Secretarial Practice Class 12 Commerce Ch.

5 Deposits

Detailed Notes on Chapter 5: Deposits

5.1 Acceptance of Deposits

• Purpose of Deposits: Accepting deposits from the public or its members is a source of raising funds
for a company, especially for short-term working capital needs. It is a cheaper way to raise funds
and involves no dilution of control.

• Risk: Accepting deposits can be a risky option for a company if it defaults in repaying them.

• Companies and Regulations: All companies accepting deposits, except Banking Companies, Non-
Banking Finance Companies (NBFCs), Housing Finance Companies, and any other company specified
by the Central Government, must comply with:

o Sections 73 to 76 of Companies Act, 2013

o Companies (Acceptance of Deposits) Rules 2014

o Directives issued by Reserve Bank of India regarding acceptance of deposits

• Types of Companies and Deposit Acceptance:

o Private Company: Can accept deposits from its members or Directors or relatives of
Directors.

o Public Company (Other than eligible company): Can accept deposits from its members or
directors.

o Eligible Public Company: Can accept deposits from their members and also from the
public.

▪ Definition of Eligible Public Company: A company having:

▪ A Net worth of not less than ` 100 crores OR

▪ Turnover of not less than ` 500 crores AND which has obtained prior
approval of its shareholders through special resolution for accepting
public deposits.

▪ Net worth is the total of paid-up capital + Free Reserves + Securities Premium
Account after deducting accumulated losses, deferred expenses, and
miscellaneous expenses not written off.

▪ Turnover is income from sales for a particular period.

o Government Company: Can accept deposits from the public.

5.2 Terms and Conditions for Acceptance of Deposits

1. Amount of Deposit:
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o Private Company: Not more than 100% of its aggregate of paid-up share capital and free
reserves when accepting from members or Directors or Relatives of Directors. Certain classes
of private companies may accept more than 100%.

o Public Company (other than Eligible Company): Cannot accept fresh deposits from
members if the amount exceeds 25% of the aggregate of the paid-up share capital and
free reserves.

o Eligible Public Company:

▪ From members: Cannot exceed 10% of aggregate of paid-up share capital and free
reserves.

▪ From public: Cannot exceed 25% of aggregate of paid-up share capital and free
reserves.

o Government Company: Can accept deposits from public not exceeding 35% of the paid-up
share capital and free reserves.

2. Period / Tenure of Deposit:

o No deposit can be accepted or renewed for a period less than six months or more than
thirty-six months.

o Short-term needs: In certain circumstances, deposits repayable earlier than six months
(minimum three months) can be accepted, but the amount cannot be more than 10% of
aggregate of paid-up share capital and free reserves.

o Premature Repayment: Company may make premature repayment on depositor's request.

o Renewal: Deposits can be renewed with the same terms, considered as fresh deposits.

3. No Demand Deposit: Company cannot accept or renew deposits repayable on demand.

4. Secured or Unsecured Deposit:

o Must be clearly mentioned in the circular or advertisement.

o If secured, a charge on its tangible assets must be created within 30 days of acceptance
of deposits.

5. Application Form: Must contain a declaration by the applicant that the deposit is not from
borrowed money.

6. Joint names: Can accept deposits in joint names (not more than 3 names).

7. Nomination: Every depositor has the right to nominate any person.

8. Circular or Advertisement:

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o Circular: Issued to invite deposits from members.

o Advertisement: Issued to invite deposits from the public.

o Contents: Must include financial position, portion of secured/unsecured, credit rating (for
eligible public company), scheme details, Deposit Trustees' names, amount due towards
previous deposits.

o Filing: A copy signed by all directors must be filed with the Registrar of Companies.

o Issue: Can be issued only after 30 days of filing with the Registrar.

o Mailing/Publication: Circulars to members by registered post, speed post, or email.

Advertisements in one English newspaper and one vernacular newspaper with wide
circulation in the state of the registered office.

o Validity: Valid for 6 months from the end of the financial year of issue or AGM date,
whichever is earlier.

