ACCEPTANCE OF DEPOSIT
Section 73 to 76 Simplified
The companies Act 2013 by way
of Section 73 to 76 has bought many changes in respect of Acceptance of
deposits by company and the changes are applicable are on Private Limited
Companies also.
To understand the ambit of
Section 73 to 76 we first need to know the definition of Deposits under old
Companies Act wiz a wiz to new Companies Act,2013.
Meaning of Deposit As per
Companies Act 1956
As per explanation to Section 58A “deposit
means any deposit of money with, and includes any amount borrowed by, a company
but shall not include such categories of amount as may be prescribed in
consultation with the Reserve Bank of India.
Such exempted categories prescribed by the
Central government in consultation with RBI (through Companies (Acceptance of
Deposit Rules), 1975) are as follows:
Amounts Received from the Government/Foreign
Sources
Loans from Banking company/Financial
Institution
Inter company deposits
Amount Received from Employee by way of
Security Deposit
Amount Received from Agents
Advances against Orders (for supply of goods
etc.)
Subscriptions to Securities
Calls in Advance of Shares
Trust Moneys
Amount Received from Directors or his
relative
Amount Received from Members (only in case of
Private co.)
Secured Bonds or Debentures
Convertible Bonds or Debentures
Promoters Unsecured Loans pursuant to
stipulations laid down by the financial institutions for granting the loan.
Also, section 3 (1)(iii) of the Companies
Act, 1956 prohibits a private company from the inviting and accepting
any DEPOSIT from person other than its members, directors
or their relatives.
DEFINITION OF DEPOSIT UNDER COMPANIES ACT 2013
In addition of above following has
been included in the definition of Deposits
1) Any amount received against
subscription to any securities including share application money provided the
securities are allotted within 60 days from the date of receipt of the
application money or advance.
If the securities are not allotted
within 60 days then the same should be refunded within 15 days else the same
shall be treated as deposit after completion of 15 days.
2) Any
amount received from Director of the company provided the Director furnishes a
declaration that the amount given is not out of borrowed funds.
3) Any amount received from an
employee of the company not exceeding his annual salary in the nature of
non interest bearing security.
4) Any amount received in the
course of or the purpose of the business for the following :-
a. As advance for the supply of goods
or provision of services provided such advance is appropriated against supply
of goods or provision of service within 365 days from the receipt of such
amount,
b. As advance received in connection
with consideration for property under an agreement or arrangement,
c. As security deposit for the
performance of the contract for supply of goods or provision of services.
d. As advance received under long
term projects for supply of capital goods.
If any amount received under clause
(a),(b) and (d) becomes refundable due to the reasons that the company
accepting money does not have necessary permission or approval to deal with the
goods or services then the amount received shall be deemed to be a deposit
after the expiry of 15 days from the date they become due for refund.
5) Any amount accepted by a
Nidhi Company in accordance with rules made u/s 406 of the Act.
LET Us Understand the Concept of Acceptance
of Deposits under Companies Act 2013 with the help of 2 practical examples:
EXAMPLE 1
ABC Private Ltd has a Share Capital of Rs 10
Crore and it wishes to raise another Rs 10 Crore by the following means:-
·
5 Crore from
Government Agency, Financial institutions, Banks or by way of Commercial Paper.
·
50 Lakhs by way
of Share Application.
·
50 Lakhs from
Director by way of Loan.
·
50 Lakhs from
issue of bonds and debentures.
·
50 Lakhs from
ICD.
·
25 Lakhs from
Employees.
·
50 Lakhs as
business advance from customer.
·
50 Lakhs as
Advance against property Sale.
·
25 Lakhs as
security deposit.
·
50 Lakhs from
promoter or Relative.
·
50 Lakhs from
relative of a Director.
·
50 Lakhs from a
shareholder.
ABC Private Limited has sought your advice on
the above means of finance.
ANSWER 1
·
5 Crore from
Government Agency, Financial institutions, Banks or by way of Commercial Paper.
The amount received or borrowed from any government agency or FI
or Bank or by way of CI is not covered under deposits.
Hence, company can raise money by way of above.
·
50 Lakhs by way
of Share Application.
Company can raise money by way of issue of
share if
a)
Section 42
compliance i.e. Private Placement.
b)
Allotment of
share within 60 days of receipt of amount.
c)
If not allotted
then termed as deposit.
·
50 Lakhs from
Director by way of Loan.
Company can receive a loan from a Director
provided
Director gives an undertaking to the company
that the loan given is from own funds and not from borrowed money.
NOTE : Suppose if Director Net Worth is Rs 10 Crore
and he has taken a loan for Rs 4 Crore then he is eligible to give loan to a
company up to Rs 6 Crore.
·
50 Lakhs from
issue of bonds and debentures.
