the Act’) and the Companies (Acceptance of 
Deposits) Rules, 2014 (hereinafter referred to as ‘the Rules’) govern the acceptance 
of deposits and also renewal thereof.  
2. CERTAIN IMPORTANT TERMS EXPLAINED 
A. DEPOSIT   
Definition: According to section 2 (31) of the Act, the term 
‘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 the Reserve bank 
of India.  
Acceptance of Deposits
Prohibition on Prohibition on 
acceptance acceptance acceptance 
[Sec. 73]
Repayment of Repayment of 
deposits deposits deposits 
[Sec. 74]
Acceptance of Acceptance of 
deposits from deposits from deposits from 
public public public
[Sec. 76]
Punishment for Punishment for 
contravention contravention contravention 
[Sec. 76A]
CHAPTER OVERVIEW 
 
© The Institute of Chartered Accountants of India
 
 
ACCEPTANCE OF DEPOSITS BY COMPANIES 
 
5.3 
 
a
    
 
5.3 
Features: 
 
(i) The above definition of ‘deposit’ is inclusive one.
(ii) It includes any money received by way of: 
a) deposit; or 
b) loan; or 
c) in any other form. 
(iii) Repayment of ‘deposit’ is time-bound.
(iv) It can be secured or unsecured.
(v) It does not include prescribed categories of 
amounts (as stated in the ‘Acceptance of Deposits’ 
Rules). 
(vi) It may be accepted in joint names not exceeding 
three persons.
(vii) A depositor may nominate any person at any 
time.
(viii) Every deposit accepted by the company shall be 
repaid with interest.
(ix) Premature repayment of a deposit can be made by 
the company. 
(x) A private company can accept deposits from its 
members only.
(xi) A public company can accept deposits from its 
members and also from the public if it fulfills certain 
parameters.
© The Institute of Chartered Accountants of India
a
 
 
 
CORPORATE AND OTHER LAWS 5.4 
 
B. AMOUNTS NOT CONSIDERED AS DEPOSIT 
Following categories of amounts are not considered as deposit [Rule 2 (1) (c)]: 
(i) Any amount received from:  
• the Central Government; or  
• a state Government; or  
• any other source whose repayment is guaranteed by the Central 
Government or a State Government; or  
• local authority; or  
• a statutory authority constituted under an Act of Parliament or a State 
Legislature; 
(ii) Any amount received from:  
• foreign Governments,  
• foreign or international banks,  
• multilateral financial institutions (including, but not limited to, 
International Finance Corporation, Asian Development Bank, 
Commonwealth Development Corporation, and International Bank for 
Industrial and Financial Reconstruction), 
• foreign Governments owned development financial institutions,  
• foreign export credit agencies,  
• foreign collaborators,  
• foreign bodies corporate and foreign citizens,  
Types of Deposits
Secured deposits 
(fully secured by 
creating charge on 
tangible assets)
Unsecured 
deposits
(partial or no 
security made 
available)
© The Institute of Chartered Accountants of India
Page 5


LEARNING OUTCOMES 
a
    
 
CHAPTER 
5 
 
0 
ACCEPTANCE OF 
DEPOSITS BY 
COMPANIES 
 
 
 
 
At the end of this chapter, you will be able to: 
?
Explain the meaning of the term ‘Deposit’. 
?
Comprehend the requirements for and restrictions on 
acceptance of deposits from members and public. 
?
Grasp the concept of ‘eligible companies’ which can accept 
deposits from public in addition to their members. 
?
Identify the punishment for contravention of the provisions 
relating to acceptance of deposits by companies. 
  
© The Institute of Chartered Accountants of India
a
 
 
 
CORPORATE AND OTHER LAWS 5.2 
?  
 