9. Appointment of Deposit Trustee:

o Required for secured deposits by eligible companies and public companies.

o Protects depositors' interest in case of default.

o Trust Deed: A contract signed with trustees, containing terms and conditions, at least 7 days
before issuing the circular or advertisement.

o Trustee can call a meeting of depositors if the company defaults.

10. Create charge on assets:

o For secured deposits from public, a charge on tangible assets must be created within 30
days of acceptance.

o Minimum security value: Equal to amount not covered by Deposit Insurance.

o Security created in favor of Deposit Trustees.

11. Deposit Insurance:

o Company needs to take Deposit Insurance at least 30 days before issue of circular or
advertisement.

o Insurance for deposits + interest up to ` 20,000.

12. Obtain Credit Rating:

o Every company must get credit rating of its deposits and include it in the
circular/advertisement.

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o Rating obtained every year during the tenure of deposits.

13. Open Deposit Repayment Reserve Account:

o In a scheduled Bank.

o Deposit not less than 15% of deposits maturing during the current and following financial
year, on or before 30th April each year.

o Used only for repaying deposits.

o Note: Points 8(a) & (b), 10, and 13 are not applicable to private companies accepting deposits
from members not exceeding 100% of aggregate paid-up capital and free reserves.

14. Deposit Receipt:

o Must be issued to depositors within 21 days from date of receipt of money or realization
of cheque.

o Signed by authorized officer.

o Contains name, address, amount, interest rate, repayment date.

15. Register of Deposit:

o Separate register to be maintained at registered office for accepted/renewed deposits.

o Details entered within 7 days from the date of issue of Deposit Receipt.

16. Return of Deposit:

o File with Registrar of Companies on or before 30th June every year.

o Contains details of deposits as on 31st March.

17. Interest:

o Maximum rate depends on RBI guidelines.

o Premature repayment: Company can deduct 1% interest from the stated rate.

o Unpaid matured deposits: Company pays penal rate of 18% for overdue period.

18. Right to Alter Terms and Conditions: Company cannot alter terms, Trust Deed, or Insurance
contract once circular/advertisement is issued and deposits accepted.

19. Disclosure in Financial Statements: Money received from Directors (or relatives in private
company) must be disclosed by way of notes.

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20. Punishment: Officer in default for contravention of Act provisions is punishable for fraud.
Maharashtra Protection of Interest of Depositors (in Financial establishments) Act, 1999 applies in
Maharashtra.

5.3 Procedure for Accepting Deposits from Public Only eligible Public companies can accept deposits
from public.

1. Hold Board Meeting: Pass resolution to accept deposits, decide amount, terms, and date for general
meeting.

2. Hold a General Meeting: Seek shareholders' approval by Special Resolution. File with Registrar of
Companies (and RBI if needed).

3. Hold Board Meeting: Approve draft advertisement, signed by majority of Directors.

4. Appoint Banker: To collect application forms and money.

5. Obtain Credit Rating: From recognized agency, rating must be in advertisement.

6. Appoint Deposit Trustee: One or more trustees. Trust deed signed at least 7 days before issuing
advertisement.

7. Take Deposit Insurance: Agreement with Insurance Company at least 30 days before issuing
advertisement.

8. File a copy of advertisement with Registrar of Companies: Publish after 30 days of filing.

9. Advertisement to the public: Publish in one English and one vernacular newspaper.

10. Upload the advertisement on the company’s website.

11. Collect application form and money.

12. Issue Deposit Receipt: Within 21 days from date of receipt of money/realization of cheque.

13. Create charge on assets: If secured deposits, within 30 days of acceptance of deposit.

14. Make entries in Register of Deposits: Within 7 days from issue of Deposit Receipts.

15. File Return of Deposits with Registrar of Companies: Before 30th June every year.

5.4 Procedure for Accepting Deposits from Members

1. Hold Board Meeting: Decide amount, terms, and date for general meeting.

2. Hold a General Meeting: Seek shareholders' approval by Special Resolution. File with Registrar of
Companies.

3. Hold Board Meeting: Approve draft circular for inviting applications from members. Signed by
majority of Directors.

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4. Appoint Banker: To collect application forms and money.

