Chapter 5: Deposits Balbharati solutions for Secretarial Practice 12th Standard HSC Maharashtra State Board

Chapter 5: Deposits


Select the correct answer from the options given below and rewrite the statement:


Deposit is a type of ______________________.

Options

Owned capital

Short term loan

Long term loan

Solution:


Deposit is a type of Short term loan.


Eligible public company and Government Company can collect deposits from _____________.

Options

It’s employees

Public

RBI

Solution:


Eligible public company and Government Company can collect deposits from Public.


Private company can accept deposits from its member or Directors upto not more than ___________ % of its aggregate of paid-up share Capital and free reserves.

Options

100

35

25


Solution:


Private company can accept deposits from its member or Directors upto not more than 100 % of its aggregate of paid-up share Capital and free reserves.


A __________ Company can accept deposits from public not exceeding 35% of its paid-up share Capital and free reserves..

Options

Government

Private

Eligible Public


Solution:


A Government Company can accept deposits from public not exceeding 35% of its paid-up share Capital and free reserves.


Deposit can be accepted for a minimum of 6 months and maximum for ________ months

Options

36

3

30


Solution:


Deposit can be accepted for a minimum of 6 months and maximum for 36 months,.


Company can issue circular or advertisement for inviting deposits after _________ days of filing it with Registrar of Companies.

Options

30

21

7


Solution:


Company can issue circular or advertisement for inviting deposits after 30 days of filing it with Registrar of Companies.


Company has to appoint ________________ to protect the interest of depositors

Options

Debenture Trustees

Deposit Trustees

Credit Rating Agency


Solution:


Company has to appoint Deposit Trustees to protect the interest of depositors. 


Charge on assets is to be created when a company issues ______________.

Options

Unsecured deposit

Unsecured Debenture

Secured deposit


Solution:


Charge on assets is to be created when a company issues Secured deposit.


Deposit Receipt is issued within ______________ days of receipt of deposit

Options

7

30

21


Solution:


Deposit Receipt is issued within 21 days of receipt of deposit


For premature repayment of deposit, company deducts __________ % of interest.

Options

1

18

20


Solution:


For premature repayment of deposit, company deducts 1 % of interest.


Return of deposit must be filed every year on or before ____________.

Options

30th June

31st March

30th April


Solution:


Return of deposit must be filed every year on or before 30th June.


Match the pairs.

Group 'A'

Group 'B'

a) Private Company

10% of aggregate of paid-up share Capital + free reserves

b) Deposit Trust Deed

Signed at least 7 days before issuing advertisement

c) Secured Deposit

Maximum 30 months

d) Tenure of deposit

Charge on tangible assets

e) Return of Deposit

100% aggregate of paid-up share capital + free reserves

 

File on or before 31st March every year

 

Signed 21 days after issuing advertisement

 

Maximum 36 months

 

Charge on intangible assets

 

File on or before 30th June every year



Solution:


Group 'A'

Answers

a) Private Company

100% aggregate of paid-up share capital + free reserves

b) Deposit Trust Deed

Signed at least 7 days before issuing advertisement

c) Secured Deposit

Charge on tangible assets

d) Tenure of deposit

Maximum 36 months

e) Return of Deposit

File on or before 30th June every year



Write a word or a term or a phrase which can substitute the following statement.


A company which can accept deposits from its members, directors, or their relatives not exceeding 100% of aggregate of paid up share capital and free reserves.

Solution:


Private Company


Company which can accept deposits from public up to 35% of its paid-up share capital and free reserves.

Solution:


Government Company


Minimum tenure of a deposit.

Solution:


6 month


Period within which a company has to create a charge on its tangible assets

Solution:


Within 30 days of acceptance of deposits.


Document issued by a company to invite its members to subscribe for its Deposits.

Solution:


Circular


Agreement between company and Deposit Trustee.

