OMTEX CLASSES: EXPLAIN THE PROCEDURE INVOLVED IN THE INVITATION OF DEPOSITS.

EXPLAIN THE PROCEDURE INVOLVED IN THE INVITATION OF DEPOSITS.

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Meaning: -Section 58-A of the Companies Act, 1956 defines as “any deposit of money with, and includes any amount borrowed by a company but shall not include such categories or amount as may be prescribed by the Central Government in consultation with the Reserve Bank of India.

The Following are the secretarial duties in connection with acceptance of deposits: -

1.      Statutory Requirements: -The secretary should ensure that the deposits comply with the provisions of the company Act and also the companies (acceptance of deposits) Rules. The Provisions include
·        No company with a net worth of Rs 1 crore can raise funds by way of public deposits.
·        No deposits can be accepted for a period of less than 3 months.
·        The total amount of deposits that can be accepted by a company is limited to 35% of the paid-up share capital and free reserves of the company.

2.      Advertisement: -The secretary should get the text of the advertisement ready, for inviting the deposits. The advertisement must contain certain particulars such as:
·        Name of the Company, Date of incorporation of the company, Business carried on by the company and its subsidiaries, Brief particulars of the management of the company,
·        Name and address and occupation of the directors etc.

3.      Publish the Advertisement: -The advertisement must be given in a leading English newspaper and in one vernacular newspaper, circulating in the state in which the registered office of the company is situated.

4.      Application Form: -The secretary has to prepare an application form to be submitted by the intending depositors. Application form should contain the declaration by the depositors.

5.      Statement in lieu Advertisement: -If the Company decides to accept deposit without invitation to the public (i.e. accepting deposits privately), then the secretary should draft the statement in lieu of advertisement.

6.      Board Meeting: - The secretary should make arrangement to hold a board meeting to decide about the following:
·        The total amount of deposits, The rate of interest, Approval of the text of the advertisement
·        The names of newspaper in which advertisement will appear.
·        Opening of bank accounts for collection of deposits

7.      Filing with Registrar: -A copy of the advertisement (or statement in lieu of advertisement) signed by a majority of the Directors to be filed with the ROC before publication of the advertisement.

8.      Arrangement to issue Receipts: -The secretary has to arrange to issue a receipt contains the prescribed details on acceptance.

9.      Bank Account: The secretary has to make arrangement with bankers, requesting them to collect the deposits, issue a receipt and keep the deposits in a separate account.

10.  Scrutiny of Application Forms: -All application forms must be scrutinised. The secretary has to see that application forms are complete and correct in all respect.

11.  Depositors List: -The secretary has to prepare depositors list. A separate list of small depositors must be prepared.

12.  Board Resolution: -The secretary requests the directors to adopt the resolution for accepting deposits and authorising the secretary to issue receipts.


13.  Issue of Receipts: -The secretary has to prepare receipts for every deposit received. The receipt must be issued within 8 weeks from the date of receipt of money.