5. Obtain Credit Rating: Rating by agency must be in circular.

6. Appoint Deposit Trustee: Trust deed signed at least 7 days before issuing circular.

7. Take Deposit Insurance: At least 30 days before issuing circular.

8. File a copy with Registrar of Companies: After 30 days of filing, company can issue circular.

9. Issue circular to members: By registered post, speed post, or email. May also publish in
newspapers.

10. Upload circular on company’s website: Optional for private and other public companies;
mandatory for eligible public company.

11. Collect application form and money.

12. Issue of Deposit Receipt: Within 21 days from date of receipt of money/realization of cheque.

13. Create charge on assets: If secured deposits, within 30 days of acceptance of deposits.

14. Make entries in Register of Deposits: Within 7 days from issue of Deposit Receipt.

15. File Return of Deposits: Before 30th June every year.

Answers to Exercise Questions (Chapter 5)

Q.1 A) Select the correct answer from the options given below and rewrite the statements.

1. Deposit is a type of short term loan.

2. Eligible public company and Government Company can collect deposits from Public.

3. Private company can accept deposits from its member or Directors upto not more than 100% of its
aggregate of paid-up share Capital and free reserves.

4. A Government Company can accept deposits from public not exceeding 35% of its paid-up share
Capital and free reserves.

5. Deposit can be accepted for a minimum of 6 months and maximum for 36 months.

6. Company issues Circular to invite its members to subscribe for its deposit scheme.

7. Company can issue circular or advertisement for inviting deposits after 30 days of filing it with
Registrar of Companies.

8. Company has to appoint Deposit Trustees to protect the interest of depositors.

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9. Charge on assets is to be created when a company issues Secured deposit.

10. Deposit Receipt is issued within 21 days of receipt of deposit.

11. For premature repayment of deposit, company deducts 1% of interest.

12. Return of deposit must be filed every year on or before 30th June.

Q.1 B) Match the pairs.

• a) Private Company - 5) 100% aggregate of paid-up share capital + free reserves

• b) Deposit Trust Deed - 2) Signed at least 7 days before issuing advertisement

• c) Secured Deposit - 4) Charge on tangible assets

• d) Tenure of deposit - 8) Maximum 36 months

• e) Return of Deposit - 10) File on or before 30th June every year

Q.1 C) Write a word or a term or a phrase which can substitute each of the following statements.

1. A company which can accept deposits from its members, directors or their relatives not exceeding
100% of aggregate of paid up share capital and free reserves. Private Company

2. Company which can accept deposits from public up to 35% of its paid-up share capital and free
reserves. Government Company

3. Minimum tenure of a deposit. 6 months

4. Maximum tenure of a deposit. 36 months

5. Period within which a company has to create a charge on its tangible assets. 30 days

6. Document issued by a company to invite its members to subscribe for its Deposits. Circular

7. Agreement between company and Deposit Trustee. Trust Deed

8. Account that can be used only for repaying deposits. Deposit Repayment Reserve Account

9. Time within which company has to issue deposit Receipt. 21 days

10. Book which contains details of deposits accepted or renewed. Register of Deposit

Q.1 D) State whether the following statements are true or false.

1. Return of deposit must be filed every year on or before 31st March. False (It must be filed on or before
30th June).

2. Eligible public company can collect deposits from its members. True.

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3. Government company can collect deposits from its members. False (Government companies collect
deposits from public).

4. A private company can collect deposits from the general public. False (Private companies collect from
members, directors, or relatives of directors).

5. Deposit can be accepted for a maximum of 36 months. True.

6. Eligible public company can collect deposits from public not exceeding 35% of its paid-up share
capital and free reserves. False (Eligible public company can collect up to 25%, Government company
up to 35%).

7. For secured deposits, company has to create a charge on its tangible assets. True.

8. Deposit Receipt is issued within 21 days of receipt of deposits. True.

9. Company appoints Credit Rating Agency to protect the interest of Depositors. False (Deposit Trustees
protect interests; Credit Rating Agency rates deposits).

10. Deposit Trust Deed is an agreement between company and Deposit Trustee. True.

Q.1 E) Find the odd one.

