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Acceptance of public deposits

Kanika Gupta (C.S Trainee) (100 Points)

26 November 2010

Can a stock broking company accept public deposits?? If yes is it require to take prior approval of SEBI and Exchange??

Plz reply its urgent.

Thanks in advance

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3 Replies

HARDIK (COMPANY SECRETARY NCFM (Corporate Governance )) (664 Points)
Replied 26 November 2010

Pvt company can accept deposit from its members and directors only. In public company read acceptance of deposit form public rules.

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Santhosh Poojary (SIEMPRE AHÍ PARA TI) (15607 Points)
Replied 26 November 2010

Yea its require to take prior Approval from SEBI

Ajay Mishra (Company Secretary) (74337 Points)
Replied 27 November 2010

If the share broking company going into acceptance of public deposits it will take additional approval from regulatory aythory like SEBI and follow the following:

1. Deposits in case of Private Limited Company

Private Company is prohibited to accept any invitation or acceptance of unsecured loans/deposits from the persons other than its members, directors or their relatives. Therefore a private company can accept deposits through private arrangement from its members, directors and their relatives.

Rule 2(b)(ix) exempt any unsecured loan money received from directors and shareholders from the definition of deposits. According to Rule 2(b)(ix), any amount received from members of a private company limited by guarantee are not exempt.

Rule 3 of Companies (Acceptance of Deposits) Rules, 1975 deal with the limit upto which a company can accept deposits/ loans.

For any invitation and acceptance of unsecured loan/deposits from relatives of directors and member, the company will have to file a statement in lieu of advertisement in accordance with the provisions of Rule 4A of the Companies (Acceptance of Deposits) Rules, 1975. The company will also have to file annual return of deposits in accordance with Rule 10.

2. Consequences of acceptance of deposit by Private Limited Company

If a private company acceptance an amount, which may be classified as deposit under section 58A read with Companies (Acceptance of Deposits) Rules, 1975, it will cease its status of a private company and has to make all the compliances for such deposits as per the requirement of said rules, as well as to comply with all the provisions as may be applicable on public limited company such as section 58A, 58AA, 58AAA, 81, 256, 257, 198, 268, 269, Schedule XIII, 274(i)(g), 295, 297, 300, 301, 372A, etc