Solution:


Deposit Trust Deed


Account that can be used only for repaying deposits

Solution:


Deposit Repayment Reserve Account


Time within which company has to issue deposit Receipt

Solution:


Within 21 days from date of receipt of deposit


Book which contains details of deposits accepted or renewed.

Solution:


Register of Deposit


State whether the following statement is true or false.


Return of deposit must be filed every year on or before 31st March.

True

False



Eligible public company can collect deposits from its members.

True

False



Government company can collect deposits from its members.

True

False



A private company can collect deposits from public.

True

False



Deposit can be accepted for a maximum of 36 months.

True

False



Eligible public company can collect deposits from public not exceeding 35% of its paidup share capital and free reserves.

True

False


For secured deposits, company has to create a charge on its tangible assets.

True

False



Deposit Receipt is issued within 21 days of receipt of deposits.

True

False



Company appoints Credit Rating Agency to protect the interest of depositors.

True

False



Deposit Trust Deed is an agreement between company and Deposit Trustee

True

False



Find the odd one of depositors.


Private company

Eligible public company

Government company.



Deposit Trustee

Deposit Trust Deed, 

Special Resolution



Appointment of Deposit Trustee

Appointment of Registrar of companies

Appointment of Credit Rating Agency



Complete the sentence:


Deposit is a type of  _____________ term loan.

Solution:


Deposit is a type of Short term loan.


Eligible Public company and Govt. Company can accept deposits from ______________.

Solution:


Eligible Public company and Govt. Company can accept deposits from Public.


To collect deposits from public, Eligible public company must have a net worth of not less than ___________

Solution:


To collect deposits from public, Eligible public company must have a net worth of not less than ₹100 crores.


A Government company can accept deposits from public not exceeding ____________.

Solution:


A Government company can accept deposits from public not exceeding 35% of its paid-up share capital and free reserves.


Deposits can be accepted or renewed for a period not less than 6 months and not more than ___________.

Solution:


Deposits can be accepted or renewed for a period not less than 6 months and not more than 36 months.


Company cannot accept or renew deposits repayable on _____________.

Solution:


Company cannot accept or renew deposits repayable on Demand.


Premature repayment of deposits can be done by a company but not before _____________.

Solution:


Premature repayment of deposits can be done by a company but not before 3 months


To invite the public to subscribe for its deposits, a company issues __________________.

Solution:


To invite the public to subscribe for its deposits, a company issues Advertisement.


Agency which gives ratings of the deposits of a company is called ______________.

Solution:


Agency which gives ratings of the deposits of a company is called Credit Rating Agency 


Account which is used only for repaying deposits is called  _________________.

Solution:


Account which is used only for repaying deposits is called Deposit Repayment Reserve Account 


Select the correct option from the bracket.

Group 'A'

Group 'B'

a) Government Company

1) ___________________

b) ___________________

2) Deposits from members

c) 36 months

3) ___________________

d) ___________________

4) Charge on tangible assets

e) Return of deposit

5)   __________________

(File on or before 30th June, Private Company, Secured deposits, Deposits from public, Maximum tenure of deposits.)




Group 'A'

Group 'B'

a) Government Company

1) Deposit from public

b) Private Company

2) Deposits from members

c) 36 months

3) Maximum tenure of Deposit

d) Secured Deposit

4) Charge on tangible assets

e) Return of deposit

5) File on or before 30th June



Answer in one sentence.


Which companies can accept deposits from the public?

Solution:


Eligible public and government companies can accept deposit.


What is the maximum deposit the Government company can collect?

Solution:


The maximum deposit the Government company can collect is not more than 35% of paid up capital and free reserves.


Who are Deposit Trustees?

Solution:


Deposit Trustees are the trustees who protect the interest of the Depositor.


What is Deposit Trust Deed?

Solution:


The Deposit Trust deed contains the terms and conditions agreed upon or between the company and the Trustee.


When does a company create charge on it’s tangible assets?

Solution:


Company create charge on assets when company wants to issue secured debentures or deposits.


