Maharashtra Board Class 12 Secretarial Practice Chapter 5 Deposits Solutions

Class 12 Secretarial Practice Chapter 5 Exercise Solutions

1A. Select The Correct Answer From The Options Given Below And Rewrite The Statements.

Question 1. Deposit is a type of
(a) Owned capital
(b) Short term loan
(c) Long term loan
Answer: (b) Short term loan
In simple words: A deposit, in the context of a company, represents funds taken from external sources for a specified period, typically categorized as a short-term financial obligation.

🎯 Exam Tip: Understanding the nature of deposits (e.g., short-term vs. long-term) is crucial for classifying company liabilities and assessing financial health.

Question 2. Eligible Public Company and Government Company can collect deposits from
(a) It's employees
(b) Public
(c) RBI
Answer: (b) Public
In simple words: Eligible Public Companies and Government Companies are authorized to solicit and accept deposits directly from the general public.

🎯 Exam Tip: Differentiating between entities eligible to accept deposits from the public versus only members is a key compliance aspect.

Question 3. A private company can accept deposits from its Member of Directors up to not more than ______ % of its aggregate of paid-up share capital and free reserves.
(a) 100
(b) 35
(c) 25
Answer: (a) 100
In simple words: Private companies have a specific limit, generally 100%, on deposits they can accept from members and directors relative to their capital and reserves.

🎯 Exam Tip: Memorizing deposit limits for different company types is essential for multiple-choice and fill-in-the-blanks questions.

Question 4. A ______ Company can accept deposits from the public not exceeding 35% of its paid-up share capital and free reserves.
(a) Government
(b) Private
(c) Eligible Public
Answer: (a) Government
In simple words: Government companies are permitted to accept public deposits, but with a restriction not to exceed 35% of their combined paid-up share capital and free reserves.

🎯 Exam Tip: Note the specific percentage limitations on deposit collection for different company categories.

Question 5. Deposits can be accepted for a minimum of 6 months and maximum for
(a) 36
(b) 3
(c) 30 months.
Answer: (a) 36
In simple words: Company deposits have a defined duration, typically ranging from a minimum of six months to a maximum of three years.

🎯 Exam Tip: The minimum and maximum tenure for deposits are standard regulatory requirements often tested in exams.

Question 6. Company issues ______ to invite its members to subscribe for its deposit scheme.
(a) Advertisement
(b) Circular
(c) Newspaper
Answer: (b) Circular
In simple words: Companies typically use a circular to invite their own members to participate in a deposit scheme.

🎯 Exam Tip: Distinguish between circulars (for members) and advertisements (for the public) when inviting deposits.

Question 7. The company can issue a circular or advertisement for inviting deposits after ______ days of filing it with the Registrar of Companies.
(a) 30
(b) 21
(c) 7
Answer: (a) 30
In simple words: A company must wait for a specified period, usually 30 days, after filing the circular or advertisement with the Registrar of Companies before inviting deposits.

🎯 Exam Tip: The filing and waiting period for issuing deposit invitations is a critical regulatory timeline to remember.

Question 8. Company has to appoint ______ to protect the interest of depositors.
(a) Debenture Trustees
(b) Deposit Trustees
(c) Credit Rating Agency
Answer: (b) Deposit Trustees
In simple words: Deposit Trustees are appointed by companies to safeguard the interests of depositors, acting as an intermediary to ensure compliance and repayment.

🎯 Exam Tip: The role of Deposit Trustees is similar to Debenture Trustees in protecting investor interests, a key concept in corporate finance.

Question 9. Charge on assets is to be created when a company issues
(a) Unsecured deposit
(b) Unsecured Debenture
(c) Secured deposit
Answer: (c) Secured deposit
In simple words: When a company accepts secured deposits, it must create a charge on its assets, meaning specific assets are pledged as collateral to protect depositors.

🎯 Exam Tip: The creation of a charge on assets is a distinguishing feature of secured deposits, providing an added layer of security for depositors.

Question 10. Deposit Receipt is issued within ______ days of receipt of deposit.
(a) 7
(b) 30
(c) 21
Answer: (c) 21
In simple words: A company is legally required to issue a Deposit Receipt to the depositor within 21 days from the date of receiving the deposit amount.

🎯 Exam Tip: The timeline for issuing Deposit Receipts is a crucial compliance detail for companies accepting deposits.

Question 11. For premature repayment of deposit, company deducts ______ % of interest.
(a) 1
(b) 18
(c) 20
Answer: (a) 1
In simple words: If a depositor requests premature repayment, the company will typically deduct a small percentage, often 1%, from the interest payable.

🎯 Exam Tip: Be aware of the standard penalty rate for premature deposit repayment, which is a common regulatory provision.

Question 12. Return of deposit must be filed every year on or before
(a) 30 June
(b) 31 March
(c) 30 April
Answer: (a) 30 June
In simple words: Companies are required to file an annual return of deposits with the Registrar of Companies by June 30th each year.

🎯 Exam Tip: The annual filing deadline for deposit returns is an important date for compliance and reporting requirements.

1B. Match The Pairs.

