Acceptance of Deposits by Companies under Companies Act, 2013
Complete practical guide covering Sections 73, 74, 75, 76, 76A, Companies (Acceptance of Deposits) Rules, 2014 and DPT-3 reporting framework.
Bird Eye View
Meaning
Exclusions
Eligibility
Section 73
Private Company
Section 76
Protection
DPT-3
Penalty
1. Bird Eye View of Deposit Law
Chapter V of the Companies Act, 2013 regulates acceptance, repayment and reporting of deposits by companies. The purpose is to protect depositors and prevent unauthorised collection of money by companies.
| Question | Simple Answer | Relevant Provision |
|---|---|---|
| What is deposit? | Any receipt of money by company unless specifically excluded. | Section 2(31), Rule 2(1)(c) |
| Who can accept deposit from members? | Private Company and Public Company, subject to conditions. | Section 73 |
| Who can accept deposit from public? | Only Eligible Public Company. | Section 76 |
| What is annual reporting? | DPT-3 is filed for deposits and specified non-deposit transactions. | Rule 16 and Rule 16A |
| What if company defaults? | NCLT remedy, penalty, prosecution and possible personal liability. | Sections 74, 75 and 76A |
Teaching line: Deposit law is not only about actual deposits. It is also about identifying exempted receipts and reporting them correctly in DPT-3.
2. Act and Rules Mapping
| Provision | Subject | Practical Use |
|---|---|---|
| Section 2(31) | Meaning of Deposit | Starting point for classification of receipt. |
| Section 73 | Deposits from Members | Applicable to private and public companies accepting deposits from members. |
| Section 74 | Old Deposits | Deposits accepted before commencement of Companies Act, 2013. |
| Section 75 | Fraudulent Acceptance | Personal liability where deposits were accepted with fraudulent intent. |
| Section 76 | Public Deposits | Applicable to Eligible Public Companies. |
| Section 76A | Penalty | Penalty for violation of Section 73 or Section 76. |
| Rule 2(1)(c) | Exclusions from Deposit | Most important rule to decide whether receipt is deposit or not. |
| Rule 6 | Creation of Security | Security and trustee for depositors. |
| Rule 16 and 16A | DPT-3 | Annual reporting of deposits and non-deposit transactions. |
3. Meaning of Deposit
Deposit includes any receipt of money by way of deposit, loan or in any other form by a company, but does not include such categories of amounts as may be prescribed.
Simple Formula: Money received by company is deposit unless specifically excluded under Rule 2(1)(c).
DepositMoney accepted by company with obligation to repay, generally with or without interest.
LoanLoan is also covered in the wide definition, unless it is specifically exempted.
AdvanceBusiness advance is generally not deposit if it is genuine and adjusted according to law.
Practical TestAlways check whether the receipt falls under any exclusion of Rule 2(1)(c).
4. Transactions Not Treated as Deposits
Rule 2(1)(c) provides various exclusions. The following table explains them in practical form.