1. Private company, Eligible public company, Government company.

o Explanation: Private and Eligible Public companies are distinct categories that can accept
deposits from members (with different limits), while Government company is a category that
accepts from the public.

2. Deposit Trustee, Deposit Trust Deed, Special Resolution.

o Explanation: Deposit Trustee and Deposit Trust Deed are directly related to the role and
agreement concerning the protection of depositors' interests. Special Resolution is a
procedural approval required for accepting deposits, but not an entity or document
specifically for protection of depositors.

3. Appointment of Deposit Trustee, Appointment of Registrar of companies, Appointment of Credit

Rating Agency.

o Explanation: Appointment of Deposit Trustee and Credit Rating Agency are steps taken by the
company to comply with deposit regulations. The Registrar of Companies is a regulatory body
to whom documents are filed, not an entity appointed by the company for the deposit process
itself.

Q.1 F) Complete the sentences.

1. Deposit is a type of short term loan.

2. Eligible Public company and Govt. Company can accept deposits from public.

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3. To collect deposits from public, Eligible public company must have a net worth of not less than ` 100
crores.

4. A Government company can accept deposits from public not exceeding 35%.

5. Deposits can be accepted or renewed for a period not less than 6 months and not more than 36
months.

6. Company cannot accept or renew deposits repayable on demand.

7. Premature repayment of deposits can be done by a company but not before 3 months.

8. To invite the public to subscribe for its deposits, a company issues advertisement.

9. Agency which gives ratings of the deposits of a company is called Credit Rating Agency.

10. Account which is used only for repaying deposits is called Deposit Repayment Reserve Account.

Q.1 G) Select the correct option from the bracket.

• a) Government Company - Deposits from public

• b) Private Company - Deposits from members

• c) 36 months - Maximum Period of Deposits

• d) Secured deposits - Charge on tangible assets

• e) Return of deposit - File on or before 30th June

Q.1 H) Answer in one sentence.

1. Which companies can accept deposits from public? Eligible Public Companies and Government
Companies can accept deposits from the public.

2. What is the maximum deposit the Government company can collect? A Government company
can collect deposits from the public not exceeding 35% of its paid-up share capital and free reserves.

3. What is the tenure of a deposit? The tenure of a deposit can be for a minimum period of six months
and a maximum of thirty-six months.

4. Who are Deposit Trustees? Deposit Trustees are individuals or institutions appointed to protect the
interest of depositors, especially when a company issues secured deposits.

5. What is Deposit Trust Deed? A Deposit Trust Deed is a contract signed between the company and
the Deposit Trustees, containing the terms and conditions of their agreement and conveying assets
of the company to the Trustees in favor of depositors.

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6. When does a company create charge on its tangible assets? A company creates a charge on its
tangible assets within 30 days of acceptance of deposits if it is accepting secured deposits from the
public.

7. Within what period should a company issue Deposit Receipt? A company should issue a Deposit
Receipt within 21 days from the date of receipt of money or realization of cheque.

8. When should a company file Return of Deposit? A company should file a Return of Deposit with
the Registrar of Companies on or before 30th June every year.

9. What is Deposit Repayment Reserve Account? A Deposit Repayment Reserve Account is a separate
bank account opened in a scheduled bank where a company deposits a portion of maturing deposits,
used only for repaying deposits.

10. What is Register of Deposit? A Register of Deposit is a separate book maintained by the company
at its registered office to record details of deposits accepted or renewed, including depositor
information.

Q.1 I) Correct the underlined words and rewrite the following sentences.

1. Government Company can accept deposit from public. (Original: members)

2. Company issues circular to invite its members for subscribing to its deposits. (Original:
advertisement)

3. Company appoints Deposit Trustees to protect the interest of Depositors. (Original: Credit Rating
Agency)

4. Deposit Receipt is issued within twenty-one days from date of receipt of deposits. (Original: seven)

5. Register of deposits is to be filed with the Registrar of companies on or before 30th June every year.
False (Return of Deposit is filed, not the Register itself).

6. Charge on assets is created when company issues secured deposit. (Original: unsecured)

7. Minimum tenure of deposit is 6 months. (Original: 36 months)

Q.1 J) Arrange in proper order.

