SKP Business Alert
28 September 2017
MCA amends the Acceptance of Deposit Rules

Section 73 of the Companies Act, 2013 (the Act), read with Companies (Acceptance of Deposit) Rules, 2014 (the Rules), inter alia, provides provisions for acceptance of deposits by a company from its members.
 
The Ministry of Corporate Affairs (MCA), through a notification issued in June 2015, granted an exemption to private companies that accept monies from its member’s not exceeding 100% of the aggregate paid-up capital and free reserves and files the details of the monies so accepted to the Registrar in the prescribed manner.
 
Recently, the MCA has notified the Companies (Acceptance of Deposits) Second Amendment Rules, 2017. By the said amendment, MCA has amended the rules and has provided further relaxation to a certain class of companies.
 

Amendments brought to the rules are:
  1. Specified IFSC public company[1]: In addition to private companies, now International Financial Services Centre (IFSC) public companies are also allowed to accept deposits from its members not exceeding 100% of the aggregate of paid-up share capital, free reserves and securities premium account.
  2. Private company: Further relaxation is provided to private companies through this amendment as it can now accept deposits from its members without any restriction on the amount, subject to the following conditions:
    1. It is not an associate or a subsidiary of any other company.
    2. Borrowings from banks, financial institutions or any body corporate is less than twice of its paid-up share capital or 500 million, whichever is less.
    3. It has not defaulted in the repayment of such borrowings subsisting at the time of accepting deposits under Section 73.
  3. Start-up company[2]: A private company, which is considered as a start-up for a period of five years from the date of its incorporation, is also allowed to accept deposits from members without any restriction on the amount.
  4. Return of deposits: All the above-mentioned companies accepting deposits from members have to file a return of the deposit to the Registrar in form DPT-3 giving the details of monies accepted as deposits.
 
[1] A specified IFSC public company means an unlisted public company which is licensed to operate by specified regulatory authorities of India from the IFSC located in an approved multi-services Special Economic Zone (SEZ), set-up under the Special Economic Zones Act, 2005
[2] A start-up company means a private company incorporated under the Companies Act, 2013 or Companies Act, 1956 and is recognised as such in accordance with notification number G.S.R. 180(E) dated 17 February 2016 issued by the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, and as amended from time to time
SKP's Comments
The rules providing relaxations to companies established in IFSCs, private limited companies and start-up companies is a welcome step. The relaxation will help these companies to access fundraising from their existing members with ease.
SKP
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