Within what period should a company issue Deposit Receipt?

Solution:


Company has to issue Deposit Receipt within 21 days from the date of receipt of the money or realisation of cheque.


When should a company Deposit?

Solution:


Company should file Return of Deposits on or before 30th June, every year.


What is Deposit Repayment Reserve Account?

Solution:


Deposit Repayment Reserve Account is an account opened by company only for repayment of deposit money


What is Register of Deposit?

Solution:


Deposit Register is a register having details like Name of the Depositors, Address, Investment period, repayment, etc.


Correct the underlined word and rewrite the following sentence.


Government Company can accept deposit from members.

Solution:


Government Company can accept deposit from public


Company issues advertisement to invite its members for subscribing to its deposits

Solution:


Company issues circular to invite its members for subscribing to its deposits


Company appoints Credit Rating Agency to protect the interest of Depositors.

Solution:


Company appoints Deposit Trustees to protect the interest of Depositors.


Deposit Receipt is issued within seven days from date of receipt of deposits

Solution:


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


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

Solution:


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


Charge on assets is created when company issues unsecured deposit.

Solution:


Charge on assets is created when company issues secured deposit.


Minimum tenure of deposit is 36 months.

Solution:


Minimum tenure of deposit is 6 months.


Arrange in proper order.


a. Appoint Deposit Trustee.

b. Hold General Meeting.

c. Create charge on assets.

Solution:


(b) Hold General Meeting.

(a) Appoint Deposit Trustee.

(c) Create charge on assets.


a. File Return of deposit

b. Issue Deposit Receipt

c. Issue advertisement.

Solution:


(c) Issue advertisement.

(b) Issue Deposit Receipt

(a) File Return of deposit


a. Obtain Credit Rating.

b. Entries in Register of Deposits.

c. Issue Deposit Receipt.

Solution:


(a) Obtain Credit Rating.

(c) Issue Deposit Receipt.

(b) Entries in Register of Deposits.


Explain the following term/concept.


Eligible Public Company

Solution:


(1) Eligible public company can accept deposits from members and the public.

(2) Eligible company under section 76(1) of Companies Act, 2013 means:

A company having net worth* of not less than Rs one hundred crores or

Turnover* of not less than Rs five hundred crores.


Tenure of Deposit

Solution:


(1) Deposits can be accepted for a minimum period of 6 months and a maximum period of 36 months.

(2) However, for short term requirements, deposits up to 10% of the aggregate paid-up capital, free reserves, and securities premium account can be accepted for a period of less than six months but not less than three months Rule 3(2) of Companies (Acceptance of Deposits) Rules, 2014.


Secured Deposit

Solution:


(1) A company can accept secured or unsecured deposits which should be clearly mentioned in every circular, form, advertisement, or in any document related to invitation or acceptance of deposits.

(2) If the company intends to issue Secured Deposits, it shall create security in favour of trustees within 30 days of acceptance of deposits. Trustees should ensure about the security of depositors. If there is any default in repayment, trustees should organize a meeting of depositors - Rules 6 to 8 of Companies (Acceptance of Deposits) Rules, 2014.


Deposit Trustee

Solution:


(1) Every company inviting deposits under section 73, of Companies Act 2013, shall appoint deposit trustees for creating security for its deposits, which shall be mentioned on the circular. Written consent shall be obtained from the trustee before their appointment.

(2) A deposit trust deed has to be signed at least 7 days before the issue of the circular. Deposit trustees cannot be removed after the issue of circular / advertisement and before the expiry of his term except with unanimous consent of all directors present at the meeting of the Board, which shall include an independent director if any.


Charge on tangible assets

Solution:


(1) Every company accepting deposits from the public shall create a charge on its tangible assets of an amount not less than the amount of deposits accepted in favour of the deposit holders in accordance with such rules as may be prescribed.

(2) The charge should be created within 30 days from accepting the deposits. 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 Trustee.