Question 1.

Group 'A'	Group 'B'
(a) Private Company	(1) 10% of the aggregate of paid-up share capital + free reserves
(b) Deposit Trust Deed	(2) Signed at least 7 days before issuing advertisement
(c) Secured Deposit	(3) Maximum 30 months
(d) Tenure of deposit	(4) Charge on tangible assets
(e) Return of Deposit	(5) 100% aggregate of paid-up share capital + free reserves
	(6) File on or before 31 March every year
	(7) Signed 21 days after issuing advertisement
	(8) Maximum 36 months
	(9) Charge on intangible assets
	(10) File on or before 30 June every year

Answer:

Group 'A'	Group 'B'
(a) Private Company	(5) 100% aggregate of paid-up share capital + free reserves
(b) Deposit Trust Deed	(2) Signed at least 7 days before issuing advertisement
(c) Secured Deposit	(4) Charge on tangible assets
(d) Tenure of deposit	(8) Maximum 36 months
(e) Return of Deposit	(10) File on or before 30 June every year

In simple words: Matching pairs involves correctly associating key concepts in company deposits with their respective definitions, characteristics, or requirements.

🎯 Exam Tip: For match-the-pairs questions, thoroughly review each item in both columns to ensure the most accurate and specific pairing. Pay attention to numerical limits and timelines.

1C. Write A Word Or A Term Or A Phrase That Can Substitute Each Of The Following Statements.

Question 1. A company that can accept deposits from its members, directors, or their relatives not exceeding 100% of the aggregate of paid-up share capital and free reserves.
Answer: Private Company
In simple words: This refers to a company structure that has specific limitations on accepting deposits, primarily from its internal stakeholders, up to a certain percentage of its capital and reserves.

🎯 Exam Tip: Understand the specific definitions and categories of companies based on their deposit-accepting capabilities and restrictions.

Question 2. The company can accept deposits from the public up to 35% of its paid-up share capital and free reserves.
Answer: Government Company
In simple words: This describes a type of company, usually government-owned, that can take deposits from the general public, but only up to a maximum of 35% of its capital and reserves.

🎯 Exam Tip: Key figures and percentages associated with different company types and their deposit-raising abilities are frequent exam points.

Question 3. Minimum tenure of a deposit.
Answer: 6 months
In simple words: The shortest period for which a company can accept a deposit is six months.

🎯 Exam Tip: The minimum and maximum deposit tenures are fundamental regulatory requirements.

Question 4. The maximum tenure of the deposit.
Answer: 36 months
In simple words: The longest period for which a company can accept a deposit is three years.

🎯 Exam Tip: Remember the upper limit for deposit tenure as it defines the long-term nature of such financing for companies.

Question 5. Period within which a company has to create a charge on its tangible assets.
Answer: 30 days of Acceptance
In simple words: For secured deposits, a company must officially pledge its physical assets as collateral within 30 days of accepting the deposit.

🎯 Exam Tip: Timelines for creating charges on assets are important for understanding compliance and depositor security.

Question 6. Document issued by a company to invite its members to subscribe for its Deposits.
Answer: Circular
In simple words: A circular is a formal document sent specifically to existing members to invite them to subscribe to a company's deposit scheme.

🎯 Exam Tip: Differentiate between a 'circular' (for members) and an 'advertisement' (for the public) when discussing deposit invitations.

Question 7. Agreement between the company and Deposit Trustee.
Answer: Deposit Trust Deed
In simple words: This is a legal document outlining the terms and conditions between a company and its Deposit Trustees, designed to protect depositors' interests.

🎯 Exam Tip: The Deposit Trust Deed is a critical legal instrument ensuring the safety and rights of depositors.

Question 8. The account can be used only for repaying deposits.
Answer: Deposit Repayment Reserve Account
In simple words: This is a dedicated bank account where companies set aside funds specifically for the repayment of maturing deposits.

🎯 Exam Tip: The purpose of the Deposit Repayment Reserve Account highlights a company's commitment to timely deposit repayment.

Question 9. Time within which company has to issue deposit Receipt.
Answer: 21 days
In simple words: A company must issue the official Deposit Receipt to the depositor within 21 days of receiving the funds.

🎯 Exam Tip: Knowledge of specific timelines, like the 21-day period for issuing deposit receipts, is critical for compliance questions.

Question 10. Book which contains details of deposits accepted or renewed.
Answer: Register of Deposits
In simple words: This is an official record maintained by the company listing all accepted and renewed deposits, along with their relevant details.

🎯 Exam Tip: Companies are required to maintain various statutory registers; knowing their purpose is important.

1D. State Whether The Following Statements Are True Or False.

Question 1. Return of deposit must be filed every year on or before 31 March.
Answer: False
In simple words: The annual filing deadline for the return of deposits is June 30th, not March 31st.

🎯 Exam Tip: Pay close attention to dates and deadlines, as they are frequently used to differentiate true from false statements.

Question 2. An eligible public company can collect deposits from its members.
Answer: True
In simple words: Eligible public companies are indeed authorized to accept deposits from their existing members.

