Section 76: Acceptance of deposits from public by certain companies.

76. (1) Notwithstanding anything contained in section 73, a public company, having such net worth or turnover as may be prescribed, may accept deposits from persons other than its members subject to compliance with the requirements provided in sub-section (2) of section 73 and subject to such rules as the Central Government may, in consultation with the Reserve Bank of India, prescribe:

Provided that such a company shall be required to obtain the rating (including its networth, liquidity and ability to pay its deposits on due date) from a recognised credit rating agency for informing the public the rating given to the company at the time of invitation of deposits from the public which ensures adequate safety and the rating shall be obtained for every year during the tenure of deposits:

Provided further that every company accepting secured deposits from the public shall within thirty days of such acceptance, create a charge on its 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 provisions of this Chapter shall, mutatis mutandis, apply to the acceptance of deposits from public under this section.

Provisions of the Companies Act, 2013:
Chapter V: ACCEPTANCE OF DEPOSITS BY COMPANIES [Sections 73 to 76]

For this chapter, the Companies (Acceptance of Deposit) Rules, 2014 (‘the Rules’) are notified with effect from April 01, 2014.

Section 76: Acceptance of deposits from public by certain companies.
Section 76 is brought to force from April 01, 2014.

Corresponding provisions of the Companies Act, 1956:
No such provision.

Corresponding provisions of the English Companies Act, 2006:
No such provision.

Applicability:
[highlight]Section 76 is applicable to certain public companies accepting or intending to accept deposits from public.[/highlight]

For acceptance of deposits [highlight]from members[/highlight] by a public company as well as private company, section 73 is applicable.

Private companies are prohibited from accepting deposits from public. However, banking companies, NBFCs and other companies to be specified by the Government can accept deposits from public.

Prohibition on acceptance of deposits contained in section 73 shall not apply where a public company accepts deposits in compliance of section 76 of the Act.

What is the difference from the Companies Act, 1956:

Comments:
Only certain eligible public companies can accept deposits from public (public deposit).

Rule 2(1) (e) of the Rules defines ‘eligible company’ as under:

“eligible company” means a public company as referred to in sub-section (1) of section 76, having a net worth of not less than one hundred crore rupees or a turnover of not less than five hundred crore rupees and which has obtained 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:
Provided that 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.

Eligible public companies may accept deposits from public, subject to ((section 76(1) ))

(a) compliance of conditions of section 73(2),
(b) compliance of the rules which the Central Government shall frame in consultation with the Reserve Bank of India,
(c) obtaining the rating (including its net worth, liquidity and ability to pay its deposits on due date) from a recognised credit rating agency for informing the public the rating given to the company at the time of invitation of deposits from the public which ensures adequate safety AND the rating shall be obtained for every year during the tenure of deposits; and
(d) creating a charge on its assets, if public deposit is a secured deposit, within thirty days of such acceptance. Amount of charge shall not be less than the amount of deposits accepted from public in favour of the deposit holders in accordance with the rules.

Following conditions are specified under section 73(2), which shall be fulfilled by eligible public company to accept deposits from public ((Section 73(2) )).

  1. Obtaining consent of members by ordinary resolution. However, where borrowing of a company has exceeded limit specified in clause (c) of section 180(1) of the Act, consent of members by way of special resolution is required.
  2. filing a circular with the Registrar of Companies (before issuing it to members). Such circular to state financial position of the company, credit rating obtained, total number of depositors from which the company has already accepted deposits, deposit amount due for repayment and other details as the Government may prescribe.
  3. issuing aforesaid circular to members of the company within 30 days of filing with the Registrar.
  4. maintaining liquid asset by depositing minimum of 15% of the amount of deposits maturing during the current and next financial year (i.e. two financial years). Such liquid asset shall be kept in a separate bank account with any of the scheduled commercial banks. Such bank account shall be called [highlight]deposit repayment reserve account[/highlight]. For example, if name of company is XYZ Limited, then it shall have a bank account called ‘XYZ Ltd – deposit repayment reserve account’. The deposit repayment reserve account shall not be used by the company for any purpose other than repayment of deposits. ((Section 73(5) ))
  5. provide deposit insurance up to such extent and in a prescribed manner.
  6. certifying that the company has not committed any default in the repayment of deposits accepted either before or after the commencement of the Act of 2013 or payment of interest on such deposit.
  7. optionally providing security, including creation of charge on assets of the company, for due repayment of the deposit amount or interest thereon. And where no security is provided for the repayment, such deposits shall be termed as “unsecured deposits”. And words “unsecured deposits” shall be quoted in every circular, form, advertisement or in any document related to invitation or acceptance of deposits.

Provisions of sections 73, 74 and 75 of the Act shall apply mutatis mutandis to acceptance of deposits from public by eligible public companies.

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