Deposit Insurance

Solution:


(1) The company enters into an agreement with the Insurance Company for taking Deposit Insurance. A company needs to take Deposit Insurance at least 30 days before the date of the circular/advertisement or its renewal.

(2) Insurance is to be taken if the amount of deposit plus interest is up to 20,000.

Insurance above 20,000 per depositor Rs 20,000 insurance.


Deposit Repayment Reserve Account

Solution:


(1) A sum not less than 20% of the amount of its deposits maturing during a financial year shall be deposited in a separate bank account in a scheduled bank. For this, a company has to open an account called as 'Deposit Repayment Reserve Account'.

(2) The amount should be deposited on or before 30th April each year. The 'Deposit Repayment Reserve Account shall be used by the company only for the purpose of repayment of deposits.


Credit Rating

Solution:


(1) Every company accepting deposits from the public shall obtain the credit rating (including its net worth, liquidity, and ability to pay its deposits on due date) from a recognised credit rating agency.

(2) The rating shall be obtained for every year during the tenure of deposits. A copy of the credit rating shall be submitted to ROC.


Deposit Receipt

Solution:


(1) The company has to issue a Deposit Receipt to every deposit holder within 21 days from receipt of the money or realization of cheque or date of renewal.

(2) The receipt has to be signed by the officer duly authorized by the Board of Directors. The receipt contains:

The name and address of the depositor, Amount of deposit, Rate of interest payable, and Date on which it is repayable



Return of Deposit

Solution:


(1) The company has to file annual return of deposits with Registrar before 30th June every year, with fees.

(2) The Return gives detail of deposit with the company as on 31st March of that year.


Study the following case/situation and express your opinion.


Apple Company Ltd. plans to raise funds through Public Deposits. Its net worth is 10 Crores.

Can they accept deposits from the public?

Solution:


No, they cannot accept deposits from the public. As per the rule, any public company having a net worth of Rs 100 crore or more can accept deposits from the public. In fact, this company can accept deposits from its members or directors.


Apple Company Ltd. plans to raise funds through Public Deposits. Its net worth is 10 Crores.

Can they accept deposits which matures after 4 years?

Solution:


As per the rules, the deposit period should not less than 6 months and more than 36 months. Thus, they cannot accept deposits which matures after 4 years.


Apple Company Ltd. plans to raise funds through Public Deposits. Its net worth is 10 Crores.

Within what period should the company issue deposit Receipt to it’s depositors?

Solution:


The company should issue Deposit Receipt to the depositors within twenty-one (21) days from the date of receipt of money or realization of cheque. The receipt has to be signed by the officer duly authorized by the Board of Directors.


ABC Company Ltd. is an eligible Public Company as per the Companies Act, 2013 with reference to accepting Public Deposits.

Can the company accept deposits in joint names?

Solution:


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


ABC Company Ltd. is an eligible Public Company as per the Companies Act, 2013 with reference to accepting Public Deposits.

Can the company accept deposits from it’s members?

Solution:


ABC Company Ltd. is an eligible Public Company as per the Companies Act, 2013. Thus, it can accept the deposits from its members as well as from public.


ABC Company Ltd. is an eligible Public Company as per the Companies Act, 2013 with reference to accepting Public Deposits.

Can the company issue secured deposits?

Solution:


Yes. The company can issue secured deposits. If a company offers secured deposits, it has to create a charge on its tangible assets within 30 days of acceptance of deposits.


Apple Company Ltd. is an eligible Public Company. It plans to raise secured deposits from the public. Please advice its Board on the following. 

Does the company need to get shareholders approval for accepting deposits?

Solution:


Yes. The company needs to get shareholders' approval for accepting deposits. For this, the Board of Directors can pass a resolution in a general meeting for the approval of accepting deposits


Apple Company Ltd. is an eligible Public Company. It plans to raise secured deposits from the public. Please advice its Board on the following. 

Does the company have to appoint a Debenture Trustee?