🎯 Exam Tip: Understand which types of companies can accept deposits from members versus the general public.

Question 3. A government company can collect deposits from its members.
Answer: False
In simple words: Government companies typically collect deposits from the public, not specifically from their members.

🎯 Exam Tip: Differentiate the sources of deposits for various company categories, particularly for government-owned entities.

Question 4. A private company can collect deposits from the public.
Answer: False
In simple words: Private companies are generally restricted from accepting deposits from the general public.

🎯 Exam Tip: Remember the fundamental distinction: Private companies typically raise deposits from members/directors, not the public.

Question 5. The deposit can be accepted for a maximum of 36 months.
Answer: True
In simple words: The longest permissible period for which a company can accept a deposit is 36 months, or three years.

🎯 Exam Tip: The maximum tenure of deposits is a standard regulatory limit often examined.

Question 6. An eligible public company can collect deposits from the public not exceeding 35% of its paid-up share capital and free reserves.
Answer: False
In simple words: The 35% limit applies to Government companies, not typically to eligible public companies for public deposits; eligible public companies have different limits for members and public.

🎯 Exam Tip: Be precise about the percentage limits and the specific types of companies to which they apply for deposit collection.

Question 7. For secured deposits, the company has to create a charge on its tangible assets.
Answer: True
In simple words: Secured deposits require the company to pledge specific physical assets as collateral, creating a legal charge against them.

🎯 Exam Tip: The creation of a charge is the defining characteristic that makes a deposit "secured."

Question 8. Deposit Receipt is issued within 21 days of receipt of deposits.
Answer: True
In simple words: Companies must provide an official receipt for deposits within 21 days of receiving the funds.

🎯 Exam Tip: This timeline is a regulatory standard for acknowledging deposit receipt and is frequently tested.

Question 9. Company appoints Credit Rating Agency to protect the interest of depositors.
Answer: False
In simple words: Deposit Trustees are appointed to protect the interests of depositors, while a Credit Rating Agency assesses the company's ability to repay.

🎯 Exam Tip: Differentiate between the roles of a Credit Rating Agency (assessment) and Deposit Trustees (protection of interest).

Question 10. Deposit Trust Deed is an agreement between the company and Deposit Trustee.
Answer: True
In simple words: The Deposit Trust Deed is a formal legal contract that defines the relationship and responsibilities between the company and the Deposit Trustees.

🎯 Exam Tip: The Deposit Trust Deed is a key legal document for secured deposits, outlining the terms of trust and protection for depositors.

1E. Find The Odd One.

Question 1. Private Company, Eligible Public Company, Government Company.
Answer: Private company
In simple words: A private company is typically the odd one out because it faces more restrictions and cannot accept deposits from the general public, unlike eligible public and government companies.

🎯 Exam Tip: For 'odd one out' questions, identify the common characteristic shared by the majority of items and then determine which item lacks that characteristic.

Question 2. Deposit Trustee, Deposit Trust Deed, Special Resolution.
Answer: Special Resolution
In simple words: Special Resolution is the odd one because it is a procedural requirement for certain corporate actions, while Deposit Trustee and Deposit Trust Deed are specific entities and documents related to the security and management of deposits.

🎯 Exam Tip: Understand the distinct categories: 'Special Resolution' is an action, whereas 'Deposit Trustee' and 'Trust Deed' are parties and instruments.

Question 3. Appointment of Deposit Trustee, Appointment of Registrar of companies, Appointment of Credit Rating Agency.
Answer: Appointment of Registrar of companies
In simple words: The 'Appointment of Registrar of companies' is not a specific appointment made by a company for managing deposits, unlike Deposit Trustees and Credit Rating Agencies which are directly involved in deposit-related functions.

🎯 Exam Tip: Focus on the direct roles and functions within the deposit-raising process to identify unrelated items.

1F. Complete The Sentences.

Question 1. Deposit is a type of ______ term loan.
Answer: Short term loan
In simple words: Deposits are typically classified as a form of short-term financing for a company.

🎯 Exam Tip: Knowing the fundamental classification of deposits as short-term debt is important.

Question 2. Eligible Public company and Government Company can accept deposits from ______.
Answer: Public
In simple words: Both eligible public companies and government companies are authorized to collect funds from the general public as deposits.

🎯 Exam Tip: Remember that public companies and government entities are the primary types that can tap into the wider public for deposits.

Question 3. To collect deposits from the public, Eligible public company must have a net worth of not less than Rs. ______.
Answer: 100 Crores
In simple words: An eligible public company needs to meet a minimum net worth criterion of Rs. 100 Crores to be allowed to accept deposits from the public.

🎯 Exam Tip: Specific financial thresholds for eligibility (like net worth) are often tested in questions related to public deposits.

Question 4. A Government company can accept deposits from public not exceeding ______.
Answer: 35% of the paid-up share capital and free reserves of the company
In simple words: Government companies are permitted to accept public deposits, but only up to 35% of their combined paid-up share capital and free reserves.

🎯 Exam Tip: Note the percentage limit for government companies accepting public deposits, as it is a specific regulatory figure.