| Sl. No. | Head | Sub-Heads | Explanation |
|---|---|---|---|
| 1 | Government Receipts | Central Government, State Government, Local Authority, Statutory Authority | Not treated as deposit. |
| 2 | Foreign Receipts | Foreign Government, Foreign Bank, Foreign Company, Foreign Citizen, Foreign Investor | Not deposit, subject to FEMA compliance. |
| 3 | Banking Borrowings | Bank Loan, SBI, Scheduled Bank, Co-operative Bank | Loans from regulated banking institutions are excluded. |
| 4 | Institutional Borrowings | PFI, Regional Financial Institution, Insurance Company | Institutional finance is not treated as deposit. |
| 5 | RBI Instruments | Commercial Paper and similar instruments | Excluded if issued according to RBI guidelines. |
| 6 | Inter-Corporate Loan | Loan from another company | Loan from company to company is not deposit. |
| 7 | Securities Money | Share Application Money, Advance towards Allotment, Securities Subscription | Allot within 60 days. If not allotted, refund within next 15 days. |
| 8 | Director Related Money | Director Loan, Relative of Director Loan in Private Company | Declaration required that money is not borrowed from others. |
| 9 | Debentures and Bonds | Secured Debentures, CCD, Listed NCD | Excluded subject to prescribed conditions. |
| 10 | Employee Security Deposit | Non-interest bearing employee security deposit | Should not exceed annual salary. |
| 11 | Trust Money | Non-interest bearing amount held in trust | Money held in fiduciary capacity is excluded. |
| 12 | Business Advances | Goods, Services, Property, Security Deposit, Long-Term Project, Warranty, Maintenance | Genuine business advances are excluded if adjusted according to law. |
| 13 | Promoter Loan | Loan brought by promoters due to bank/FI condition | Exemption continues only till bank/FI loan is repaid. |
| 14 | Nidhi Company | Amounts accepted as per Nidhi Rules | Separate Nidhi framework applies. |
| 15 | Special Regulated Receipts | Chit, CIS, Startup Convertible Note, AIF, VCF, REIT, InvIT, Mutual Fund | Excluded due to separate regulatory framework or specific exemption. |
When Exempted Receipts May Become Deposit
| Receipt | Important Condition | If Condition Fails |
|---|---|---|
| Share Application Money | Allot within 60 days or refund within next 15 days. | May become deposit. |
| Customer Advance | Generally adjust against goods/services within prescribed period. | May become deposit. |
| Director Loan | Declaration from director is required. | Risk of deposit treatment. |
| Promoter Loan | Must be pursuant to bank/FI stipulation. | Exemption may not apply. |
5. Who Can Accept Deposits?
| Type of Company | Deposits from Members | Deposits from Public |
|---|---|---|
| Private Company | Permitted | Not Permitted |
| Public Company | Permitted | Not Permitted |
| Eligible Public Company | Permitted | Permitted |
Practical Understanding
| Situation | Applicable Provision | Answer |
|---|---|---|
| Private company accepting deposits from shareholders | Section 73 | Allowed subject to conditions and exemptions. |
| Public company accepting deposits from shareholders | Section 73 | Allowed subject to full compliance. |
| Eligible public company accepting deposits from public | Section 76 | Allowed subject to stricter compliance. |
| Private company accepting deposits from public | Not permitted | Not allowed. |
| Ordinary public company accepting deposits from public | Not permitted | Only eligible public company can do this. |
Eligible Public Company Criteria
| Criteria | Requirement |
|---|---|
| Net Worth | ₹100 crore or more |
| OR | Turnover ₹500 crore or more |
6. Acceptance of Deposits from Members under Section 73
Section 73 permits companies to accept deposits from members subject to prescribed conditions. The intention is that members should receive sufficient disclosures and the company should maintain repayment discipline.
| Sl. No. | Condition | Purpose |
|---|---|---|
| 1 | Approval of members in general meeting | Members approve deposit proposal. |
| 2 | Issue of circular to members | Disclosure of financial position, credit rating, depositors, outstanding deposits and other information. |
| 3 | Filing of circular with ROC | Filing before issuing the circular. |
| 4 | Deposit Repayment Reserve Account | 20% of deposits maturing in next financial year to be kept by 30 April. |
| 5 | No default in repayment | Company should not have defaulted in deposit repayment or interest payment. |
| 6 | Security, if any | If secured, charge is created. If not secured, mention unsecured deposit. |
7. Private Company Exemptions
Private companies may get relaxation from Section 73(2)(a) to (e), subject to prescribed conditions.
| Category | Condition | Benefit |
|---|---|---|
| Capital and reserves based exemption | Money from members does not exceed 100% of paid-up share capital, free reserves and securities premium. | Exemption from certain Section 73(2) conditions. |
| Startup company | Recognised startup for five years from incorporation. | Relaxation from certain deposit conditions. |
| Closely held private company | Not associate/subsidiary; borrowings within prescribed limits; no default in repayment of borrowings. | Relaxation from certain deposit conditions. |
Important: Exemption from certain Section 73 conditions does not automatically mean exemption from DPT-3 reporting.
