ACCPETANCE OF DEPOSITS BY COMPANIES - COMPANIES BILL 2012
Introduction:
One of the major areas in which Companies Bill 2012 changes made are on Deposits. Before going into the provisions in the Bill, let us look into the law applicable on Deposits as per Companies Act 1956.
Provisions pertaining to Deposits as on date
Acceptance of Deposits was dealt by Sec. 58A, 58 AA, 58 B read with Companies (Acceptance of Deposits) Rules 1975.
As per these provisions, a Company can accept deposits only on the following conditions.
i) Only a Public Limited Company can accept deposits.
ii) Company need to publish an advertisement in the prescribed form and manner as laid in Rule 4 of Companies (Acceptance of Deposits) Rules 1975. Prior to publishing such advertisement, Company needs to file it with ROC signed by majority of Directors.
iii) Only Companies with a minimum Net owned Funds of 1 crore can accept deposits. (Net owned funds are explained in a detailed manner); To put it briefly Net owned funds is the aggregate of paid up capital and free reserves less certain items like accumulated loss, intangible assets, investment in subsidiary, etc.
Further a limit upto which a Company can accept deposits has also been prescribed:
1. A Company can accept deposits upto 10 % of its paid up capital & free reserves from its shareholders (other than shareholders in Private Limited Company).
2. Upto 25 % of its paid up capital & free reserves from General public.
As regards the repayment, it is mandatory for the Company to repay the deposits as and when they are due, unless it is renewed. If not, stringent punishment are prescribed.
Now let us look at the provisions in the Companies Bill 2012.
Deposits have been dealt in a separate chapter (Chapter V) under Clauses 73 to 76 explain provisions pertaining to Deposits.
Clause 73 of Companies bill 2012 provides for prohibition for acceptance of deposits from public (marginal notes) corresponding section 58A of the Companies Act, 1956.
Clause 76 of Companies bill 2012 provisions have been given for acceptance of deposits from public by certain companies
As per the Companies Bill, the following entities are not coming under the purview of provisions relating to Deposits & they can continue to accept Deposits:
i) Banking company
ii) Non Banking Financial company
Apart from the above, Notified Companies and Public company having such net worth or turnover as may be prescribed can accept deposits subject to the following conditions:
a. They can accept deposits only from its members prohibits from public (marginal notes)
b. They need to create a Deposit repayment reserve account to the extent of 15% amount of deposits maturing during the current financial year and the immediately following financial year.
c. Company has to issue a circular containing details such as financial position of the company, details of credit rating obtained, total number of depositors, the amount due towards in respect of any previous deposits accepted by the company , etc.
d. Company has to file a copy of the circular with Registrar of Companies, 30 days prior to issue of the circular.
e. Company needs to take deposit insurance as to be prescribed by the Government
f. Company needs to give a Certificate that it has not defaulted either principal or interest before or after commencement of the Act.
g All existing deposits should be refunded within one year from such commencement or from the date on which payments are due, whichever is earlier (clause 74)
Further it has been mentioned that the deposit repayment reserve shall not be used for any other purpose except for repayment of deposits.
Certain issues are worth pondering:
The bill has prescribed that Notified Companies and Companies with a certain Net worth or Turnover can accept deposits only from shareholders. This gives rise to some interesting questions:
1. After the Act comes into force, a Deposit holder may be a shareholder initially at the time of becoming a Deposit holder. Later he can sell his shares without the knowledge of the company and continue to remain as Deposit holder, then he becomes a non member – public How this could be monitored?
2. Taking Deposit insurance, mandatory credit rating and advertisement and other administrative expenditure will cost the Companies and this will indirectly affect the cost.
3. The penalty leviable in case of non payment of deposits is extremely high; hence Accepting Deposits is not going to be an attractive option for many Companies. However this will certainly help avoid the unscrupulous elements making money from the public.
4. As per provisions of the bill, the company should create securities and even if partial security lead to the deposits will become unsecured one.
CS A RENGARAJAN
CAclubindia
