Acceptance of Deposits - Simplified (With Help of Examples)

5/12/2015
AcceptanceofDepositsSimplified(WithHelpofExamples)
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AcceptanceofDepositsSimplified(WithHelpof
Examples)
CAGauravMittal(../profile.asp?member_id=92664)
on02June2014
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ACCEPTANCEOFDEPOSIT
Section73to76Simplified
The companies Act 2013 by way of Section 73 to 76 has bought many changes in respect of Acceptance of
depositsbycompanyandthechangesareapplicableareonPrivateLimitedCompaniesalso.
To understand the ambit of Section 73 to 76 we first need to know the definition of Deposits under old
CompaniesActwizawiztonewCompaniesAct,2013.
MeaningofDepositAsperCompaniesAct1956
a. As per explanation to Section 58A deposit means any deposit of money with, and includes any amount
borrowedby,acompanybutshallnotincludesuchcategoriesofamountasmaybeprescribedinconsultation
withtheReserveBankofIndia.
http://www.caclubindia.com/articles/acceptanceofdepositssimplifiedwithhelpofexamples20674.asp#.VVGNkfmqqko
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b.SuchexemptedcategoriesprescribedbytheCentralgovernmentinconsultationwithRBI(throughCompanies
(AcceptanceofDepositRules),1975)areasfollows:
i.AmountsReceivedfromtheGovernment/ForeignSources
ii.LoansfromBankingcompany/FinancialInstitution
iii.Intercompanydeposits
iv.AmountReceivedfromEmployeebywayofSecurityDeposit
v.AmountReceivedfromAgents
vi.AdvancesagainstOrders(forsupplyofgoodsetc.)
vii.SubscriptionstoSecurities
viii.CallsinAdvanceofShares
ix.TrustMoneys
x.AmountReceivedfromDirectorsorhisrelative
xi.AmountReceivedfromMembers(onlyincaseofPrivateco.)
xii.SecuredBondsorDebentures
xiii.ConvertibleBondsorDebentures
xiv. Promoters Unsecured Loans pursuant to stipulations laid down by the financial institutions for granting the
loan.
Also,section3(1)(iii)oftheCompaniesAct,1956prohibitsaprivatecompanyfromtheinvitingandaccepting
anyDEPOSITfrompersonotherthanitsmembers,directorsortheirrelatives.
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DEFINITIONOFDEPOSITUNDERCOMPANIESACT2013
InadditionofabovefollowinghasbeenincludedinthedefinitionofDeposits
1) Any amount received against subscription to any securities including share application money provided the
securitiesareallottedwithin60daysfromthedateofreceiptoftheapplicationmoneyoradvance.
Ifthesecuritiesarenotallottedwithin60daysthenthesameshouldberefundedwithin15dayselsethesame
shallbetreatedasdepositaftercompletionof15days.
2) Any amount received from Director of the company provided the Director furnishes a declaration that the
amountgivenisnotoutofborrowedfunds.
3)Anyamountreceivedfromanemployeeofthecompanynotexceedinghisannualsalaryinthenatureof
noninterestbearingsecurity.
4)Anyamountreceivedinthecourseoforthepurposeofthebusinessforthefollowing:
a. As advance for the supply of goods or provision of services provided such advance is appropriated against
supplyofgoodsorprovisionofservicewithin365daysfromthereceiptofsuchamount,
b.Asadvancereceivedinconnectionwithconsiderationforpropertyunderanagreementorarrangement,
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c.Assecuritydepositfortheperformanceofthecontractforsupplyofgoodsorprovisionofservices.
d.Asadvancereceivedunderlongtermprojectsforsupplyofcapitalgoods.
Ifanyamountreceivedunderclause(a),(b)and(d)becomesrefundableduetothereasonsthatthecompany
accepting money does not have necessary permission or approval to deal with the goods or services then the
amountreceivedshallbedeemedtobeadepositaftertheexpiryof15daysfromthedatetheybecomeduefor
refund.
5)AnyamountacceptedbyaNidhiCompanyinaccordancewithrulesmadeu/s406oftheAct.
LET Us Understand the Concept of Acceptance of Deposits under Companies Act 2013 with the help of 2
practicalexamples:
EXAMPLE1
ABCPrivateLtdhasaShareCapitalofRs10CroreanditwishestoraiseanotherRs10Crorebythefollowing
means:
5CrorefromGovernmentAgency,Financialinstitutions,BanksorbywayofCommercialPaper.