8. Public Deposits under Section 76
Section 76 permits only eligible public companies to accept deposits from persons other than members. Public deposits are subject to stricter compliance because money is collected from a wider group of persons.
| Requirement | Explanation |
|---|---|
| Eligible public company | Net worth ₹100 crore or more, or turnover ₹500 crore or more. |
| Compliance with Section 73 | Section 76 company must also comply with Section 73 conditions. |
| Credit rating | Rating from recognised credit rating agency is mandatory. |
| Annual rating | Rating must be maintained during tenure of deposits. |
| Security and charge | For secured public deposits, charge must be created on assets. |
| Public advertisement | Public invitation requires proper disclosure and advertisement. |
9. Protection of Depositors
The Act protects depositors through repayment reserve, security, trustee mechanism, NCLT remedy and penal provisions.
Deposit Repayment Reserve Account20% of deposits maturing during the following financial year to be kept by 30 April in scheduled bank.
Security for DepositsCharge may be created on eligible movable or immovable assets.
Trustee for DepositorsSecurity is created in favour of trustee to safeguard depositors.
NCLT RemedyDepositor can apply to NCLT if company fails to repay deposit or interest.
DRRA Example
If deposits of ₹50 lakh are maturing during next financial year, the company must keep ₹10 lakh in Deposit Repayment Reserve Account by 30 April.
10. Repayment and Default
Every deposit must be repaid with interest according to the terms agreed between company and depositor. Failure to repay attracts serious consequences.
| Topic | Explanation |
|---|---|
| Repayment obligation | Principal and interest must be repaid on due date. |
| NCLT remedy | Depositor may approach NCLT for repayment, interest and compensation. |
| Old deposits | Section 74 deals with deposits accepted before Companies Act, 2013. |
| Fraudulent deposits | Section 75 imposes personal liability where deposits were accepted with fraudulent intent. |
11. DPT-3 Compliance Framework
DPT-3 is not only for actual deposits. It is also used to report certain outstanding receipts of money which are not considered deposits.
| Purpose in DPT-3 | When to Select |
|---|---|
| Return of Deposits | When company has accepted deposits. |
| Particulars of Transactions not considered as Deposit | When company has only exempted receipts such as director loan, inter-corporate loan, share application money etc. |
| Return of Deposits and Particulars of Transactions not considered as Deposit | When company has both deposits and exempted receipts. |
| One Time Return | Historical return introduced for outstanding money/loans from 01.04.2014 to 31.03.2019. |
DPT-3 Due Date
Reporting DateInformation is reported as on 31 March.
Filing Due DateGenerally 30 June every year.
12. Penalties and Punishments
| Default | Provision | Consequence |
|---|---|---|
| Failure to repay old deposits | Section 74 | Company fine ₹1 crore to ₹10 crore. Officer imprisonment up to 7 years and fine ₹25 lakh to ₹2 crore. |
| Fraudulent acceptance of deposits | Section 75 | Unlimited personal liability of responsible officers. |
| Contravention of Section 73 or Section 76 | Section 76A | Company fine minimum ₹1 crore or twice deposit amount, whichever is lower, up to ₹10 crore. |
| Officer in default under Section 76A | Section 76A | Imprisonment up to 7 years and fine ₹25 lakh to ₹2 crore. |
| Wilful fraud | Section 447 | Fraud action may apply. |
13. Practical Examples
| Transaction | Deposit Status | Practical Note | DPT-3 |
|---|---|---|---|
| Director gives loan to private company | Not deposit | Declaration required from director. | Generally reportable as not considered deposit. |
| Company receives loan from another company | Not deposit | Inter-corporate loan is excluded. | Generally reportable. |
| Share application money pending beyond 60 plus 15 days | May become deposit | Track allotment and refund timeline. | Careful classification required. |
| Customer advance for goods | Not deposit | Should be adjusted against supply within prescribed period. | May be reportable if outstanding. |
| Private company accepts money from outsiders as deposit | Not permitted | Private company cannot accept public deposits. | Violation risk. |
| Eligible public company accepts public deposits | Permitted | Section 76 compliance required. | Report as deposit. |
Final teaching formula: First identify the receipt, then check Rule 2(1)(c), then check company eligibility, then apply Section 73 or Section 76, then file DPT-3 where applicable.