1. a. Appoint Deposit Trustee. b. Hold General Meeting. c. Create charge on assets. Correct Order: b.
Hold General Meeting, a. Appoint Deposit Trustee, c. Create charge on assets.

2. a. File Return of deposit b. Issue Deposit Receipt c. Issue advertisement. Correct Order: c. Issue
advertisement, b. Issue Deposit Receipt, a. File Return of deposit.

3. a. Obtain Credit Rating. b. Entries in Register of Deposits. c. Issue Deposit Receipt. Correct Order: a.
Obtain Credit Rating, c. Issue Deposit Receipt, b. Entries in Register of Deposits.

Q.2 Explain the following terms / concepts.

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1. Eligible Public Company: An Eligible Public Company is a public company that can accept deposits
from both its members and the public. To qualify, it must have a net worth of not less than 100 crores
or a turnover of not less than500 crores, and must have obtained prior approval of its shareholders
through a special resolution for accepting public deposits.

2. Tenure of Deposit: The tenure of a deposit refers to the period for which the deposit is accepted by
the company. According to regulations, no deposit can be accepted or renewed for a period less than
six months or more than thirty-six months. In certain specific circumstances for short-term needs, a
company may accept deposits for a minimum of three months, but the amount is capped at 10% of
its aggregate paid-up share capital and free reserves.

3. Secured Deposit: A secured deposit is a type of deposit accepted by a company where a charge is
created on its tangible assets as security for the loan. This must be clearly mentioned in the circular
or advertisement inviting deposits. The charge must be created within 30 days of accepting the
deposits, and its value should be sufficient to cover the entire deposit amount and interest, especially
the amount not covered by Deposit Insurance.

4. Deposit Trustee: A Deposit Trustee is an individual or institution appointed by a company when it

issues secured deposits, particularly if inviting deposits from the public. Their primary role is to
protect the interest of the depositors in case the company defaults on repayment. A contract called a
Deposit Trust Deed is signed with them at least seven days before the circular or advertisement is
issued.

5. Charge on tangible assets: A charge on tangible assets refers to the creation of a legal claim or lien
on the company's physical assets (like land, building, machinery) in favor of the depositors, especially
for secured deposits. This ensures that if the company fails to repay the deposit, the depositors
(through their trustees) can claim their money from these charged assets. For public secured
deposits, this charge must be created within 30 days of acceptance.

6. Deposit Insurance: Deposit Insurance is a measure taken by a company to safeguard the deposits
against potential loss. A company needs to enter into an agreement with an Insurance Company for
Deposit Insurance at least 30 days before issuing the circular or advertisement. The insurance covers
deposits plus interest up to a certain amount, specifically `20,000.

7. Deposit Repayment Reserve Account: This is a special account that every company accepting
deposits must open in a scheduled bank. Annually, on or before April 30th, the company must deposit
an amount not less than 15% of the deposits maturing during the current and following financial year
into this account. The funds in this account can only be used for the purpose of repaying deposits.

8. Credit Rating: Credit rating, in the context of deposits, is an assessment provided by a Credit Rating
Agency that indicates the creditworthiness of the company and the risk level associated with its
deposits. Companies must obtain a credit rating for their deposits and include this rating in the
circular or advertisement. This rating must be obtained annually throughout the tenure of the
deposits.

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9. Deposit Receipt: A Deposit Receipt is a formal acknowledgement of debt issued by a company to a

depositor upon receiving money as a deposit. It serves as proof of the deposit and must be issued
within 21 days from the date of receipt of the money or realization of the cheque. The receipt contains
crucial details such as the depositor's name and address, the amount deposited, the rate of interest
payable, and the repayment date.

10. Return of Deposit: The Return of Deposit is a document that a company accepting deposits must file
annually with the Registrar of Companies. This return contains detailed information about all
deposits held by the company as of March 31st of that year. It must be filed on or before June 30th
every year.

Q.3 Study the following case / situation and express your opinion.