Solution:


Yes. The company has to appoint a Debenture Trustee. This is because, if the company wants to issue secured deposits, then it is compulsory to appoint a Debenture Trustee.


Apple Company Ltd. is an eligible Public Company. It plans to raise secured deposits from the public. Please advice its Board on the following. 

Within what period should the company create a charge on it’s assets?

Solution:


The company has to create a charge on its tangible assets within 30 days of acceptance of deposits.


SUN Pvt. Ltd. company wants to raise funds through deposits.

Can the company accept deposits from the public?

Solution:


No, the company cannot accept deposits from the public. This is because SUN Pvt. Ltd. is a private limited company and it cannot accept deposits from the public. Only eligible public companies and government companies can accept deposits from the public.


SUN Pvt. Ltd. company wants to raise funds through deposits.

Which document should the company issue to invite deposits?

Solution:


In the above case, SUN Pvt. Ltd. is a private limited company. Thus, it should issue a circular to invite deposits from its members.


SUN Pvt. Ltd. company wants to raise funds through deposits.

What is the maximum period for which they can accept deposits?

Solution:


The maximum period of accepting deposits is 36 months. Thus, it can accept deposits for a maximum period of 36 months.


Answer in brief.


State the amount of deposits that different types of companies can collect by way of deposits.

Solution:

The amount of deposits that different types of companies can collect by way of deposits is as follows:

1. 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 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 deposit 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 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 ic.

- In addition, it can accept deposits up to 10% of the egate 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 Companies Act, 2013.

It can accept deposits up to 35% of paid-up capital, free reserves and securities premium account From the ic.

 

State the contents of circular or Advertisement for Deposit

Solution:


Circular or Advertisement: If a company invites deposits from its members, it issues a circular. But if it invites deposits from the public, the company has to issue an advertisement.

a) Contents of circular or advertisement:

i) Statement about the financial position of the company

ii) The portion of secured and unsecured deposit of fresh issue

iii) Credit rating obtained from a Credit Rating Agency (only for an eligible public company)

iv) Details of the scheme

v) Name of Deposit Trustees

vi) Amount due towards deposits of any previous deposits accepted by the company.

b) Filing of circular or advertisement with Registrar of Companies: Company has to file a copy of the circular or Advertisement signed by all directors with the Registrar of Companies.

c) Issue of circular or Advertisement: Only after 30 days of filing a copy of circular or Advertisement with the Registrar of Companies, the company can issue the circular or advertisement.

The company can send the circular to the members through registered post, speed post, or as email.

For inviting the public, the company has to publish the advertisement in one English newspaper and one vernacular newspaper having wide circulation in the state where the company's registered office is located.

d) The validity of circular or advertisement: The 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.



State the provisions regarding appointment of Deposit Trustee.

Solution:


The provisions regarding Appointment of Deposit Trustee are explained as follows:

When issuing secured deposits, eligible companies and public companies have to appoint one or more Deposit Trustees. The Trustees protect the interest of the depositor in case a company defaults in repaying the depositors. Company signs a contract with the Deposit Trustees called as Trust Deed. It contains the terms and conditions of the contract. The deed has to be signed at least 7 days before issuing the circular or advertisement.

The Deposit Trustee on its own or on the request of one-tenth of depositors can call a meeting of all depositors when a company defaults in repaying deposits.


State any four terms and conditions regarding acceptance of Deposit.

Solution:


TERMS AND CONDITIONS FOR ACCEPTANCE OF DEPOSITS:

1. 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, certain class of Private Companies as specified by the Companies Act can accept deposits 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 deposit 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 :

i) From the Members:

Cannot accept fresh deposits if the amount of such deposits together with the previous deposits exceeds 10% of the aggregate of paid-up share capital and free reserves.

ii) From Public: Cannot accept fresh deposits if the amount of such deposits together with the previous deposits exceeds 25% of the aggregate of paid-up share capital and free reserves.

