Justify the following statements.
1. All companies cannot accept deposits from public.
Ans: (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.
2. There is a limit or restriction on the amount that a company can collect as Deposits.
Ans: (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.
3. Company has to fulfill certain provisions related to issue of circular or advertisement.
Ans: (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).
4. While issuing secured deposits, company has to appoint Deposit Trustee.
Ans: (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.
5. Companies have to create a charge on their tangible assets while issuing secured deposits.
Ans: (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.
6. Company issuing deposit must open Deposit Repayment Reserve Account.
Ans: (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.