Maharashtra Board Class 12 Secretarial Practice Chapter 5 Deposits PDF Download

Deposits

5.1 Acceptance of deposits

5.2 Terms and conditions for acceptance of deposits

5.3 Procedure for accepting deposits from public

5.4 Procedure for accepting deposit from Members

Introduction

Accepting deposits from the public or from its own members is one of the sources of raising funds for a company. It is cheaper to raise funds through deposits. Moreover, there is no dilution of control as it is a type of short term loan taken by the company. However accepting deposits can be a risky option for a company in case it defaults in repaying the deposits. In this chapter we will learn which companies can collect deposits, the terms and conditions to be fulfilled and the procedure to collect deposits from members and public.

5.1 Acceptance Of Deposit

All companies, accepting deposits, except:

A Banking Company

A Non-Banking Finance Company (NBFC)

A Housing Finance Company and

Such other company as the Central Government will specify have to comply with the provisions of (a) Section 73 to 76 of companies Act, 2013 (b) Companies (Acceptance of Deposits) Rules 2014 and (c) Directives issued by Reserve Bank of India regarding acceptance of deposits.

Directives: Official instruction.

Following chart shows which companies can collect deposits from members and from public.

Private Company: A private company can accept deposit from its members or Directors or relatives of Directors.

Public Company (Other than eligible company): These companies can accept deposits from its members or directors.

Eligible Public Company: These companies can accept deposits from their members and also from the public. Eligible public company means a company having:

A Net worth of not less than ₹ 100 corores or

Teacher's Note

In India, many companies raise money through deposits. For example, HDFC Bank and ICICI Bank accept deposits from people. This is like a Fixed Deposit you keep in a bank.

Exam Trick

Remember: Deposit = Fixed maturity. Just like you keep money in your bank FD, a company also keeps money for a fixed time period. It is not like a loan that you can ask back anytime.

Points to Remember

Deposits are short-term loans taken by a company.

Not all companies can collect deposits from the public.

Only eligible public companies and government companies can collect deposits from the public.

A private company can only collect deposits from its members and directors.

Net worth of a company means total paid-up capital plus free reserves.

5.2 Terms And Conditions For Acceptance Of Deposits

1. Amount of Deposit

A) Private Company: A Private Company can accept deposits from its members or Directors or Relatives of Directors not more than 100 percent of its aggregate of paid up share capital and free reserves.

However, certain class of Private Companies as specified by the Companies Act, can accept deposits more than 100 percent of its aggregate of paid up share capital and free reserves.

B) Public Company (other than Eligible Company): These Companies cannot accept fresh deposit from members if the amount of such deposits together with the previous deposits exceeds 25% of the aggregate of the paid up share capital and free reserves of the company.

C) Eligible Public Company:

D) Government Company can accept deposits from public not exceeding 35% of the paid up share capital and free reserves of the company.

2. Period / Tenure of Deposit

No deposit can be accepted or renewed which is to be repaid within a period of six months or more than thirty six months.

In certain circumstances, a company may accept deposits repayable earlier than six months to meet its short term needs. Such deposits must have a tenure of minimum three months and the amount of such deposits cannot be more than 10% of aggregate of the paid up share capital and free reserves of the company. Under certain circumstances, on the request of the depositor, company makes premature repayment of deposits. Company may also renew its deposits with the same terms of issue and it will be considered as fresh deposits.

3. No demand deposit

Company cannot accept or renew deposits repayable on demand.

4. Secured or Unsecured Deposit

A company can accept secured or unsecured deposit which should be clearly mentioned in the circular or advertisement inviting deposits. If a company offers secured deposits, it has to create a charge on its tangible assets within 30 days of acceptance of deposits.

Teacher's Note

In India, many people keep Fixed Deposits with companies like Mahindra Finance. These deposits can be secured or unsecured. A secured deposit means the company keeps some property as guarantee.

Exam Trick

Remember: Secured Deposit = Company keeps guarantee. Unsecured Deposit = No guarantee. It is like loan - if you take loan from a bank with your house as guarantee, it is secured. Without guarantee, it is unsecured.

Points to Remember

Tenure means the period for which the deposit is kept.

Minimum tenure is 6 months and maximum is 36 months.

Secured deposits need a charge on company's assets as guarantee.

Unsecured deposits do not have any guarantee.

A charge on assets means the company promises to give that asset to depositor if it cannot repay.

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