Question 5. Deposits can be accepted or renewed for a period not less 6 months and not more than ______.
Answer: 36 months
In simple words: Company deposits must be for a period of at least six months but no longer than thirty-six months.

🎯 Exam Tip: The minimum and maximum deposit tenures are fundamental regulatory requirements.

Question 6. Company cannot accept or renew deposits repayable on ______.
Answer: Demand
In simple words: Companies are legally prohibited from accepting deposits that are repayable immediately upon the depositor's request.

🎯 Exam Tip: This rule prevents deposits from functioning like bank current accounts, ensuring a fixed tenure.

Question 7. Premature repayment of deposits can be done by a company but not before ______.
Answer: 3 months
In simple words: While premature repayment is possible, there's a minimum lock-in period of three months before a company can process such a request.

🎯 Exam Tip: Be aware of the minimum period required before premature repayment of a deposit can occur.

Question 8. To invite the public to subscribe for its deposits, a company issues ______.
Answer: Advertisement
In simple words: When a company wants to attract deposits from the general public, it typically publishes an advertisement.

🎯 Exam Tip: Differentiate between 'advertisement' (for the public) and 'circular' (for members) when inviting deposits.

Question 9. Agency which gives ratings of the deposits of a company is called ______.
Answer: Credit rating agency
In simple words: A Credit Rating Agency evaluates a company's financial health and ability to repay deposits, assigning a rating that helps investors assess risk.

🎯 Exam Tip: Understand the role of credit rating agencies in providing an independent assessment of a company's financial credibility.

Question 10. Account which is used only for repaying deposits is called ______.
Answer: Deposit Repayment Reserve Account
In simple words: This is a special bank account dedicated solely to accumulating funds for the repayment of maturing deposits.

🎯 Exam Tip: The Deposit Repayment Reserve Account emphasizes the regulatory requirement for companies to plan for deposit repayments.

1G. Select The Correct Option From The Bracket.

Question 1.

Group 'A'	Group B'
(a) Government Company	(1)
(b)	(2) Deposits from members
(c) 36 months	(3)
(d)	(4) Charge on tangible assets
(e) Return of deposit	(5)

(File on or before 30 June, Private Company, Secured deposits, Deposits from public, Maximum tenure of deposits)
Answer:

Group 'A'	Group B'
(a) Government Company	(1) Deposits from public
(b) Private Company	(2) Deposits from members
(c) 36 months	(3) Maximum tenure of deposits
(d) Secured deposits	(4) Charge on tangible assets
(e) Return of deposit	(5) File on or before 30 June

In simple words: This exercise tests the ability to correctly associate different company types, deposit features, and regulatory requirements with their corresponding descriptions or values.

🎯 Exam Tip: For matching questions, it's beneficial to fill in the most obvious pairs first to narrow down options for the remaining items.

1H. Answer In One Sentence.

Question 1. Which companies can accept deposits from the public?
Answer: Government Companies and Eligible Public companies can accept deposits from the public.
In simple words: Only specific categories of companies, namely Government and Eligible Public companies, are authorized to solicit deposits from the general public.

🎯 Exam Tip: Clearly distinguish between company types that can accept public deposits versus those that cannot, or only from members.

Question 2. What is the maximum deposit the Government company can collect?
Answer: Government companies can accept deposits from the public not exceeding 35% of the paid-up share capital and free reserves of the company.
In simple words: Government companies have a specific ceiling for public deposits, limited to 35% of their total paid-up share capital and free reserves.

🎯 Exam Tip: Remember the precise percentage limit for government companies regarding public deposits, as it's a key regulatory figure.

Question 3. What is the tenure of a deposit?
Answer: A company can accept deposits for a minimum of 6 months and a maximum of 36 months.
In simple words: The tenure of a deposit refers to its duration, which must be at least six months and cannot exceed thirty-six months.

🎯 Exam Tip: The minimum and maximum tenures for deposits are fundamental regulatory specifications to remember.

Question 4. Who are Deposit Trustees?
Answer: Eligible companies and public companies have to appoint one or more Deposit Trustees to protect the interest of the depositor, in case a company defaults in repaying the depositors.
In simple words: Deposit Trustees are independent entities appointed by companies to safeguard the financial interests of depositors, especially if the company fails to repay deposits.

🎯 Exam Tip: Understand the critical role of Deposit Trustees as protectors of depositor interests, similar to debenture trustees.

Question 5. What is Deposit Trust Deed?
Answer: Company signs a contract with the Deposit Trustees called as Trust Deed which contains the terms and conditions of the contract.
In simple words: A Deposit Trust Deed is a legal agreement between the company and Deposit Trustees, detailing the terms and conditions for managing and securing deposits.

🎯 Exam Tip: The Deposit Trust Deed formalizes the commitment and protective measures for depositors, making it a crucial legal document.

Question 6. When does a company create a charge on its tangible assets?
Answer: A Company accepting secured deposits from the public has to create a charge on its tangible assets.
In simple words: A company creates a charge on its physical assets when it accepts secured deposits from the public, pledging them as collateral.