 
1. INTRODUCTION 
Chapter V Consists of sections 73 to 76A as well as the Companies 
(Acceptance of Deposits) Rules, 2014. 
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 sections 73 to 76A of the Companies Act, 
2013 (hereinafter referred to as ‘the Act’) and the Companies (Acceptance of 
Deposits) Rules, 2014 (hereinafter referred to as ‘the Rules’) govern the acceptance 
of deposits and also renewal thereof.  
2. CERTAIN IMPORTANT TERMS EXPLAINED 
A. DEPOSIT   
Definition: According to section 2 (31) of the Act, the term 
‘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 the Reserve bank 
of India.  
Acceptance of Deposits
Prohibition on Prohibition on 
acceptance acceptance acceptance 
[Sec. 73]
Repayment of Repayment of 
deposits deposits deposits 
[Sec. 74]
Acceptance of Acceptance of 
deposits from deposits from deposits from 
public public public
[Sec. 76]
Punishment for Punishment for 
contravention contravention contravention 
[Sec. 76A]
CHAPTER OVERVIEW 
 
© The Institute of Chartered Accountants of India
 
 
ACCEPTANCE OF DEPOSITS BY COMPANIES 
 
5.3 
 
a
    
 
5.3 
Features: 
 
(i) The above definition of ‘deposit’ is inclusive one.
(ii) It includes any money received by way of: 
a) deposit; or 
b) loan; or 
c) in any other form. 
(iii) Repayment of ‘deposit’ is time-bound.
(iv) It can be secured or unsecured.
(v) It does not include prescribed categories of 
amounts (as stated in the ‘Acceptance of Deposits’ 
Rules). 
(vi) It may be accepted in joint names not exceeding 
three persons.
(vii) A depositor may nominate any person at any 
time.
(viii) Every deposit accepted by the company shall be 
repaid with interest.
(ix) Premature repayment of a deposit can be made by 
the company. 
(x) A private company can accept deposits from its 
members only.
(xi) A public company can accept deposits from its 
members and also from the public if it fulfills certain 
parameters.
© The Institute of Chartered Accountants of India
a
 
 
 
CORPORATE AND OTHER LAWS 5.4 
 
B. AMOUNTS NOT CONSIDERED AS DEPOSIT 
Following categories of amounts are not considered as deposit [Rule 2 (1) (c)]: 
(i) Any amount received from:  
• the Central Government; or  
• a state Government; or  
• any other source whose repayment is guaranteed by the Central 
Government or a State Government; or  
• local authority; or  
• a statutory authority constituted under an Act of Parliament or a State 
Legislature; 
(ii) Any amount received from:  
• foreign Governments,  
• foreign or international banks,  
• multilateral financial institutions (including, but not limited to, 
International Finance Corporation, Asian Development Bank, 
Commonwealth Development Corporation, and International Bank for 
Industrial and Financial Reconstruction), 
• foreign Governments owned development financial institutions,  
• foreign export credit agencies,  
• foreign collaborators,  
• foreign bodies corporate and foreign citizens,  
Types of Deposits
Secured deposits 
(fully secured by 
creating charge on 
tangible assets)
Unsecured 
deposits
(partial or no 
security made 
available)
© The Institute of Chartered Accountants of India
 
 
ACCEPTANCE OF DEPOSITS BY COMPANIES 
 
5.5 
 
a
    
 
5.5 
• foreign authorities or persons resident outside India;  
 The receipt of funds shall be subject to the provisions of Foreign Exchange 
Management Act, 1999 and rules and regulations made thereunder; 
(iii) Any amount received as a loan or facility from:  
• any banking company, or  
• State Bank of India or its subsidiary banks, or  
• a notified banking institution, or  
• a corresponding new bank (as defined in the Banking Companies 
(Acquisition and Transfer of Undertakings) Acts of 1970 and 1980), or  
• any co-operative bank; 
(iv) Any amount received as a loan or financial assistance from:  
•
1
Public Financial Institutions, or 
• any regional financial institutions, or 
• Insurance companies, or 
• Scheduled banks (as defined in Reserve bank of India Act, 1934;  
(v)  Any amount received against issue of commercial paper or any other 
instruments issued in accordance with the guidelines or notification issued 
by the Reserve Bank of India; 
(vi) Any amount received by a company from any other company (Mainly known 
as Inter Company Deposit (ICD)); 
(vii) Any amount received and held towards subscription to any securities 
(including share application money or advance towards allotment of 
securities, pending allotment), so long as such amount is appropriated only 
against the amount due on allotment of the securities applied for; 
Notes:  
(a) It is clarified by way of Explanation that if the securities for which 
application money or advance for such securities was received cannot 
 
1
 Such PFI’s as notified by the Central Government in this behalf in consultation with the 
Reserve Bank of India. 
© The Institute of Chartered Accountants of India