What is company deposit?

Question

What is company deposit?

Answer 1

S.58A of Companies Act, 1956 has put restrictions on acceptance of deposits by any company subject to rules being prescribed. Accordingly, Companies (Acceptance of Deposits) Rules, 1975 were prescribed which lay down various regulations and procedures for acceptance of deposits by companies. The important provisions of the Rules are summarised as under :

1.



The rules do not apply to banking companies and financial companies for which RBI have separately prescribed rules.

2.



The rules are summarised as under.

3.



Deposit means deposit of money and includes any amount borrowed by a company, but does not include certain types of borrowings; viz. amount received :

a)



from Govt, Local Authority, Foreign Govt or any other foreign person, citizen or authority or any amount guaranteed by Govt.

b)



from Banks.

c)



from various Govt or semi-Govt financial Cos. or Corporation/insurance Cos. or a Public financial institution as may be notified by the CG.

d)



from any other company.

e)



by way of security deposit from an employee./td>

f)



by way of security or advance from any purchasing, selling or other agents in the course of business or any advance received against orders for supply of goods, properties or services.

g)



by way of subscription to any share, stock, bonds or debentures pending allotment. Any amount received by way of calls in advance so long as this is not repayable under the Articles.

h)



in trust or in transit.

i)



from a director in case of any company or from a shareholder in case of a private company out of his own funds (that is not borrowed or accepted from others) including a Company which has become public u/s.43A so long as it retains S. 3(1)(iii) conditions in its Articles. The director/shareholder concerned however has to furnish a declaration in writing to the effect that the amount is not being given out of funds acquired by him by borrowing or accepting from others.

j)



by issue of bonds or debentures secured by the mortgage of any immovable property or with an option to convert them into shares. Provided the amount does not exceed the market value of property.

k)



from promoters by way of unsecured loans pursuant to agreement with financial institutions for loans so long as such loans are outstanding.