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Deposit Rules 1975

Ashish Sharma (Service) (1028 Points)

26 February 2010

if a Private Company taking loan without interest from some persons up to 19000/- is it consider as public deposit

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Rasesh (CS CWA MBA (Fin) B.Com LL.B (Spl)) (6501 Points)
Replied 26 February 2010

Yes. Private Limited company can take deposit only from member, directors and their relatives.

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Ashish Sharma (Service) (1028 Points)
Replied 26 February 2010

What will be consequence if it had taken the loan from others

Rasesh (CS CWA MBA (Fin) B.Com LL.B (Spl)) (6501 Points)
Replied 26 February 2010

Fine if the contravention relates to invitation of any deposit which may extend to Rs. 10 lacs but shall be not less Rs. 50,000/-.

Fine if the contravention relates to acceptance of any deposit which shall not be less than an amount equal to the deposit so accepted

Every officer in default - imprisonment which may extend to five years and fine.

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 26 February 2010

Kindly appreciate, A private limited company can take unsecured loan from its shareholders and the same would not be covered under section 58A and other deposit provisions as such transaction is exempt by deposit rules 1975.

A public and private company can also take loan from Banks/PFIs under the same section 372A as an inter corporate loan.

But if such company take loan from an individual the same would be considered as public deposit under section 58A read with Companies (Acceptance of Public Deposit) Rules, 1975.

As per the definition of deposit given in Rule 2 of the said rules “deposit means any deposit of money with and include any amount borrowed by, a Company but does not include certain amounts.

There are certain amounts which are not considered as deposit as per the rules above and such amount includes inter corporate transaction hence amount taken by company/bank and PFI from other corporate are not considered as deposit.

On the other hand amount taken by public company from individual is not covered in the exemption given by the said rule, hence amount taken by public company from individual is considered as deposit under section 58A read with Companies (Acceptance of Public Deposit) Rules, 1975.

LOAN FROM INDIVIDUALS/OUTSIDERS

Kindly appreciate, A private limited company can take unsecured loan from its shareholders, directors and their relatives and the same would not be covered under section 58A and other deposit provisions as such transaction is exempt by deposit rules 1975.

But if a private company take unsecured loans from persons other than its shareholders, directors and their relatives the same would be considered as deposit under section 58A read with Companies (Acceptance of Public Deposit) Rules, 1975.

Regards

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Rasesh (CS CWA MBA (Fin) B.Com LL.B (Spl)) (6501 Points)
Replied 26 February 2010

Perfect Detailed reply.

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CS Ankur Srivastava (Company Secretary & Compliance Officer) (17853 Points)
Replied 26 February 2010

Originally posted by : Rasesh
	Yes. Private Limited company can take deposit only from member, directors and their relatives.

The provisions of deposit would not apply in this case. As you said that the Private Company can take deposit from its members, director and their relatives. However, as per acceptance of deposit rules, 1975 it is exempted deposit..