What are the provision and rules of companies Act1956 with respect to Acceptance of Public deposits? Or Write Short Notes on Acceptance of Public Deposit?

Meaning: -Deposits is a loan received by the company from an investor on certain terms and conditions about repayment of principal amount wit interest. Deposits are accepted only by public companies. Private companies are restricted to accept the deposits from general public.

Definition: -According to Companies Act 1956 the term deposits means 'Any deposit of money with the company and any amount borrowed by the company'.

According to the provisions of Companies (Amendment of Deposits) Rules 1975 and amendments made thereafter, all companies except the companies doing banking and finance business can accept deposits.

There are some restrictions or limitations on the acceptance of such deposits:

1.       A company can accept deposits up to 25% of the total of its paid up share capital and free reserve.
2.       A company can accept deposits in the form of
a.       Unsecured debentures
b.       Deposits from its members and
c.        Deposits guaranteed by the directors up to 10% of the total of its paid up capital and free reserves.
3.       In all, a company can accept deposits up to 35% of the total of its shares capital and free reserves.
4.       A government company can accept deposits up to 35% of paid up capital and free reserves.
5.       The application for deposits must be made in the prescribed form supplied by the company only.
6.       The depositor should give a declaration that the amount of deposits is not borrowed and not accepted as deposit by him from any other person.
7.       According to the provision of the companies Act a private company cannot accept deposits from the general public.
8.       A company cannot accept deposits payable on demand.
9.       A company can accept deposits for a minimum period of 6 months and maximum period of 3 years i.e. 36 months.
10.    On acceptance of deposits company must issue a deposit receipt with 8weeks from the date of receipt of money to the depositors.
11.    A maximum rate of interest payable on deposit is 12.5% p.a. as per the Companies Amendment Rules 2001.
12.    Company can pay brokerage on deposits collected, through brokers, depending on period of deposits at the following rate:
up to 1 years
more than 1 year
More than 2 year

13.    Company accepting deposits must keep a Registrar of Deposits at the registered office of the company.
14.    Company must file with the Registrar, a return of deposits duly certified by the auditor of the company on 31st March every year. A copy of such return must also be submitted to the Reserve Bank of India.

15.    Any deposit received by a company against the provision of the Act must be paid back by the company within 30 days of the deposits.