🎯 Exam Tip: The creation of a charge is a mandatory security measure for secured deposits, providing recourse to depositors.

Question 7. Within what period should a company issue a Deposit Receipt?
Answer: The company has to issue a Deposit Receipt to the depositors within twenty-one (21) days from the date of receipt of money or realization of cheque.
In simple words: A company must issue a Deposit Receipt within 21 days of receiving the deposit amount, either in cash or upon the clearance of a cheque.

🎯 Exam Tip: The 21-day timeline for issuing deposit receipts is a frequently tested compliance requirement.

Question 8. When should a company file Return of Deposit?
Answer: A company has to file a Return of Deposit on or before 30 June every year with the Registrar of Companies.
In simple words: Companies are required to submit an annual Return of Deposit to the Registrar of Companies by June 30th each year.

🎯 Exam Tip: The annual filing deadline for deposit returns is a critical date for company compliance and reporting.

Question 9. What is Deposit Repayment Reserve Account?
Answer: Every company accepting deposits has to open a Deposit Repayment Reserve Account in a scheduled Bank which can be used only for repaying deposits.
In simple words: The Deposit Repayment Reserve Account is a mandatory bank account opened by companies to specifically hold funds for the repayment of their deposits.

🎯 Exam Tip: Understand that the DRRA serves as a dedicated fund for deposit repayment, ensuring liquidity for this obligation.

Question 10. What is the Register of Deposit?
Answer: A company has to maintain a separate Register for deposits accepted or renewed at its registered office which is called as Register of Deposits.
In simple words: The Register of Deposits is an official record book kept by a company detailing all accepted and renewed deposits.

🎯 Exam Tip: Knowing the types of statutory registers a company must maintain is important for corporate governance questions.

1I. Correct The Underlined Word/S And Rewrite The Following Sentences.

Question 1. Government companies can accept deposits from members.
Answer: Government companies can accept deposits from the public.
In simple words: Government companies typically solicit deposits from the general public, not exclusively from their members.

🎯 Exam Tip: Distinguish the primary source of deposits for government companies, which is the public, not just members.

Question 2. Company issues advertisement to invite its members for subscribing to its deposits.
Answer: Company issues a circular to invite its members for subscribing to its deposits.
In simple words: For inviting members to subscribe to deposits, a company issues a circular, not a public advertisement.

🎯 Exam Tip: Remember to use 'circular' for members and 'advertisement' for the general public when inviting deposits.

Question 3. Company appoints Credit Rating Agency to protect the interest of Depositors.
Answer: Company appoints Deposit Trustees to protect the interest of Depositors.
In simple words: Deposit Trustees are specifically appointed to safeguard the interests of depositors, whereas a Credit Rating Agency assesses the risk.

🎯 Exam Tip: Clearly differentiate between the protective role of Deposit Trustees and the assessment role of a Credit Rating Agency.

Question 4. Deposit Receipt is issued within 7 days from the date of receipt of deposits.
Answer: Deposit Receipt is issued within 21 days from the date of receipt of deposits.
In simple words: The legal requirement states that a Deposit Receipt must be issued within 21 days, not 7 days, of receiving the deposit.

🎯 Exam Tip: Accuracy in timelines, like the 21-day period for issuing deposit receipts, is crucial for scoring well.

Question 5. Register of deposits is to be filed with the Registrar of companies on or before 30th June every year.
Answer: Return of deposits is to be filed with the Registrar of companies on or before 30th June every year.
In simple words: It is the 'Return of deposits', not the 'Register', that must be formally submitted to the Registrar of Companies by June 30th annually.

🎯 Exam Tip: Distinguish between the 'Register of Deposits' (an internal record) and the 'Return of Deposits' (an external filing).

Question 6. Charge on assets is created when a company issues unsecured deposits.
Answer: Charge on assets is created when the company issues secured deposits.
In simple words: A charge on assets is only created when deposits are 'secured', meaning assets are pledged as collateral, not for 'unsecured' deposits.

🎯 Exam Tip: The presence or absence of a charge on assets is the key differentiator between secured and unsecured deposits.

Question 7. The minimum tenure of the deposit is 36 months.
Answer: The minimum tenure of the deposit is 6 months.
In simple words: The shortest allowable period for a deposit is six months, not 36 months, which is the maximum.

🎯 Exam Tip: Clearly differentiate between the minimum and maximum tenures, as these figures are often confused.

1J. Arrange In Proper Order.

Question 1. Appoint Deposit Trustee, Hold General Meeting, Create charge on assets.
Answer: Hold General Meeting, Appoint Deposit Trustee, Create charge on assets.
In simple words: The correct sequence typically involves first holding a general meeting to approve the deposit scheme, then appointing a trustee, and finally creating a charge on assets if the deposits are secured.

🎯 Exam Tip: For sequencing questions, recall the logical flow of corporate actions, from approval to implementation and security measures.

Question 2. File Return of deposit, Issue Deposit Receipt, Issue advertisement.
Answer: Issue advertisement, Issue Deposit Receipt, File Return of deposit.
In simple words: The process starts with inviting deposits (advertisement), then formally acknowledging them (receipt), and finally reporting them annually (return).

