Public Deposit
Querist :
Anonymous
(Querist) 16 June 2010
This query is : Resolved
U/s 58A a Public Limited Company can not receive any deposit from Public. So my question is If a Public Limited Company is willing to take deposit from public then what is the Proces for that?
A V Vishal
(Expert) 16 June 2010
In order to take deposits from public it must seek and obtain permission of the Reserve Bank of India.
The public deposits are regulated by the provisions of the Companies Act and the Companies (Acceptance of Deposit) Rules,1975. According to them, the following amounts are not included in the expression 'deposits':-
* Any amount received from the Central Government or a State Government, local authority, foreign Government, any foreign citizen or authority or any other source whose repayment is guaranteed by the Central Government or a State Government
* Any amount received as a loan from any banking company, State Bank of India or its subsidiaries,a nationalised bank or co-operative bank
* Any amount received as a loan from any of the notified financial institutions
* Any amount received by a company from any other company
* Any amount received from an employee of the company by way of security deposit
* Any amount received by way of security or as an advance from any purchasing ,selling or other agents in the course of or for the purposes of the business of the company
* Any amount received by way of subscripttions to any shares, stock, bonds or debenture pending the allotment of such shares,etc.,and calls in advance on shares
* Any amount received in trust or any amount in transit
* Any amount received from directors of the company or from its shareholders by a private company
* Any amount of unsecured loans brought in by the promoters in pursuance of stipulations of financial institutions or loans provided by the promoters themselves and/or by their relatives but not by their friends and business associates.
Under the Companies Act and the rules framed thereunder, the invitation and acceptance of deposits by companies is subjected to the following conditions:-
* Companies are not permitted to raise unlimited amounts of fund through public deposits. The aggregate of all outstanding deposits cannot exceed certain prescribed percentage of the paid up capital and free reserves of the company.
* Invitations of deposits by a company can be made only by means of an advertisement specifying the financial position,management structure and other particulars relating to a company. A company which has defaulted in repayment of deposit or interest thereon is prohibited from inviting deposits.
* The depositors shall fill the application form supplied by the company. The company in return issues a deposit receipt which is an acknowledgement of debt by the company.The terms and conditions of the deposit are printed on the back of the receipt.The company shall maintain a register of deposits containing the prescribed particulars and file returns of deposits duly certified by their auditor with a Registrar on or before 30th June of every year.
* The interest to be allowed on such deposits by the company must be in accordance with the rate fixed by the Government. The rate of interest on deposits also varies depending upon the period of deposit and the reputation of the company.
The Companies (Amendment) Act,2000 has inserted certain new sections, in order to protect the interests of small depositors. The expression 'small depositor' means ''a depositor who has deposited (in a financial year) a sum not exceeding twenty thousand rupees in a company and includes his successors,nominees and legal representatives". In case of any default by the company in paying back to them, it shall inform the Company Law Board within sixty days from the date of default. The Company Law Board will then direct the company to repay to small depositors within a period of thirty days from the date of receipt of intimation of default. On failure to comply with the orders of the Board, the company and its directors shall be punishable with imprisonment and payment of daily fine during the period in which such non-compliance continues. However,if such a defaulting company wants to invite deposits from small depositors,it shall state the complete nature of default in all its future advertisements and application form.
Besides, the Reserve Bank of India issues directives from time to time for regulating public deposits. These are aimed at safeguarding the interest of the public and to give them a feeling of security in investing in the public deposits. These regulations pertain to:-
* The ratio of deposits to the paid-up capital and free reserves of the company
* The maximum duration of the deposits
* Obligation to invest a specified percentage of the deposit in a current or other account with a scheduled bank free from any charge or lien,or in approved securities which shall be used only for the repayment of deposits
* The filing of periodical returns with the RBI, giving the required information about public deposits/loans as well as furnishing of certain specified information on its financial position and working.
