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ACCEPTANCE OF DEPOSITS BY COMPANIES UNDER COMPANIES ACT 2013 PART II

Corporate Laws / Banking / SEBI / LLP - By: - Mr.M. GOVINDARAJAN - Dated:- 24-6-2015 - In this part the other provisions relating to acceptance of deposits are discussed . Circular or advertisement Section 73(2)(a) requires the eligible company to issue circulars to its members. Rule 4 provides for the form and particulars of advertisement or circulars. Every eligible company intending to invite deposit from its members shall issue a circular to all its members by registered post with acknowled .....

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lar in the form of advertisement, unless such circular or circular in the form of advertisement is issued on the authority and in the name of the Board of Directors of the company. A copy of the circular, duly signed by a majority of the directors of the company as constituted at the time the Board approved the circular or circular in the form of advertisement, or their agents, duly authorized by them in writing, shall be delivered to the Registrar for registration, thirty days before the issue .....

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rcular or circular in the form of advertisement, shall be issued, in each succeeding financial year, for inviting deposits during that financial year. The date of issue of the newspaper in which the advertisement appear shall be taken as the date of issue of the advertisement and the effective date of issue of circular shall be the date of dispatch of the circular. Section 73(2)(d) provides that the company issuing deposit shall provide such deposit insurance in such manner and to such extend as .....

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e deposit insurance contract shall be deemed to be the amount in respect of both the principal amount and interest due thereon. Rule 5(2) provides that the deposit insurance contract shall specifically provide that in case the company defaults in repayment of principal amount and interest thereon, the depositor shall be entitled to the repayment of principal amount of deposits and the interest thereon by the insurer up to the aggregate monetary ceiling as specified in the contract. The proviso t .....

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ts shall be borne by the company itself. The same shall not be recovered from the depositors by deducting the same from the principal amount or interest payable thereon. Rule 5(4) describes the consequences if any default is made in complying with the terms and conditions of the deposit insurance contract. If there is any default is made in complying with the contract which makes the insurance cover ineffective, the company shall either rectify the defect immediately or enter into a fresh contra .....

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security including the creation of such charges on the property of the assets of the company. Where a company does not secure the deposits or secures such deposits partially, then the deposits shall be terms as unsecured deposits . It shall be so quoted in every circular, form, advertisement or in any document related to invitation or acceptance of deposits. Rule 6 provides for creation of security. Rule 6(1) provides that the company shall provide for security by way of a charge on the assets .....

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eals with the registered valuer has not come into effect. The Central Government clarified that pending notification of Section 247 of the Act and finalization of qualification and experience of valuers, valuation of stocks, shares, debentures, securities etc., shall be conducted an independent merchant banker who is registered with SEBI or an independent Chartered Accountant in practice having a minimum experience of 10 years. Provisions relating to Trust Rule 6(2) provides that the security, n .....

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iting secured deposits. A written contract shall be obtained from the trustee for depositors before their appointment and a statement shall appear in the circular or advertisement with reasonable prominence to the effect that the interest for depositors has given their consent to the company to be so appointed. Rule 7(3) provides that no person including a company, which is in the business of providing trusteeship services, shall be appointed as a trustee for the depositors, if the proposed trus .....

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irector, key managerial personnel or any other officer or an employee of the company. Rule 7(4) provides that the trustee shall not be removed from office after the issue of circular or advertisement and before the expiry of his term except with the consent of all the directors present at a meeting of the Board. In case the company is required to have independent directors, at least one independent director shall be present in such meeting of the Board. Rule 7(2) provides that the company shall .....

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ensure that the assets of the company on which charge is created together with the amount of deposit insurance are sufficient to cover the repayment of the principal amount of secured deposits outsanding and interest accrued thereon; satisfy himself that the circular or advertisement inviting deposits does not contain any information which is inconsistent with the terms of the deposit scheme or with the trust deed and is in compliance with the rules and provisions of the Act; ensure that the .....

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of the interest of depositors and to resolve their grievances. Rule 9 provides that the trustee for depositors shall call a meeting of all the depositors on- requisition in writing signed by at least one tenth of the depositors in value for the time being in force; the happening of any event, which constitute a default or which, in the opinion of the trustee for deposition affects the interest of the depositors. Nomination Rule 11 provides that a depositor may, at any time, nominate any person .....

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pany shall, on the acceptance or renewal of a deposit, furnish to the depositor or his agent a receipt for the amount received by the company, within a period of 21 days from the date of money or realization of cheque or date of renewal. The receipt shall be signed by an officer of the company duly authorized by the Board in this behalf and shall state the date of deposit, the name and address of the depositor, the amount received by the company as deposit, the rate of interest payable thereon a .....

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ts accepted or renewed at its registered office. The entries shall be made within 7 days from the date of issuance of the receipt duly authenticated by a director or secretary of the company or by any other officer authorized by the Board for this purpose. The Register shall be preserved in good order for a period of not less than 8 years from the financial year in which the latest entry is made in the register. The following particulars are to be entered in the deposit register- name, address .....

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ade; details of deposit insurance including extent of deposit insurance; particulars of security or charge created for repayment of deposits; any other relevant particulars. Pre mature repayment of deposits Rule 15 provides that a depositor may get refund of deposit after the expiry of six months from the date of such deposit but before the expiry of the period for which such deposit was accepted. In such cases the rate of interest payable shall be reduced by 1% from the original interest rat .....

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period of emergency declared under Article 352 of the Constitution; The company may permit a depositor to renew his deposit before the expiry of the period for which such deposit was accepted by the company, for availing of a higher rate of interest, the company shall pay interest to such depositor at the higher rate if such deposit is renewed in accordance with the other provisions of these rules and for a period longer than the unexpired period of the deposit. Where the period for which the d .....

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- 3 has been newly substituted with effect from 31.03.2015 by means of amendment to this Rule. Penalties Section 73 (3) provides that the deposit shall be repaid by the company with interest in accordance with the terms and conditions of the agreement. Rule 17 provides that the company shall pay a penal rate of interest of 18% per annum for the over due period in case of deposits, whether secured or unsecured, matured and claimed but remaining unpaid. Section 74 provides that where any deposit a .....

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uch repayment , notwithstanding anything contained in any other law for the time being in force or under the terms and conditions subject to which the deposit was accepted or any scheme framed under any law; and repay within one year from such commencement or from the date on which such payments are due, whichever is earlier. The statement shall be in Form -DPT -4. Section 74 (2) provides that the company may, if it is unable to pay the deposit, file a petition before the company. The Tribunal .....

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e Act. Section 74(3) provides that if a company fails to repay the deposits or part thereof or any interest within the time specified or such further time as may be allowed by the Trubunal, the company shall, in addition to the payment of the amount of deposit or part thereof or interest due, be punishable with fine which shall not be less than ₹ 1 crore but which may extend to ₹ 10 crores. Every officer of the company who is in default shall be punishable with imprisonment which may .....

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5(1) provides that where a company fails to repay the deposit or part thereof or any interest due within the time specified or such further time as may be allowed by the Tribunal and it is proved that the deposits had been accepted with intent to defraud the depositors or for any fraudulent purpose, every officer of the company who was responsible for the acceptance of such deposit shall be personally responsible without any limitation of liability, for all or any of the losses or damages that m .....

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