50LakhsbywayofShareApplication.
50LakhsfromDirectorbywayofLoan.
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50Lakhsfromissueofbondsanddebentures.
50LakhsfromICD.
25LakhsfromEmployees.
50Lakhsasbusinessadvancefromcustomer.
50LakhsasAdvanceagainstpropertySale.
25Lakhsassecuritydeposit.
50LakhsfrompromoterorRelative.
50LakhsfromrelativeofaDirector.
50Lakhsfromashareholder.
ABCPrivateLimitedhassoughtyouradviceontheabovemeansoffinance.
ANSWER1
5CrorefromGovernmentAgency,Financialinstitutions,BanksorbywayofCommercialPaper.
The amount received or borrowed from any government agency or FI or Bank or by way of CI is not covered
underdeposits.
Hence,companycanraisemoneybywayofabove.
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50LakhsbywayofShareApplication.
Companycanraisemoneybywayofissueofshareif
a.Section42compliancei.e.PrivatePlacement.
b.Allotmentofsharewithin60daysofreceiptofamount.
c,Ifnotallottedthentermedasdeposit.
50LakhsfromDirectorbywayofLoan.
CompanycanreceivealoanfromaDirectorprovided
Director gives an undertaking to the company that the loan given is from own funds and not from borrowed
money.
NOTE:SupposeifDirectorNetWorthisRs10CroreandhehastakenaloanforRs4Crorethenheiseligible
togiveloantoacompanyuptoRs6Crore.
50Lakhsfromissueofbondsanddebentures.
Companycanraisemoneybywayofbondsanddebenturesprovided
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Provided
a.AmountissecuredbyafirstchargeagainstpropertyOR
b.Suchbondsordebenturesshouldbecompulsorilyconvertibleintoshareswithin5years.
50LakhsfromICD.
Intercorporatedepositsarenotcoveredinthedefinitionofdeposits,hencecompanycanuseICDasameansof
finance.
25LakhsfromEmployees.
Yes,canberaisedfromemployeesprovidedamountreceivedfromemployeedoesntexceedbyhistotalannual
salary.
50Lakhsasbusinessadvancefromcustomer.
Yes, amount can be raised from customer however, such advance should be adjusted with 365 days from the
dateofreceiptofadvance.
50LakhsasAdvanceagainstproperty.
Yesitcanberaised,howeversuchamountshouldbeadjustedagainstthepropertyonly.
25Lakhsassecuritydeposit.
Yes,assecuritydepositsareoutoftheambitofdefinitionofdeposits.
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However,itisadvisedtoreceivesecuritydepositunderaspecificagreement.
Eg:Securitydepositagainstrent,securitydepositagainstsupplyofmaterialorfulfillmentofservice.
50LakhsfrompromoterorRelative.
No,butifanyamountbroughtinbythepromotersofthecompanybywayofunsecuredloaninpursuanceofthe
stipulationofanylendingfinancialinstitutionorabanksubjecttofulfillmentofthefollowingconditions,namely:
(a) the loan is brought in pursuance of the stipulation imposed by the lending institutions on the promoters to
contributesuchfinance
(b)theloanisprovidedbythepromotersthemselvesorbytheirrelativesorbybothand
(c) the exemption under this subclause shall be available only till the loans of financial institution or bank are
repaidandnotthereafter
50Lakhsfromashareholder.
No,Companycannotraiseanamountfromshareholders.
EXAMPLE2
On 1st April 2014, following loans are standing outstanding in the books of M/s ABC Pvt Ltd. The board has
soughtyouradviceregardingthetreatmentofthem.
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1.Rs1CrorefromDirector.
2.Rs50Lacfromshareholder.
3.Rs50LacfromrelativeofaDirector
4.Rs50LacasabusinessAdvance.
5.Rs2Croreasadvanceagainstproperty.
6.Rs1Croreasshareapplicationmoney.
7.Rs2CroreasICD
8.Rs1Crorefromunknownsourcesornonrelatives.
SOLUTION2
The Companies Act 2013, states that in case any Deposit is outstanding in the books of accounts of company
thensamehastobereportedtotheROCby30thJune2014andhastoberepaidby31stMarch2015.
Here, the deposits are to be checked under the definition of Deposits as defined under Companies Act 1956
insteadofCompaniesAct2013.
