Can a non-banking company accept deposits from public ? by : DR. T.K. JAIN AFTERSCHO☺OL centre for social entrepreneurship sivakamu veterinary hospital road bikaner 334001 rajasthan, india FOR – PGPSE PARTICIPANTS mobile : 91+9414430763 5 DECEMBER 09
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Answer :
Yes but there are many regulations, we shall discuss about those regulations now
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Deposits ..??? Banking companies can easily take deposits. But public companies have to follow regulations ... sec. 58A,AA,AAA,B of companies act apply regarding deposits. There is Companies (Acceptance of deposits) rules 1975 also which is about rules for deposit acceptance. Banks and NBFCs are regulated by RBI and not by these laws 5 DECEMBER 09
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What is not a deposit ? (sec. 2b) Intercorporate deposit debentures / bond govt. Grants loans from promotors security deposits
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Duration of deposits ?? (rule 3 1.a)
The duration of deposit can be minimum 6 months and max. 36 months.
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Maximum rate of interest (rule 3 1 c)
The rate that RBI fixes for NBFCs
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Max. Rate of brokerage
Max. Is 2 % for deposits upto 1 year : 1% for deposits 1 to 2 years : 1.5% (rule 31d)
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Minimum net owned funds (31e)
Minimum net owned funds must be 1 crores.
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Ceiling limit on deposit ... rule 3(2) Deposits against debentures / shares etc. From shareholders : 10% of paid up capital + reserves govt. Company can get upto 35% of paid up capital + reserves from other public for for other companies : max. 25% of paid up capital + reserves 5 DECEMBER 09
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Liquid assets rule 3a Company will have to deposit 15% of accepted deposits in specified securities specified securities are : promissory notes (gilt edge security) deposits of scheduled banks UTI / HDFC / govt.bonds schemes etc. 5 DECEMBER 09
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Advertisement (rule 4)
Proper advertisement in specified format must be given in english + vernacular newspapers and a copy of this must be given to Registrar duly signed by director
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Statement in lieu of advertisement
Rule : 4A : when you dont issue advertisement, file this.
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Register of deposit (rule 7)
Maintain proper register of deposits – with details like name, amount, address, particulars of the depositor
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Premature withdrawal ( rule : 8 )
After 6 months anytime – provided interest is reduced by 1%
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Penal interest for delay (rule 8A)
A company delaying interest payment / payment of matured depsoits will have to pay penal interest @ 20% compouding annually.
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Small depositor ?
A person depositing less than or upto 20000 in a company
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Return of deposits ....
As per rule 10 : every company must submit return of deposit as on 31 march to registrar of companies
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How to extend time of deposit ?
If a company wants to extend time, it has to have : 1. board meeting 2. newspaper advertisement regarding public notice 3. permission from government (apply form 1 and 65 with all the documents)
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Nomination facility
Depositor may nominate any person in form 2B, to company, as per sec. 58A (11)
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Default – remedies (sec. 58A 9,10 and 58AAA) It is a cognizable offence (non bailable, mentioned in schedule I of Cr. P.C. 1908, arrest without warrant is possible) a person can apply in form 4 for any such complaints with copy of deposit receipt, fees of Rs. 50 to company law board / other authorities 5 DECEMBER 09
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Case : Your company has equity of 10 1 0 cr. General Reserves of 5 cr. Capital subsity of 5 cr. Miscellaneous exp. Not written off of 2 crore and deposit of 1.5 cr. How much deposit can you accept from public (non govt. Company)
10 + 5 + 5 – 2 = 18 25% of 18 = 4.5 cr. Can be maximum deposit from public and 10% = 1.8 cr. Can be maximum deposit from shareholders. The company already has public deposit of 1.5 cr. So it can take (4.5 – 1.5) = 3 cr. Maximum public deposit can be accepted. 5 DECEMBER 09
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Case : Your company has equity of 10 1 0 cr. General Reserves of 5 cr. Capital subsity of 5 cr. Miscellaneous exp. Not written off of 2 crore, cror e, Convertible debenture : 1 crores and deposit from shareholders of .5 cr. How much deposit can you accept from shareholders (non govt. Company) 10 + 5 + 5 = 20 crore less miss. miss. Exp. 20 – 2 = 18 10% of this : 1.8 crore less convertible debenture : 1 cr. Less deposits from shareholders : .5 cr = .3 cr.General Can be Reserves taken up from shareholders as depsoits. 5 DECEMBER 09
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Case : Your company has equity of 10 cr. Share premium of 5 cr. Capital Capital subsity of 5 cr. cr. Miscellaneous exp. Not written off of 2 crore, cror e, Convertible debenture : 1 crores and deposit from shareholders of .5 cr. How much deposit can you accept from shareholders (govt. Company) 10 + 5 + 5 = 20 crore less miss. miss. Exp. 20 – 2 = 18 35% of this : 6.3 crore less convertible debenture : 1 cr. Less deposits from shareholders : .5 cr = 4.8 cr. Can be taken up from shareholders as depsoits. 5 DECEMBER 09
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Declarations about Deposits ....
Whenever a company goes for IPO / FPO (follow on public issue – 2nd public issue ) , or any other issue, it will have to submit a declaration that it has not defaulted in deposits
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