Understanding Acceptance of Deposits under the Companies Act, 2013

Managing company finances goes beyond profit and loss — it also involves compliance with key legal provisions. One of the most significant areas under the Companies Act, 2013 is the regulation surrounding acceptance of deposits.

This blog explains the meaning of deposits, exceptions, procedural requirements, forms involved, compliance norms, and penalties under the Act — helping businesses stay compliant and informed.

What is a Deposit?

As per Section 2(31) of the Companies Act, 2013, a deposit includes any receipt of money by way of deposit, loan, or any other form by a company.

Eligible Public Company (EPC)

A public company qualifies as an Eligible Public Company if it meets all of the following criteria:

• Net worth of at least ₹100 crore, or
• Turnover of at least ₹500 crore, and
• Obtains prior consent through a Special Resolution in the general meeting, and
• Files the resolution with the ROC (and RBI, if required).

Exception: If deposits do not exceed the limits under Section 180(1)(c), an Ordinary Resolution is sufficient.

What is Not a Deposit?

Under Rule 2 of the Companies (Acceptance of Deposits) Rules, 2014, certain receipts are not considered deposits, including:

•  Application money for securities (if shares allotted/refunded within 60 + 15 days)
• Bonds or debentures (secured or convertible within 10 years)
• Receipts from directors or promoters (subject to declaration and disclosure)
• Convertible notes for startups (min ₹25 lakh, repayable or convertible within 10 years)
• Trade advances, security deposits, or trust receipts
•  Loans from banks or inter-corporate loans
• Receipts from government or foreign sources
•  Collective investment or alternative investment funds

If such receipts are not refunded within the prescribed time, they become deemed deposits.

Deposits vs Advances

Not all advance payments qualify as deposits. Certain business-related advances are excluded, such as:

• Advances for goods/services (appropriated within 365 days)
• Advances for immovable property as per agreement terms
• Security deposits for performance of contracts
• Advances under long-term supply or warranty contracts (within 5 years)
• Subscription advances for publications
• Refundable advances as allowed by sectoral regulators

However, if these amounts remain unadjusted or refundable after 15 days of becoming due, they are treated as deposits.

Key Provisions under the Companies Act, 2013
Section 73 – Prohibition on Acceptance from Public

Private and public companies must comply with strict conditions when accepting deposits from members.

• Requires Ordinary Resolution in the general meeting
• Filing of Form DPT-1 and registration with ROC
•  Validity and certification requirements for circulars

Private Companies (Tri-criteria):

• Not an associate/subsidiary of another company
• Borrowings < lower of (2x paid-up share capital or ₹50 crore)
• No subsisting default at the time of accepting deposits

Section 76 – Acceptance from Public

Only Eligible Public Companies can accept deposits from the public.

• Must obtain annual credit rating (minimum investment grade)
• File rating with ROC using Form DPT-3
• Issue circulars and maintain proper documentation

Section 74 – Repayment of Deposits before Commencement

Companies holding deposits before the Act commenced must:

• File statements with ROC within 3 months
• Repay deposits within 1 year or by due date, whichever is earlier
• Face penalties:

 Companies: ₹1–10 crore
 Officers: Imprisonment up to 7 years and fines up to ₹2 crore

Section 75 – Fraudulent Acceptance of Deposits

If deposits are accepted with intent to defraud, officers become personally liable for losses and may face civil action under Section 245(1)(g)

Compliance Requirements

Form DPT-3 – Return of Deposits

All companies (except banks, NBFCs, housing finance, and government companies) must file Form DPT-3 annually.

Purpose:

• To intimate ROC about deposits accepted or transactions not considered as deposits.
• To ensure transparency and financial tracking.

Filing Timelines:

• One-time Return: For period 01.04.2014–31.03.2019
• Annual Return: Every year by 30th June after financial year-end

Key Form Sections:

1. Company details (CIN, name, address)
2. Purpose (deposit or non-deposit receipts)
3. Eligibility details
4. Net worth calculation
5. Particulars of deposits and liquid assets

Form DPT-1 – Invitation of Deposits

A circular/advertisement form filed at least 30 days before inviting deposits.
Includes:

• Financial position, deposit scheme details
• Auditor’s certificate confirming no repayment default

Form MGT-14 – Resolutions Filing

All board or member resolutions related to deposits must be filed within 30 days of passing.

Other Compliance Requirements

Deposit Receipts: Must be issued within 21 days of acceptance/renewal
Register of Deposits: Maintained for at least 8 years
Deposit Trustee: Appointment and eligibility checks mandatory for secured deposits
Deposit Repayment Reserve: Required as a safeguard for investors

GST and Other Law Implications

• GST: Applicable on advance for services (not goods).
• Case Reference: Dream Event Pvt. Ltd vs GST Department
• Other applicable laws may include:

 ncome Tax Act, 1961
 PMLA, 2002
 Benami Transaction Act, 2016
 RBI Act, 1934
 SEBI Act, 1992
 Indian Contract Act, 1872

Case Laws and Penalties

Major Judicial References

• Nitin Rekhan vs Union of India
• Helios & Matheson vs The State
•  Ashish Mahendrakar vs State of Maharashtra

Penalties under Section 76A

• Company: ₹1 crore or twice the deposit amount (whichever lower, up to ₹10 crore)
• Officers: Imprisonment up to 7 years or fine up to ₹2 crore
• Loopholes and Practical Issues
• Exemptions for private companies accepting deposits within limits
• Possible asset valuation manipulation for secured deposits
• Weak deposit trustee oversight
• Deposits accepted without insurance in specific cases
• Misclassification of receipts to avoid compliance

Presentation and Disclosure in Financial Statements

In the Balance Sheet (Schedule III):

• Non-Current Liabilities: Long-term borrowings (>12 months)
• Current Liabilities: Short-term borrowings (≤12 months or on-demand)

Notes to Accounts should include:

• Nature of deposits and source (members/public/directors)
• Security status (secured/unsecured)
• Outstanding amount, rate of interest, and due dates
• Disclosure of defaults or non-compliance, if any

Summary

• Repayment of deposits is time-bound and mandatory
• Deposits may be secured or unsecured
• Private companies can accept deposits only from members
• Public companies can accept from members and the public (with conditions)
• Premature repayment allowed at a lower interest rate
• Non-compliance can attract severe penalties and imprisonment
• Companies must maintain full disclosure with ROC and adhere to prescribed formats