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Insight on amendments made to the Companies (Acceptance of Deposit) Rules, 2014

A. Introduction:

The MCA has issued the Companies (Acceptance of Deposits) Amendment Rules, 2016 on June 29, 2016, amending and expanding the list of exempted Deposits under the Companies (Acceptance of Deposit) Rules, 2014. These amendments shall come into force on the date of their publication in the Official Gazette.  These rules are summarised below

B. Amendments relating to Acceptance of Deposits:

Sl. No. Section/Rule Previous Provision New provision substituted
Rule 2(1) (c)
1. In Item (b) of Rule 2(1)(c)(xii)



In the explanation

A) for the words “consideration of property”

B) for the words “ against the property”

C) for the words, “ referred to in the first provisio”

A)consideration of immovable property”

B) against such property

C) Referred to in the provisio

2. 2(1)(c)(viii)

For the words “any amount received from a person who, at the time of the receipt of the amount, was a director of the company:

Provided that the director from whom money is received, furnishes to the company at the time of giving the money, a declaration in writing to the effect that the amount is not being given out of funds acquired by him by borrowing or accepting loans or deposits from others “

any amount received from a person who, at the time of the receipt of the amount, was a director of the company or a relative of the director of the private company:

Provided that the director of the company or relative of the director of the private company, as the case may be, from whom money is received, furnishes to the company at the time of giving the money, a declaration in writing to the effect that the amount is not being given out of funds acquired by him by borrowing or accepting loans or deposits from others and the company shall disclose the details of money so accepted in the Board’s report

3. 2(1)(c)(ix) For the words “five years” The words ten years
4. 2(1)(c)(xi) For the words "any non-interest bearing amount received or held in trust;" any non-interest bearing amount received and held in trust
5. In the explanation, after 2(1)(c)(xiv) for the words "shall be treated as deposits" shall be considered as deposits unless specifically excluded under this clause
Rule 3
6. Rule 3 For the words “paid-up share capital and free reserves”, wherever they occur paid-up share capital, free reserves and securities premium account
7. Rule (3) for the words "twenty-five percent” thirty-five per cent (35%)
8. Rule 3(8)

 “Every eligible company shall obtain at least once in a year, credit rating for deposits accepted by it in the manner specified herein below and a copy of the rating shall be sent to be Registrar of Companies along with the return of deposits in Form DPT-3

Name of the agency Minimum investment Grade Rating
(a) The Credit Rating Information Services of India Ltd FA-(FA Minus)
(b) ICRA Ltd MA-(MA Minus)
(c) Credit Analysis and Research Ltd CARE BBB(FD)
(d) Fitch Ratings India Private Ltd tA-(ind)(FD)
(e) Brickwork Ratings India Pvt Ltd (Brickwork) BWR FBBB
(f) SME Rating Agency of India Ltd SMERA A

“Every eligible company shall obtain at least once in a year, credit rating for deposits accepted by it and a copy of the rating shall be sent to the Registrar of Companies along with the return of deposits in Form DPT-3

(b) The credit rating referred to in clause (a) shall not be below the minimum investment grade rating or other specified credit rating for fixed deposits, from any one of the approved credit rating agencies as specified for Non-Banking Financial Companies in the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998, issued by the Reserve Bank of India, as amended from time to time”

Rule 4
9. Rule 4(2) “Every eligible company intending to invite deposits shall issue a circular in the form of an advertisement in form DPT-1 for the purpose in English language in an English newspaper having country wide circulation and in vernacular language in a vernacular newspaper having wide circulation in the State in which the registered office of the company is situated, and shall also place such circular on the website of the company, if any.".
Rule 5
10. Proviso of Rule 5(1) For the words, “ Provided that the companies may accept deposits without deposit insurance contract till 31st March, 2015 “Provided that the companies may accept deposits without deposit insurance contract till 31st March, 2017 or till the availability of deposit insurance product, whichever is earlier.” shall be substituted