D) Government companies can accept deposits from the public not exceeding 35% of the paid-up share capital and free reserves of the company.

2. Period / Tenure of Deposit: No deposit can be accepted or renewed which is to be repaid within 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. Such deposits must have a tenure of a minimum of three months and the amount of such deposits cannot be more than 10% of the aggregate of the paid-up share capital and free reserves of the company. Under certain circumstances, on the request of the depositor, the company makes premature repayment of deposits. The company may also renew its deposits with the same terms of issue and it will be considered as fresh deposits.

3. No demand deposit: Company cannot accept or renew deposits repayable on demand.

4. Secured or Unsecured Deposit: A company can accept a secured or unsecured deposit which should be clearly mentioned in the circular or advertisement inviting deposits. If the company offers secured deposits, it has to create a charge on its tangible assets within 30 days of acceptance of deposits.

5. Application Form: A company has to provide an application form. It should contain a declaration by the applicant that the deposit he is making is not made out of any money borrowed by him from another person.

6. Joint names: Company can accept deposits in joint names of depositors. But there should not be more than 3 names.

7. Nomination: Every depositor at any time, has the right to nominate any person as a nominee in the event of the death of the depositor

8. Circular or Advertisement: Of a company invites deposits from its members, it issues a circular. But if it invites deposits from the public, the company has to issue an advertisement.

a) Contents of circular or advertisement:

i) Statement about the financial position of the company

ii) The portion of secured and unsecured deposit of fresh issue

iii) Credit rating obtained from a Credit Rating Agency (only for eligible public company)

iv) Details of the scheme

v) Name of Deposit Trustees

vi) Amount due towards deposits of any previous deposits accepted by the company

b) Filing of circular or advertisement with Registrar of Companies :

The company has to file a copy of the circular or Advertisement signed by all directors with the Registrar of Companies.

c) Issue of circular or Advertisement: Only after 30 days of filing a copy of circular or Advertisement with the Registrar of Companies, the company can issue the circular or advertisement. The company can send the circular to the members through registered post, speed post, or as email. For inviting the public, the company has to publish the advertisement in one English newspaper and one vernacular newspaper having wide circulation in the state where the company’s registered office is located.



Justify the following statement


All companies cannot accept deposits from public.

Solution:


Justification:

(1) Eligible Public company, having a net worth of around Rs 100 crores or more or turnover of Rs 500 crores can only accept deposits from the public. Government companies can also accept deposits from the public.


(2) Whereas, Public company can accept deposits from its members or directors only. A private company can accept deposits from its members, directors or relatives of directors only.


(3) An eligible public company can invite or accept deposits from the public only after the publication of an advertisement.


(4) Advertisement inviting deposits must be published in English and vernacular language. The advertisement has to be signed by majority of directors or their authorized agents. Thus, all companies cannot accept deposit from public.


There is a limit or restriction on the amount that a company can collect as Deposits.

Solution:


Justification:

(1) A private company can accept deposits from its members not exceeding 100% of the aggregate of the paid-up share capital and free reserves.


(2) A Public Company can accept deposits up to 25% of the aggregate of paid-up capital, free reserves and securities premium account.


(3) An Eligible company can accept deposits up to 25% of paid-up capital, free reserves, and securities premium account from public. In addition, it can accept deposits up to 10% of the aggregate of paid-up share capital, free reserves, and securities premium account from members.


(4) 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 public. Thus, it is rightly justified that, there is a limit or restriction on the amount that a company can collect as deposits.


Company has to fulfill certain provisions related to issue of circular or advertisement.

Solution:


Justification:

(1) If a company invites deposits from its members, it issues a circular. But if it invites deposits from the public, the company has to issue an advertisement.


(2) The company has to file a copy of the circular or advertisement with the Registrar of Companies.


(3) The Company can issue circular or advertisement, only after 30 days of filing a copy of circular or advertisement with the Registrar of Company (ROC).


