The Companies (Acceptance of Deposits) Amendment Rules, 2018 amended the Principal Rules the Companies (Acceptance of Deposits) Rules, 2014 with effect from 15th August 2018. These amendment rules indicate government acceptance of no availability of a product called deposit insurance deposits accepted by companies. This also indicates that corporate deposits are the most humble and vulnerable class of small investors. In this post, we will discuss, advertisement or circular required to be issued for inviting public deposits by the companies.
Circular and its Advertisement
Every company is not eligible to invite deposits. A company should fulfil the condition mentioned in sub-section (2) of section 73 of the Companies Act, 2013.
To invite deposit from its members, the company shall issue a circular to all its members in Form DPT-1. Such circular shall be circulated among members by registered post with acknowledgement due or speed post or by electronic mode.
Statewide Advertisement of circular
Additionally, the company shall publish the circular in two newspapers one of English and another of vernacular language having wide circulation in the State in which the registered office of the company is situated. Such advertisement shall publish in the English language in an English newspaper and in vernacular language in a vernacular newspaper.
Certificate of Auditor
This is a new requirement inserted with effect from 15th August 2018.
The company shall take a certificate from the statutory auditor. This certificate shall be attached with the above-said circular.
The Certificate as an attachment to the said circular shall state either that:
- the company has not committed default in the repayment of deposits or in the payment of interest on such deposits accepted either before or after the commencement of the Act; or
- that the company had made good the default and a period of five years have lapsed since the date of making good the default.
This provision not only restricts a company which made a default in the repayment of deposits or in the payment of interest on such deposits. This provision further restricts such defaulting companies for a period of five years from the date of such default made good.
Further compliance to accept deposit from public
To accept a deposit from the public, the company shall be an eligible company.
According to clause (e) of rule 2, the “eligible company” means a public company as referred to in sub-section (1) of section 76,
- a net worth of not less than one hundred crore rupees; or
- a turnover of not less than five hundred crore rupees.
Such company shall also obtain the prior consent of the company in general meeting by means of a special resolution and also filed the said resolution with the Registrar of Companies before making any invitation to the Public for acceptance of deposits.
However, an eligible company, which is accepting deposits within the limits specified under clause (c) of sub-section (1) of Section 180, may accept deposits by means of an ordinary resolution.
Nationwide advertisement of circular
To invite deposit from the general public, the eligible company shall publish the circular in two newspapers one in English newspaper having nationwide circulation and another of vernacular language newspaper having statewide circulation.
Every company inviting deposits from the public shall upload and place a copy of the circular on the website of the company if any. [Combined reading of Rule 4(2) and 4(3)]
Authority to issue circular
No company shall issue such circular inviting deposit from members or the public unless such circular is issued on the authority and in the name of the Board of directors of the company.
Registration of circular
The company not less than thirty days before the date of such issue shall deliver to the Registrar for registration a copy of circular signed by a majority of the directors of the company as constituted at the time the Board approved the circular or their agents, duly authorised by them in writing.
Agent of Directors
The directors of a company may not delegate their powers or duties in normal purpose. This is an exceptional case.
Validity of circular
A circular issued for this purpose shall be valid until:
- the expiry of six months from the date of closure of the financial year in which it is issued; or
- until the date on which the financial statement is laid before the company in the annual general meeting; or,
- where the annual general meeting for any year has not been held, the latest day on which that meeting should have been held in accordance with the provisions of the Act, whichever is earlier,
Fresh issue of circular
A fresh circular or circular in the form of an advertisement shall be issued, in each succeeding financial year, for inviting deposits during that financial year.
Date of issue of circular
For the purpose of this rule, the date of the issue of the newspaper in which the advertisement appears 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.