C. Substituted provisions:

Rule 2 of Companies (Acceptance of Deposits) Rules, 2014
1. In explanation (a) of Rule 2(1)(c)(vii) Provided that unless otherwise required under the Companies Act, 1955 (l of 1956) or the Securities and Exchange Board of lndia Act, 1992 (15 of 1992) or rules or regulations made thereunder to allot my share, stock, bond, or debenture within a specified period, if a company had received any amount by way of subscriptions to any shares, stock, bonds or debentures before the 1st April, 2014 and disclosed it in the balance sheet for the financial year ending on or before the 31st March, 2014 against which the allotment is pending on the 3lst March, 2015, the company shall, by the 1st June 2015, either return such amounts to the persons from whom these were received or allot shares, stock, bonds or debentures or comply with these rules."
2. After 2(1)(c)(ix) "(ixa) any amount raised by issue of non-convertible debenture not constituting a charge on the assets of the company and listed on a recognized stock exchange as per applicable regulations made by Securities and Exchange Board of India.”
3. In 2(1)(c)(xii) after item (d) and before the proviso

"(e) as an advance towards consideration for providing future services in the form of a warranty or maintenance contract as per written agreement or arrangement, if the period for providing such services does not exceed the period prevalent as per common business practice or five years, from the date of acceptance of such service whichever is less;

(f) as an advance received and as allowed by any sectoral regulator or in accordance with directions of Central or State Government;

(g) as an advance for subscription towards publication, whether in print or in electronic to be adjusted against receipt of such publications; "

In the Explanation, the words "referred to in the proviso" shall be omitted;

4. After 2(1)(c)(xiv)

(xv) any amount received by way of subscription in respect of a chit under the Chit Fund Act,1982 (40 of 1982);

(xvi) any amount received by the company under any collective investment scheme in compliance with regulations framed by the Securities and Exchange Board of India,

(xvii) an amount of twenty five lakh rupees or more received by a start-up company, by way of a convertible note (convertible into equity shares or repayable within a period not exceeding five years from the date of issue) in a single tranche, from a person.

Explanation.- For the purposes of this sub-clause,

I. "start-up company" means a private company incorporated under the Companies Act, 2013 or Companies Act, 1956 and recognized as such in accordance with notification number G.S.R. 180(E) dated 17th February, 2016 issued by the Department of Industrial Policy and Pr('motion, Ministry of Commerce and industry;

II. "convertible note” means an instrument evidencing receipt of money initially as a debt, which is repayable at the option of the holder, or which is convertible into such number of equity shares of the start-up company upon occurrence of specified events and as per the other terms and conditions agreed to and indicated in the instrument.

(xviii) any amount received by a company from Alternate Investment Funds, Domestic Venture Capital Funds and Mutual Funds registered with the Securities and Exchange Board of India in accordance with regulations made by it."

In Rule 3
5. After Rule 3(7) Every eligible company shall obtain, at least once in a year, credit rating for deposits accepted by it in the manner specified herein below and a copy of the rating shall be sent to the Registrar of Companies along with the return of deposits in Form DPT-3.
6. In Rule 3 "Provided that a private company may accept from its members monies not exceeding one hundred per cent of aggregate of the paid up share capital, free reserves and securities premium account and such company shall file the details of monies so accepted to the Registrar in such manner as may be specified."
Rule 16
7. After Rule 16

"16A. Disclosures in the financial statement:-

(1) Every company, other than a private company, shall disclose in its financial statement, by way of notes, about the money received from the director.

(2) Every private company shall disclose in its financial statement, by way of notes, about the money received from the directors, or relatives of directors."

8. In Form DPT-1 DISCLAIMER- It is to be distinctly understood that filing of circular or circular in the Form of advertisement with the Registrar should not in any way be deemed or construed that the same has been cleared or approved by the Registrar or Central Government. The Registrar or Central Government does not take any responsibility either for the financial soundness of any deposit scheme for which the deposit is being accepted or invited or for the correctness of the statements made or opinions expressed in the circular or circular in the Form of advertisement. The depositors should exercise due diligence before investing in the deposits schemes."

(D) Exemption to Private Companies:

Clauses (a) to (e) of Section 73(2):  Shall not apply to a private company which accepts from its members monies not exceeding 100% of aggregate of the paid up share capital and free reserves, and such company shall file the details of monies so accepted to the Registrar of Companies.

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  • By Revanth Gopidi  0 Comments   

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