Deposit from members by Private Company

Category: COMPANY LAW
Date: March 5, 2020

Brief provisions on Deposit from members by Private Company

  1. Principal sections for acceptance of deposit are section 73-76
  2. Acceptance of deposit from members by Private Company  is subject to passing of special resolution in general meeting of the company and on such terms and conditions as specified and provided for in the section .
  3. For Private Company major provisions are :
    1. The deposit shall not be repaid within 6 months.
    2. Maximum maturity rate shall not be more than 36 months.
    3. Interest rate shall not be more than maximum rate of interest or brokerage prescribed by the RBI for acceptance of deposits by non-banking financial companies.
    4. Deposit repayment reserve shall be created by the Company
    5. After approval at the in the Extra Ordinary General Meeting, resolution in Form MGT – 14 shall be filed within 30 days.
    6. After acceptance of deposit within 30 days, Form DPT-3 has to be filed. Also on or before 30 June every year till the deposit repayment is pending the Form DPT-3 needs to be filed.

4. There is no Maximum limit on acceptance of deposit from members to following classes of private companies, namely:—

              (i) a private company which is a start-up, for five years from the date of its incorporation;

              (ii) a private company which fulfils all of the following conditions, namely:—

                            (a) which is not an associate or a subsidiary company of any other company;

(b) the borrowings of such a company from banks or financial institutions or any body corporate is less than twice of its paid up share capital or fifty crore rupees, whichever is less ; and

(c) such a company has not defaulted in the repayment of such borrowings subsisting at the time of accepting deposits under section 73;

 

By June 5, 2015 notification for private companies the following exemption was provided

6Chapter V, clauses (a) to (e) o[ sub-section (2) of section 73

Shall not apply to a private company which accepts from its members monies not exceeding one hundred per cent. of aggregate of the paid up share capital and free reserves, and such company shall file the details of monies so accepted to the Registrar in such manner as may be specified.

Further June 13, 2017 notification for private companies the following exemption was provided

Chapter V, clauses (a) to (e) of sub-section (2) of section 73.

Shall not apply to a private company- 

(A) which accepts from its members monies not exceeding one hundred per cent. of aggregate of the paid up share capital, free reserves and securities premium account; or

 (B) which is a start-up, for five years from the date of its incorporation;  or

 (C) which fulfils all of the following conditions, namely:- 

(a) which is not an associate or a subsidiary company of any other company;

(b) if the borrowings of such a company from banks or financial institutions or any body corporate is less than twice of its paid up share capital or fifty crore rupees, whichever is lower; and

 (c) such a company has not defaulted in the repayment of such borrowings subsisting at the time of accepting deposits under this section:

Provided that the company referred to in clauses (A), (B) or (C) shall file the details of monies accepted to the Registrar in such manner as may be specified.

Further by 19th September, 2017 notification notification for private companies the following exemption was provided

Provided further that the maximum limit in respect of deposits to be accepted from members shall not apply to following classes of private companies, namely:—

 (i) a private company which is a start-up, for five years from the date of its incorporation;

 (ii) a private company which fulfils all of the following conditions, namely:—

 (a) which is not an associate or a subsidiary company of any other company;

(b) the borrowings of such a company from banks or financial institutions or any body corporate is less than twice of its paid up share capital or fifty crore rupees, whichever is less ; and

 (c) such a company has not defaulted in the repayment of such borrowings subsisting at the time of accepting deposits under section 73;

Provided also that all the companies accepting deposits shall file the details of monies so accepted to the Registrar in Form DPT-3.

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