While issuing secured deposits, company has to appoint Deposit Trustee.

Solution:


Justification:

(1) A company can accept secured or unsecured deposits which should be clearly mentioned in every circular, form, advertisement, or in any document related to invitation or acceptance of deposits.


(2) If the company intends to issue Secured Deposits, it shall create security in favour of trustees within 30 days of acceptance of deposits. Trustees should ensure about the security of depositors.


(3) If there is any default in repayment, trustees should organize a meeting of depositors.


(4) Thus, it is rightly justified that, while issuing secured deposits, the company has to appoint a Deposit Trustee.


Companies have to create a charge on their tangible assets while issuing secured deposits.

Solution:


Justification:

(1) Every company accepting deposits from the public shall create a charge on its tangible assets of an amount not less than the amount of deposits accepted in favour of the deposit holders in accordance with such rules as may be prescribed.


(2) The charge should be created within 30 days from accepting the deposits.


(3) The minimum amount of security should be equal to the amount not covered by Deposits Insurance. The security is created in favour of the Deposit Trustee.


(4) Thus, it is rightly justified that, companies have to create a charge on tangible assets while issuing secured deposits.


Companies have to create a charge on their tangible assets while issuing secured deposits.

Solution:


Justification:

(1) A company has to open an account called as "Deposit Repayment Reserve Account for issuing deposits.

(2) A sum not less than 20% of the amount of its deposits maturing during a financial year shall be deposited in a separate bank account in a scheduled bank.

(3) The amount should be deposited on or before 30th April each year. The Deposit Repayment Reserve Account shall be used by the company only for the purpose of repayment of deposits.

(4) Thus, it is rightly justified that, the company issuing deposit must open Deposit Repayment Reserve Account.

 

Answer the following question:


Explain the type of companies that can raise deposits along with the maximum amount they can raise as deposits.

Solution:


Type of companies that can raise deposits along with the maximum amount they can raise as deposits are as follows:


(a) Private Company:

A private company can accept deposits from its members not exceeding 100% of the aggregate of the paid-up share capital and free reserves.

It can file details of such deposits to the Registrar in such manner as may be specified


(b) Public Company (Other than Eligible Company :

Both public and private companies can accept deposits from members.

A public company can accept deposits up to 25% of the aggregate of paid-up capital, free reserves and securities premium account

Rule 3(4) of Companies (Acceptance of Deposits) Rules, 2014.

For your understanding:  Words 'securities premium account' have been inserted w.e.f. 15-9-2015.


(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 public.

In addition, it can accept deposits up to 10% of the aggregate 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 Companies Act, 2013.

It can accept deposits up to 35% of paid-up capital, free reserves, and securities premium account from the public.


Explain the provisions related to circular or advertisement for inviting deposits.

Solution:


If a company invites deposits from its members, it issues a circular. But if it invites deposits from the public, the company has to issue an advertisement. The provisions related to circular or advertisement for inviting deposits are as follows:

 

(a) Contents of circular or advertisement: 

Statement about the financial position of the company. The portion of secured and unsecured deposits of fresh issues.

Credit rating obtained from a Credit Rating Agency (only for an eligible public company). 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: 

Company has to file a copy of the circular or advertisement with the Registrar of Companies.

The advertisement or circular shall be signed by the majority of directors or their authorized agents.

 

(c) Issue of circular or advertisement: 

The Company can issue circular or advertisement, only after 30 days of filling a copy of the circular or advertisement with the Registrar of Company (ROC).

A company can send the circular to all its members by registered post, speed post, or electronically.

In addition, the company has to publish the circular as an advertisement in newspapers in English and vernacular language.

 

(d) The validity of Circular or Advertisement: 

The circular or advertisement shall be valid till the expiry of six months from date of closure of financial year or till the financial statement of the company is laid before AGM of the company, whichever is earlier. After that, fresh circular or advertisement should be published Rule 46) of Companies (Acceptance of Deposits) Rules, 2014.

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