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Acceptance of deposit

Ashutosh (Article Assistant) (72 Points)

08 December 2011

A Private Limited Company has been converted to a Public Limited. Earlier in its Private status the Company has acquired an ample of unsecured loans from its directors, relatives of directors and shareholders. Now when the Company has been converted into a Public Limited status, the unsecured loans will be treated as deposits or not?

Now in case where the declaration is not received from directors for the money invested is not obtained from the borrowed funds, whether such amount will be treated as deposit or not?

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23 Replies

CS Ankur Srivastava (Company Secretary & Compliance Officer) (17853 Points)
Replied 08 December 2011

Now the provisions of deposit will be applicable on the Company.

In this case it will not be classified as deposit whether the directors have given the declaration or not. Because the date on which the deposit was accepted, the company was private.

Now, for renewal and acceptance of deposits, the company needs to file an Statement in Lieu of Advertisement and then this disclosure will be required.

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Ashutosh (Article Assistant) (72 Points)
Replied 08 December 2011

Originally posted by : CS Ankur Srivastava

Thanks for your kind reply.

I would also like to know whether a Private Company needs to obtain declaration for the sum obtained from its directors, his relatives and shareholders ?

And in case a Public Company acquires deposits but the declaration is not received from its members, what will be the status of that amount of money. Whether it will be considered as Deposits u/s 58A?

CS Ankur Srivastava (Company Secretary & Compliance Officer) (17853 Points)
Replied 08 December 2011

Yes it will be considered as Deposit under Section 58A.

However, practically this declaration is not obtained by the Company because it is the internal matter of the Company, it can take the declaration from the director whenever required.

(Guest)

Pl clarify my doubt: Whether a public company can not accept amount from its directors, relatives of directors, shareholders and outsiders ? Why it will be considered as deposit under section 58A ? Pls clarify in detail??

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Ashutosh (Article Assistant) (72 Points)
Replied 09 December 2011

Please go through the following attachment, i hope this may help you.

Attached File : 593880 882892 deposit rules2.doc downloaded: 218 times

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(Guest)

Thanks so much Ashutosh for the attachment. Pls clarify my doubt : Whether XYZ Limited can accept Rs. 5.00 Crore as loan from Mr. A who is not related to company in any way and Rs. 5.00 Crore from Mr. B who is director and shareholder of company . Will that amount of Rs. 10.00 crore be considered as DEPOSIT under section 58A.

ashish gupta (Teaching for CA CS Students ) (281 Points)
Replied 09 December 2011

Hi,

below point belongs to sec 283, can u give me suitable example for same

He becomes director by virtue of an office or employment in the company, on ceasing to hold

that office or employment.

Thanks

(Guest)

Originally posted by : ashish gupta
	Hi, below point belongs to sec 283, can u give me suitable example for same He becomes director by virtue of an office or employment in the company, on ceasing to hold that office or employment. Thanks

In which context have you written this statement.

CS Ankur Srivastava (Company Secretary & Compliance Officer) (17853 Points)
Replied 10 December 2011

Dear Neha,

subject to the limits of the company, yes Rs. 5 Cr be considered as deposit and Rs. 5 Cr accepted from director shall be classified as exempted deposit.

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(Guest)

Dear Ankur Sir, Thanks for your reply but pls elaborate in detail from where I have to check the limits of deposit and from where I can get the information that amount of loan from director is exempt. Pls tell the source from where i can get information about deposits. I have read the rules of acceptance of deposit. But I can not find this exception. Pls note in my case. Company is not paying interest on the amount to director as well as outsider. In the absence of payment of interest will it be considered as deposit. Pls answer my queries in detail. My email id is nehajaincs @ gmail.com

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(Guest)

Ankur Sir, Also let me know if the amount of Rs. 5 crore will be considered as deposit. Then company has not complied with any requirement of acceptance of deposit. Statement in lieu of advertisement not filed with ROC, Receipts not issued to depositors, Interest not paid, etc. All non compliances are their. Now what company should do to correct the non compliances. Many thanks to you in anticipation. Hope to hear from you soon. Regards.

Ashutosh (Article Assistant) (72 Points)
Replied 11 December 2011

Dear Neha,

Sorry for late reply.

I have a similar case like you have elaborated, you may go through the attachment.

Attached File : 593880 883832 section 58a query.doc downloaded: 147 times

CS Ankur Srivastava (Company Secretary & Compliance Officer) (17853 Points)
Replied 12 December 2011

Originally posted by : Neha Jain
	Dear Ankur Sir, Thanks for your reply but pls elaborate in detail from where I have to check the limits of deposit and from where I can get the information that amount of loan from director is exempt. Pls tell the source from where i can get information about deposits. I have read the rules of acceptance of deposit. But I can not find this exception. Pls note in my case. Company is not paying interest on the amount to director as well as outsider. In the absence of payment of interest will it be considered as deposit. Pls answer my queries in detail. My email id is nehajaincs @ gmail.com

Dear Neha,

Pleae go through Companies (Acceptance of Deposit) Rules, 1975.

CS Ankur Srivastava (Company Secretary & Compliance Officer) (17853 Points)
Replied 12 December 2011

Definition of deposit given under Rule 2 wherein it is provided that deposit means any deposit of money with and includes any amount borrowed by a company, but does not include follwoing:

Under Rule 2(ix): deposit shall not include following

"Any amount received from a person who, at the time of receipt of the amount, was a director of the company or a relative of a director, or member of a private company."