🎯 Exam Tip: Understand the chronological order of activities: invitation, receipt, and subsequent regulatory filings.

Question 3. Obtain Credit Rating, Entries in Register of Deposits, Issue Deposit Receipt.
Answer: Obtain Credit Rating, Issue Deposit Receipt, Entries in Register of Deposits.
In simple words: Before accepting public deposits, a company typically gets a credit rating, then issues receipts to depositors, and finally records these details in its register.

🎯 Exam Tip: The sequence reflects a logical flow from pre-deposit requirements (rating) to transaction (receipt) and record-keeping (register).

2. Explain The Following Terms/Concepts:

 

Question 1.Eligible Public Company
Answer:These companies can accept deposits from their members and also from the public. Eligible public company means a company having:
• A net worth, not less than Rs. 100 crores or
• Turnover not less than Rs. 500 crores and which has obtained prior approval of its shareholders through special resolution for accepting public deposits.
In simple words: An Eligible Public Company can take deposits from both its members and the public, provided it meets specific financial criteria (net worth or turnover) and has obtained shareholder approval.

🎯 Exam Tip: Remember the two key financial criteria (net worth and turnover) and the requirement for shareholder approval via special resolution for public deposits.

 

Question 2.Tenure of Deposit
Answer:
• Tenure of the deposit is the term or period of deposit.
• A company can accept deposits for 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. Premature repayment is made after 3 months.
In simple words: The tenure of a deposit is typically between 6 and 36 months, though in special cases, companies might accept deposits repayable earlier for short-term needs, with premature repayment possible after 3 months.

🎯 Exam Tip: Pay attention to the minimum (6 months) and maximum (36 months) deposit periods, and the condition for premature repayment.

 

Question 3.Secured Deposit
Answer:
• Secured deposits are those deposits against which a charge is created within 30 days of the issue.
• A company can accept secured or unsecured deposits which should be clearly mentioned in the circular or advertisement inviting deposits.
In simple words: Secured deposits are backed by a charge on the company's assets, established within 30 days of issue, and companies must clearly state whether deposits are secured or unsecured in their invitations.

🎯 Exam Tip: Understand that a 'charge on assets' provides security, and the disclosure requirement in circulars is crucial for transparency.

 

Question 4.Deposit Trustee
Answer:
• Deposit Trustee acts as a link between the company and deposit holder.
• Eligible companies and public companies issuing secured deposits appoint one or more Deposit Trustees.
• The Trustees protect the interest of the depositor in case a company defaults in repaying the depositors.
In simple words: Deposit Trustees are appointed by companies issuing secured deposits to safeguard depositors' interests, acting as an intermediary and ensuring repayment even if the company defaults.

🎯 Exam Tip: The primary role of Deposit Trustees is safeguarding depositors, especially in cases of secured deposits and company defaults.

 

Question 5.Charge on tangible assets
Answer:
• A Company accepting a secured deposit from the public, within thirty days of acceptance, has to create a charge on its tangible assets for an amount not less than the amount of deposit accepted.
• It means keeping tangible assets as security for the secured deposit hold.
In simple words: When a company accepts secured deposits, it must create a charge (security) on its tangible assets within 30 days, ensuring the asset's value is at least equal to the deposit amount.

🎯 Exam Tip: The 30-day deadline for creating a charge and the asset value requirement are critical points for secured deposits.

 

Question 6.Deposit Insurance
Answer:
• Deposit Insurance is a protection cover for deposit holders.
• It is to be taken at least 30 days before the issue of circular or advertisement.
• If the amount of deposit plus interest on it is up to Rs. 20,000, insurance is to be taken.
In simple words: Deposit insurance protects deposit holders, must be secured at least 30 days before inviting deposits, and is required for deposits up to Rs. 20,000 including interest.

🎯 Exam Tip: Note the purpose of deposit insurance (protection), the timing requirement (30 days prior), and the maximum insured amount (Rs. 20,000).

 

Question 7.Deposit Repayment Reserve Account
Answer:
• DRRA is an account opened in a scheduled bank for repaying the deposit amount.
• Every company has to open DRRA that accepts deposits.
• Every year, on or before 30 April, the company has to deposit an amount not less than 15% of the number of deposits maturing during the current year and following financial year.
• This account can be used only for repaying deposits.
In simple words: The Deposit Repayment Reserve Account (DRRA) is a mandatory bank account used solely for repaying deposits, where companies must annually deposit at least 15% of maturing deposits by April 30th.

🎯 Exam Tip: Key details include the account's purpose (repayment only), the annual deposit requirement (15% of maturing deposits), and the deadline (April 30th).

 

Question 8.Credit Rating
Answer:
• Credit rating is an estimate of the ability of the organization to fulfill its financial commitments.
• Every company has to get a credit rating of its deposits through a Credit Rating Agency.
• The Credit Rating Agency considers the net worth of the company, liquidity position, ability to repay deposits on time, etc., and accordingly gives a rating.
• The rating shall be obtained every year during the tenure of the deposits.
In simple words: Credit rating assesses a company's ability to repay its financial obligations, with a Credit Rating Agency providing an annual rating based on factors like net worth and liquidity, which helps depositors evaluate risk.