1. **Apple Company Ltd. plans to raise funds through Public Deposits. It’s net worth is 10 Crores.** a.
**Can they accept deposits from the public?** No, Apple Company Ltd. cannot accept deposits from
the public as it has a net worth of10 crores, which is less than the required `100 crores for an Eligible
Public Company to accept public deposits. b. Can they accept deposits which matures after 4
years? No, the company cannot accept deposits which mature after 4 years (48 months) because the
maximum period for which deposits can be accepted or renewed is 36 months. c. Within what
period should the company issue deposit Receipt to it’s depositors? The company should issue
Deposit Receipts to its depositors within 21 days from the date of receipt of money or realization of
the cheque.

2. ABC Company Ltd. is an eligible Public Company as per the Companies Act, 2013 with reference
to accepting Public Deposits. a. Can the company accept deposits in joint names? Yes, the
company can accept deposits in joint names of depositors, provided there are not more than 3 names.
b. Can the company accept deposits from it’s members? Yes, as an Eligible Public Company, it can
accept deposits from its members. c. Can the company issue secured deposits? Yes, a company can
accept secured deposits, which should be clearly mentioned in the circular or advertisement. If
secured, a charge on tangible assets must be created.

3. Apple Company Ltd. is an eligible Public Company. It plans to raise secured deposits from the
public. Please advice its Board on the following. a. Does the company need to get shareholders
approval for accepting deposits? Yes, an Eligible Public Company needs to obtain prior approval of
its shareholders through a special resolution for accepting public deposits. b. Does the company
have to appoint a Debenture Trustee? No, the company does not have to appoint a Debenture
Trustee for deposits. It needs to appoint a Deposit Trustee when issuing secured deposits from the
public. c. Within what period should the company create a charge on it’s assets? The company
should create a charge on its tangible assets within 30 days of acceptance of the secured deposits.

4. SUN Pvt. Ltd. company wants to raise funds through deposits. a. Can the company accept
deposits from the public? No, a Private Company cannot accept deposits from the general public. It
can only accept deposits from its members or Directors or relatives of Directors. b. Which document
should the company issue to invite deposits? The company should issue a circular to invite

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deposits from its members or directors. c. What is the maximum period for which they can accept
deposits? The maximum period for which they can accept deposits is 36 months.

Q.4 Answer in brief.

1. State the amount of deposits that different types of companies can collect by way of deposits.

o Private Company: Not more than 100% of its aggregate of paid-up share capital and free
reserves from its members, directors, or their relatives.

o Public Company (other than Eligible Company): Not more than 25% of the aggregate of
the paid-up share capital and free reserves from its members or directors.

o Eligible Public Company:

▪ From members: Not more than 10% of aggregate of paid-up share capital and free
reserves.

▪ From public: Not more than 25% of aggregate of paid-up share capital and free
reserves.

o Government Company: Not exceeding 35% of the paid-up share capital and free
reserves from the public.

2. State the contents of circular or Advertisement for Deposit. The circular or advertisement
inviting deposits must include:

o A statement about the financial position of the company.

o The portion of secured and unsecured deposit of fresh issue.

o Credit rating obtained from a Credit Rating Agency (only for eligible public company).

o Details of the scheme.

o Name of Deposit Trustees.

o Amount due towards deposits of any previous deposits accepted by the company.

3. State the provisions regarding appointment of Deposit Trustee. When issuing secured deposits,
eligible companies and public companies must appoint one or more Deposit Trustees to protect the
interest of depositors. The company must sign a contract with the Deposit Trustees, known as a Trust
Deed, at least seven days before issuing the circular or advertisement. The Deposit Trustee can call a
meeting of depositors if the company defaults in repaying deposits.

4. State any four terms and conditions regarding acceptance of Deposit. Four terms and conditions
regarding acceptance of deposit are:

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o Period / Tenure: Deposits cannot be accepted or renewed for less than six months or more
than thirty-six months.

o No Demand Deposit: Companies cannot accept or renew deposits repayable on demand.

o Secured or Unsecured: Companies can accept secured or unsecured deposits, which must
be clearly stated. If secured, a charge on tangible assets must be created within 30 days.

o Deposit Receipt: A Deposit Receipt must be issued to depositors within 21 days from the
date of receipt of money or realization of cheque.

