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A company can accept deposits for a minimum of 6 months and a maximum of 36 months.

• 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.

• 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.

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 taken 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 is.

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.

(a) Yes, the company has to seek the shareholder’s approval for accepting deposits by passing a special resolution.

(b) Yes, the company has to appoint a Deposit Trustee as it is issuing secured deposits.

(c) A Company can create a charge on its tangible assets within 30 days of acceptance.

• There are different types of companies that can accept deposits from the public as well as members.
• A private company can accept deposits from the public of more than 100% of their aggregate of paid-up share capital and free reserves.
• Eligible Public Company and Public Company cannot accept deposits from the public exceeding 25% of the aggregate paid-up share capital and free reserves of the company.
• Government company can accept deposits up to 35% of the paid-up share capital and free reserves. Thus, we can conclude that there is a limit or restriction on the amount that a company can collect as Deposits and the statement stands justified.

(a) No, it cannot accept deposits from the public because it is a private company.

(b) A Private Ltd. Company can issue circulars to invite deposits.

(c) The maximum period for accepting deposits is 36 months.

1. Private Company

2. Government Company

3. 6 months

4. 36 months

5. 30 days of Acceptance

6. Circular

7. Deposit Trust Deed

8. Deposit Repayment Reserve Account

9. 21 days

10. Register of Deposits

A company has to maintain a separate Register for deposits accepted or renewed at its registered office which is called as Register of Deposits.

1. Hold General Meeting, Appoint Deposit Trustee, Create charge on assets.

2. Issue advertisement, Issue Deposit Receipt, File Return of deposit.

3. Obtain Credit Rating, Issue Deposit Receipt, Entries in Register of Deposits.

A circular is issued when the company invites deposits from its members. An advertisement is issued when the company invites deposits from the public.

(a) 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.

Company signs a contract with the Deposit Trustees called as Trust Deed which contains the terms and conditions of the contract.

Correct option: (a) Deposit Trustees

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 about 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.

Correct option: (a) 1

Correct option: (c) 21

Correct option: (a) 30

• The company has to file a copy of the circular or advertisement with the Registrar of Companies before inviting the public.
• Circular or advertisement should be issued to the public after 30 days of filing.
• It should be signed by all directors of the company.
• Circular is sent to the members by the speed post, registered post, or email.
• Thus, it is rightly said that a company has to fulfill certain provisions related to the issue of circular or advertisement.

Correct option: (b) Public

1. Short term loan

2. Public

3. ₹ 100 Crores

4. 35% of the paid-up share capital and free reserves of the company

5. 36 months

6. Demand

7. 3 months

8. Advertisement

9. Credit rating agency

10. Deposit Repayment Reserve Account

1. Private company

2. Special Resolution

3. Appointment of Registrar of companies

Correct option: (b) Short term loan

1. False

2. True

3. False

4. False

5. True

6. False

7. True

8. True

9. False

10. True

Correct option: (a) 30 June

Every company accepting deposits has to open a Deposit Repayment Reserve Account in a scheduled Bank which can be used only for repaying deposits.

Correct option: (a) 36

A company has to file a Return of Deposit on or before 30 June every year with the Registrar of Companies.

Correct option: (b) Circular

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.

Correct option: (c) Secured deposit

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.

A Company accepting secured deposits from the public has to create a charge on its tangible assets.

• 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.
• The chargeable asset amount should not be less than the amount of deposit accepted.
• The minimum amount of security should be equal to the amount not covered by Deposit Insurance.
• The Security is created in favour of the Deposit trustees.
• Creating a charge on the assets ensures safety to the deposits of deposit holders.
• In case a company fails to repay the number of deposits, the deposit holders can sell the assets and recover the amount invested.
• Thus, it is rightly justified that the companies have to create a charge on their tangible assets while issuing secured deposits.

1. Government companies can accept deposits from the public.

2. Company issues are circular to invite its members for subscribing to its deposits.

3. Company appoints Deposit Trustees to protect the interest of Depositors.

4. Deposit Receipt is issued within 21 days from the date of receipt of deposits.

5. Return of deposits is to be filed with the Registrar of companies on or before 30th June every year.

6. Charge on assets is created when the company issues secured deposits.

7. The minimum tenure of the deposit is 6 months.

Government Companies and Eligible Public companies can accept deposits from the public.

(a) Yes, the company can accept deposits in joint names of depositors. But there should not be more than 3 names.

(b) 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.

(c) 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.

(a) No, the company cannot accept deposits from the public as its net worth is less than ₹ 100 crores.

(b) No, the deposit can be accepted or renewed which mature after four years.

(c) 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.

• Accepting deposits from the public is an important source of raising funds for a company.
• The company needs to follow certain terms and conditions while collecting deposits from the public.
• Similarly, on the other side, provisions issued by the Central Government, Companies Rules 2014, and directives issued by the Reserve Bank of India do not allow companies to accept deposits.
• Banking companies, Non-Banking Finance Companies, Housing Finance companies are not allowed to accept deposits.
• Thus, it is rightly said, that all companies cannot accept deposits from the public.