WeWilltakeeachcaseseparatelyNow:
Rs1CrorefromDirector.
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AnyamountreceivedfromaDirectorisnotaDeposithenceitneednotbereportedandcancontinuetostayin
books.Theloancanberenewedontheexpiryofterm,ifthereisnotermthenitisadvisabletomakeatenurefor
same.
Rs50Lacfromshareholder.
AmountreceivedfromshareholderswasnotcoveredinthedefinitionofdepositsunderoldActhencethesame
isnotrequiredtobereported.
However,Loanfromshareholderscannotberenewedandhastoberepaidbackonexpiryofterm.Ifthereisno
termthanatermcontractshouldbemadenow.
Rs50LacfromrelativeofaDirector
Again as per old definition loan from relatives of Director were out of the ambit of the definition of Deposits,
Hencenoreportingrequiredhoweversamecannotberenewedandhastoberepaidbackonexpiryofterm.If
thereisnotermthanatermcontractshouldbemadenow.
Rs50LacasabusinessAdvance.
BusinessAdvanceisexcludedfromthedeposits,hencethereisnoneedtoreportthesameandtheamountcan
continuetoappearinbooks.
The 365 days condition is not applicable here. However genuineness of the transaction is to be checked. It
shouldbecheckedwhetherthereareanytransactionhappeningbetweentheparties.
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Ifnot,thenitisadvisabletorefundtheamount.
Rs2Croreasadvanceagainstproperty.
Sameasaboveitisnotadeposit,hencenoreportingnecessary.
Rs1Croreasshareapplicationmoney.
ShareApplicationmoneyisnotadeposithencethereisnoneedtoreportthesame.
However,allthependingapplicationmoneyappearinginbooksofAccountsshouldeitherbeallottedorrefunded
back to the subscribers. As in many cases share application money is standing outstanding since many years
andasperrulesoutstandingshareapplicationmoneyshouldbedepositedinInvestorProtectionFundAccount.
Soitisadvisedeithertorefundorallottheamountincurrentfinancialyear.
Rs2CroreasICD
ICD are exempt from the definitions of Old as well as New Companies Act, hence company can freely accept
ICD.
Rs1Crorefromunknownsourcesornonrelatives.
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Wemusthavefacedasituationundersomeamountisoutstandinginbooksofaccounts,howeverthecompany
isunabletoascertaintowhomthatamountbelongto.
Such amount received or unexplained money or money standing in books from non relatives needs to be
reported to ROC by 30th June 2014, as they get covered under the definition of Companies Act. The said
amountistoberepaidby31stMarch2015.
Ihopeallthepracticalqueriesarebeingcoveredupbytheseexamples.
Howeverifyoustillhaveanyspecificquerypleaseaskthesame.
CAGauravMittal
Partner
Singal&Company
Email:mittalgaurav05@gmail.com
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RecentComments
Total:12
Login(../user_login.asp) topostcomment
SURESHKUMARNAGUBANDI(../profile.asp?member_id=179516)02November2014
DearSir,ThanQVeryMuchforyourvaluablesharing.Pleaseguidemeonthefollowing
issue:IfaPrivateLimitedcompanyshowsUnsecuredLoansfromoneofthedirectorcum
shareholderandemployees(case1:exceededcase2:doesnotexceededtheirannual
salarygivenasunsecuredloanonlytothecompany)ofthesamecompanyason31st
March2014.WhataretheconsequencesaspernewcompaniesAct,2013andstepsto
betakenimmediately?ThanksaMillionforyourValuableExplanationSir.
divyaagarwal(../profile.asp?member_id=520393)15October2014
heygaurav...thanksyaar...superbexplanationwellmiqueryisourcompanyhas
acceptedunsecuredloansfromtheothercompanyandthatothercompanyholds50
percentofshareholdinginourcompanysowhetheritwillbetreatedasdepositunder
newcompaniesact2013oritsanICDiunderstandthatreportingtoROCisnotrequired
asloansfromshareholdersareallowedasunderoldactbtstillwannaknowasperthe
newact??
mohitverma(../profile.asp?member_id=1314288)28August2014
withregardtobusinessadvancerecievedpriortonewcompaniesacttheconditionof
365daysisnotapplicable,isthereanyprovisionorjudgemntspecifyingthesame?
13/21
5/12/2015
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