Company can raise
money by way of bonds and debentures provided
Provided
a)
Amount is secured by a first charge against property;
OR
b)
Such bonds or debentures should be compulsorily convertible into shares
within 5 years.
·
50 Lakhs from ICD.
Inter corporate
deposits are not covered in the definition of deposits, hence company can use
ICD as a means of finance.
·
25 Lakhs from Employees.
Yes, can be raised
from employees provided amount received from employee doesn’t exceed by his
total annual salary.
·
50 Lakhs as business advance from customer.
Yes, amount can be
raised from customer however, such advance should be adjusted with 365 days
from the date of receipt of advance.
·
50 Lakhs as Advance against property.
Yes it can be
raised, however such amount should be adjusted against the property only.
·
25 Lakhs as security deposit.
Yes, as security
deposits are out of the ambit of definition of deposits.
However, it is
advised to receive security deposit under a specific agreement.
Eg :- Security deposit
against rent, security deposit against supply of material or fulfillment of
service.
·
50 Lakhs from promoter or Relative.
No, but if any
amount brought in by the promoters of the company by way of unsecured loan in
pursuance of the stipulation of any lending financial institution or a bank
subject to fulfillment of the following conditions, namely:-
(a)
the loan is brought in pursuance of the stipulation imposed by the lending
institutions on the promoters to contribute such finance;
(b)
the loan is provided by the promoters themselves or by their relatives or by
both; and
(c)
the exemption under this sub-clause shall be available only till the loans of
financial institution or bank are repaid and not thereafter;
·
50 Lakhs from a shareholder.
No, Company cannot
raise an amount from shareholders.
EXAMPLE 2
On 1st
April 2014, following loans are standing outstanding in the books of M/s ABC
Pvt Ltd. The board has sought your advice regarding the treatment of them.
1)
Rs 1 Crore from Director.
2)
Rs 50 Lac from shareholder.
3)
Rs 50 Lac from relative of a Director
4)
Rs 50 Lac as a business Advance.
5)
Rs 2 Crore as advance against property.
6)
Rs 1 Crore as share application money.
7)
Rs 2 Crore as ICD
8)
Rs 1 Crore from unknown sources or non relatives.
SOLUTION 2
The Companies Act
2013, states that in case any Deposit is outstanding in the books of accounts
of company then same has to be reported to the ROC by 30th June 2014
and has to be repaid by 31st March 2015.
Here, the deposits
are to be checked under the definition of Deposits as defined under Companies
Act 1956 instead of Companies Act 2013.
We Will take each
case separately Now:
1)
Rs 1 Crore from Director.
Any amount
received from a Director is not a Deposit hence it need not be reported and can
continue to stay in books. The loan can be renewed on the expiry of term, if
there is no term then it is advisable to make a tenure for same.
2)
Rs 50 Lac from shareholder.
Amount received from shareholders was
not covered in the definition of deposits under old Act; hence the same is not
required to be reported.
However, Loan from
shareholders cannot be renewed and has to be repaid back on expiry of term. If
there is no term than a term contract should be made now.
3)
Rs 50 Lac from relative of a Director
Again as per old
definition loan from relatives of Director were out of the ambit of the
definition of Deposits, Hence no reporting required however same cannot be
renewed and has to be repaid back on expiry of term. If there is no term than a
term contract should be made now.
4)
Rs 50 Lac as a business Advance.
Business Advance
is excluded from the deposits, hence there is no need to report the same and
the amount can continue to appear in books.
The 365 days
condition is not applicable here. However genuineness of the transaction is to
be checked. It should be checked whether there are any transaction happening
between the parties.
If not, then it is
advisable to refund the amount.
5)
Rs 2 Crore as advance against property.
Same as above it is not a deposit,
hence no reporting necessary.
6)
Rs 1 Crore as share application money.
Share Application money is not a
deposit; hence there is no need to report the same.
However, all the pending application
money appearing in books of Accounts should either be allotted or refunded back
to the subscribers. As in many cases share application money is standing
outstanding since many years and as per rules outstanding share application
money should be deposited in Investor Protection Fund Account.
So it is advised either to refund or
allot the amount in current financial year.
7)
Rs 2 Crore as ICD
ICD are exempt from the definitions of
Old as well as New Companies Act, hence company can freely accept ICD.
8)
Rs 1 Crore from unknown sources or non
relatives.
We must have faced
a situation under some amount is outstanding in books of accounts, however the
company is unable to ascertain to whom that amount belong to.
Such amount received
or unexplained money or money standing in books from non relatives needs to be
reported to ROC by 30th June 2014, as they get covered under the
definition of Companies Act. The said amount is to be repaid by 31st
March 2015.
Gaurav Mittal
Partner
Singal & Co
Chartered Accountants
Office : WA
120A, Third Floor,
Shakarpur
Delhi 110092
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