🎯 Exam Tip: Understand that credit rating is mandatory for deposits and is an annual process, assessing a company's repayment capacity.

 

Question 9.Deposit Receipt
Answer:
• A deposit Receipt is issued by the company to depositors.
• Deposit Receipt is issued within twenty-one (21) days from the date of receipt of money or realization of cheque.
• The receipt has to be signed by the officer duly authorized by the Board of Directors.
• The Receipt contains the name and address of the depositor, amount of deposit, rate of interest payable, and date on which it is repayable.
In simple words: A Deposit Receipt is a formal acknowledgment issued by the company to depositors within 21 days of receiving funds, detailing the deposit amount, interest rate, and repayment date, and signed by an authorized officer.

🎯 Exam Tip: Key details to remember are the 21-day issuance deadline, required signatures, and the essential information it must contain for the depositor.

 

Question 10.Return of Deposit
Answer:
• A company has to file a Return of Deposit, on or before 30 June every year, with the Registrar of Companies.
• The Return gives details of deposit with the company as of 31 March of that year.
In simple words: Every company must file an annual Return of Deposit with the Registrar of Companies by June 30th, providing a snapshot of all deposits held as of March 31st.

🎯 Exam Tip: Remember the filing deadline (June 30th) and the reporting date (March 31st) for the Return of Deposit.

3. Study The Following Case/Situation And Express Your Opinion.

 

Question 1.Apple Company Ltd. plans to raise funds through Public Deposits. Its net worth is 10 Crores.
(a) Can they accept deposits from the public?
Answer:No, the company cannot accept deposits from the public as its net worth is less than Rs. 100 crores.
In simple words: Apple Company Ltd. cannot accept public deposits because its net worth of Rs. 10 crores falls below the minimum Rs. 100 crores required for public companies.

🎯 Exam Tip: Always check the net worth criteria for companies accepting public deposits; it's a common condition.

 

Question (b).Can they accept deposits that mature after 4 years?
Answer:No, the deposit can be accepted or renewed which mature after four years.
In simple words: No, deposits cannot be accepted if they mature after four years, as the maximum permissible tenure for deposits is 36 months (3 years).

🎯 Exam Tip: The maximum tenure for accepting deposits is 36 months (3 years); exceeding this limit is not permitted.

 

Question (c).Within what period should the company issue deposit Receipts to its depositors?
Answer:The company has to issue a Deposit Receipt to the depositors within twenty-one (21) days from the date of receipt of money or realization of the cheque.
In simple words: The company must issue a Deposit Receipt to depositors within 21 days from the date it receives the money or the cheque clears.

🎯 Exam Tip: The 21-day period for issuing deposit receipts is a strict regulatory requirement for companies.

 

Question 2.ABC Company Ltd. is an Eligible Public Company as per the Companies Act, 2013 with reference to accepting Public Deposits.
(a) Can the company accept deposits in joint names?
Answer:Yes, the company can accept deposits in joint names of depositors. But there should not be more than 3 names.
In simple words: Yes, ABC Company Ltd. can accept deposits in joint names, but the total number of joint holders should not exceed three.

🎯 Exam Tip: While joint deposits are allowed, always remember the maximum limit of three names for such accounts.

 

Question (b).Can the company accept deposits from it's members?
Answer:Yes, the company can accept fresh deposits only if the amount of such deposits together with the previous deposits does not exceed 10% of the aggregate of paid-up share capital and free reserves.
In simple words: Yes, the company can accept fresh deposits from its members, provided the total amount (new plus old) does not exceed 10% of its combined paid-up share capital and free reserves.

🎯 Exam Tip: Note the 10% limit on deposits from members, calculated against paid-up share capital and free reserves.

 

Question (c).Can the company issue secure deposits?
Answer:Yes, the company can issue a secured deposit only if it is clear which should be clearly mentioned in the circular or advertisement inviting deposits.
In simple words: Yes, an Eligible Public Company can issue secured deposits, but it must explicitly disclose this in its circulars or advertisements to potential depositors.

🎯 Exam Tip: Transparency regarding whether deposits are secured or unsecured is a key compliance requirement for companies.

 

Question 3.Apple Company Ltd. is an Eligible Public Company. It plans to raise secured deposits from the public. Please advise its Board on the following.
(a) Does the company need to get shareholders' approval for accepting deposits?
Answer:Yes, the company has to seek the shareholder's approval for accepting deposits by passing a special resolution.
In simple words: Yes, for accepting public deposits, Apple Company Ltd. must obtain approval from its shareholders by passing a special resolution.

🎯 Exam Tip: Shareholder approval via special resolution is a mandatory step for eligible public companies accepting public deposits.

 

Question (b).Does the company have to appoint a Deposit Trustee?
Answer:Yes, the company has to appoint a Deposit Trustee as it is issuing secured deposits.
In simple words: Yes, since Apple Company Ltd. is issuing secured deposits, it is required to appoint a Deposit Trustee to safeguard the interests of the depositors.