Q.5 Justify the following statements.

1. All companies cannot accept deposits from public. This is true because only Eligible Public
Companies and Government Companies are permitted to accept deposits from the public.
Private companies and public companies (other than eligible companies) are restricted to accepting
deposits from their members, directors, or relatives of directors, not the general public.

2. There is a limit or restriction on the amount that a company can collect as Deposits. This
statement is true as the Companies Act, 2013, and relevant rules specify varying maximum
limits for the amount of deposits different types of companies (private, public, eligible public,
government) can collect, usually expressed as a percentage of their paid-up share capital and free
reserves.

3. Company has to fulfill certain provisions related to issue of circular or advertisement. This is
true. A company must file a copy of the circular or advertisement (signed by all directors) with
the Registrar of Companies. The circular or advertisement can then only be issued after 30 days of
this filing. Additionally, specific details and disclosures are mandated to be included in these
documents.

4. While issuing secured deposits, company has to appoint Deposit Trustee. This statement is true.
Companies, specifically eligible companies and public companies, are required to appoint one
or more Deposit Trustees when issuing secured deposits. These trustees act to protect the
interests of the depositors.

5. Companies have to create a charge on their tangible assets while issuing secured deposits. This
is true. For secured deposits, particularly when accepted from the public, a company must create a
charge on its tangible assets within 30 days of acceptance of the deposits. This charge serves as
security for the amount of deposit accepted.

6. Company issuing deposit must open Deposit Repayment Reserve Account. This statement is
true. Every company that accepts deposits is required to open a Deposit Repayment Reserve
Account in a scheduled bank. A specified percentage (not less than 15%) of the maturing deposits
must be deposited into this account annually, and the funds in this account can only be used for
repaying deposits.

Q.6 Answer the following questions.

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1. Explain the type of companies that can raise deposits along with the maximum amount they
can raise as deposits. The types of companies that can raise deposits and their respective maximum
amounts are:

o Private Company: Can accept deposits from its members or Directors or relatives of
Directors. The amount accepted cannot be more than 100% of its aggregate of paid-up
share capital and free reserves.

o Public Company (Other than eligible company): Can accept deposits from its members or
directors. The amount cannot exceed 25% of the aggregate of the paid-up share capital
and free reserves.

o Eligible Public Company: Can accept deposits from both their members and also from the
public.

▪ From members: The amount cannot exceed 10% of aggregate of paid-up share
capital and free reserves.

▪ From public: The amount cannot exceed 25% of aggregate of paid-up share capital
and free reserves.

o Government Company: Can accept deposits from the public. The amount cannot exceed
35% of the paid-up share capital and free reserves of the company.

2. Explain the provisions related to circular or advertisement for inviting deposits. The provisions
related to circular or advertisement for inviting deposits are as follows:

o Type of Document: If a company invites deposits from its members, it issues a circular. If
it invites deposits from the public, the company issues an advertisement.

o Contents: The circular or advertisement must contain specific information, including a

statement about the financial position of the company, the portion of secured and
unsecured deposit of the fresh issue, the credit rating obtained (for eligible public
companies), details of the deposit scheme, the name of Deposit Trustees, and the amount
due towards any previous deposits accepted by the company.

o Filing: A copy of the circular or advertisement, signed by all directors, must be filed with the
Registrar of Companies.

o Issue Timeline: The company can issue the circular or advertisement only after 30 days of
filing it with the Registrar of Companies.

o Dissemination: Circulars to members can be sent through registered post, speed post,
courier, or electronic mode. For public invitation, the advertisement must be published in
one English newspaper and one vernacular newspaper having wide circulation in the
state where the company’s registered office is located.

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Secretarial Practice Class 12 Commerce Ch. 5 Deposits

o Validity: The circular or advertisement is valid for 6 months from the end of the financial
year in which it was issued or the date on which the Annual General Meeting was held,
whichever is earlier.

o Exemptions for Private Companies: Certain provisions related to circular contents and
filing (points 8a and 8b in the detailed notes) are not applicable to private companies
accepting deposits from members not exceeding 100% of paid-up capital and free reserves.

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