🎯 Exam Tip: The appointment of a Deposit Trustee is compulsory when a company issues secured deposits to the public.

 

Question (c).Within what period should the company create a charge on it's assets?
Answer:A Company can create a charge on its tangible assets within 30 days of acceptance.
In simple words: The company must create a charge on its tangible assets within 30 days of accepting secured deposits.

🎯 Exam Tip: Adhering to the 30-day deadline for creating a charge on assets is a crucial compliance point for secured deposits.

 

Question 4.SUN Pvt. Ltd. company wants to raise funds through deposits.
(a) Can the company accept deposits from the public?
Answer:No, it cannot accept deposits from the public because it is a private company.
In simple words: SUN Pvt. Ltd., being a private company, is generally prohibited from accepting deposits directly from the public.

🎯 Exam Tip: Remember that private companies have restrictions on accepting deposits from the general public, typically limited to members or directors.

 

Question (b).Which document should the company issue to invite deposits?
Answer:A Private Ltd. Company can issue circulars to invite deposits.
In simple words: A Private Ltd. Company should issue circulars to its members or eligible individuals to invite deposits, rather than public advertisements.

🎯 Exam Tip: Private companies use 'circulars' for internal invitations, while 'advertisements' are for public invitations by eligible public companies.

 

Question (c).What is the maximum period for which they can accept deposits?
Answer:The maximum period for accepting deposits is 36 months.
In simple words: The maximum duration for which a private company can accept deposits is 36 months.

🎯 Exam Tip: Ensure you remember the 36-month maximum limit for deposit tenure, applicable to both public and private companies.

4. Answer In Brief.

 

Question 1.State the number of deposits that different types of companies can collect by way of deposits.
Answer:Deposits are a source of short-term funds for the company. Deposits can be accepted by the company by the public, directors, or its members. It is a loan take by the company and there are various terms and conditions that a company needs to follow to accept them. The amount of deposits that different types of companies can collect by way of deposits is as follows: 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, a certain class of Private Companies as specified by the Companies Act can accept deposits of 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 deposits 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: An 'Eligible Company', i.e. company eligible to accept deposits from the public under section 76(1) of Companies Act, 2013, can accept deposits up to 25% of paid-up capital, free reserves, and securities premium account from the ic. In addition, it can accept deposits up to 10% of the gate of paid-up share capital, free reserves, and securities premium account from members Rule 3(4) of Companies (Acceptance of Deposits) Rules, 2014.
(d) Government Company: A Government company is eligible to accept deposits under section 76 of the Companies Act, 2013. It can accept deposits up to 35% of paid-up capital, free reserves, and securities premium account From the ic.
In simple words: Different company types have specific limits for deposit collection: Private Companies up to 100% (or more if specified) from members/directors; Public Companies (non-eligible) up to 25% from members; Eligible Public Companies up to 25% from public and members, plus 10% from members under specific rules; and Government Companies up to 35% from the public.

🎯 Exam Tip: Memorize the distinct percentage limits for deposit acceptance for each type of company, as this is a frequent examination point.

 

Question 2.State the contents of Circular or Advertisement for Deposit.
Answer:Circular or Advertisement:
• If a company invites deposits from its members, it issues a circular.
• If a company invites deposits from the public, it issues an advertisement. Contents of circular or advertisement:
• Statement showing the financial position of the company
• The portion of secured and unsecured deposit of fresh issue
• Credit rating obtained from a Credit Rating Agency (only for eligible public companies)
• Details of the scheme
• Name of Deposit Trustees
• Amount due towards deposits of any previous deposits accepted by the company.
(b) Filing of Circular or Advertisement with Registrar of Companies: A company has to file a copy of a circular or advertisement signed by all directors with the Registrar of Companies.
(c) Issue of Circular or Advertisement:
• The company must file a copy of the circular or advertisement with the Registrar of the Company.
• The filing of circular or advertisement must be done within 30 days.
• Only after filing the circular or advertisement, the company can issue it to the public.
• The advertisement must be published in an English newspaper and in the regional language newspaper where the company's registered office is located.
• The company can send the circular to the members through registered post, speed post, or email.
(d) Validity of Circular or Advertisement: The validity of circular or advertisement is valid for 6 months from the end of the financial year in which it was issued or the date on which the Annual General Meeting was held, whichever is earlier.
In simple words: Companies inviting deposits must issue either a circular (for members) or an advertisement (for public), containing financial details, security status, credit rating, scheme details, trustee names, and previous dues. This document, signed by all directors, must be filed with the Registrar of Companies and issued within 30 days of filing. After filing, the circular or advertisement can be issued, requiring publication in English and regional newspapers. Circulars can be mailed to members. These documents are valid for six months from the financial year-end of issuance or the date of the Annual General Meeting, whichever comes first.

🎯 Exam Tip: Remember the distinction between circulars and advertisements, the comprehensive content requirements, and the specific filing and issuance timelines for compliance. Pay attention to the publication requirements for advertisements and the dual criteria for determining the validity period of circulars/advertisements.

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