# Rule 7 — Trustee for Depositors

For secured deposits, the company must appoint one or more independent trustees who will act as the depositors' guardians.

## When and How

When: Every company inviting secured deposits must appoint one or more trustees for depositors before creating the security.
Deposit Trust Deed: Executed in Form DPT-2, at least 7 days before issuing the circular/advertisement.

## Duties & Functions of the Trustee

1. Protect the interest of depositors — including ensuring that securities are created within the stipulated time.

2. Redress grievances of depositors effectively.

## Disqualifications — Who CANNOT be a Trustee

No person (including a company in the trusteeship business) shall be appointed if the proposed trustee:

(a) Is a director, KMP, officer, employee, or depositor of the company OR of its holding/subsidiary/associate company; OR

(b) Is indebted to the company, or its holding/subsidiary/associate company, or a subsidiary of such holding company.

(The list continues in subsequent clauses of Rule 7 not reproduced here.)

## Why the disqualifications matter

The trustee is meant to be independent of the company so that depositor interests are not compromised by conflicts. A director, employee or borrower of the company cannot impartially safeguard depositors against the company.

Worked example

### Example 1

Example 1 — Timing of Trust Deed

A company plans to issue its deposit advertisement on 1-Sep. By when must the deposit trust deed (Form DPT-2) be executed?

Solution: At least 7 days before issue — i.e., on or before 25-Aug (so that 26-Aug to 1-Sep gives the 7 clear days).

### Example 2

Example 2 — Disqualification Check

Mr. R is the CFO of the company's subsidiary. The company proposes to appoint him as deposit trustee. Is this permitted?

Solution: No — as a KMP/officer of a subsidiary company, Mr. R is disqualified under Rule 7. The trustee must be independent of the company group.

⚠️ Common exam mistakes

Believing the trustee can be any director or senior employee — independence from the company group is mandatory.
Confusing the Form: appointment uses Form DPT-2 (not DPT-1, which is for the circular/advertisement).
Forgetting the 7-day prior execution requirement for the deposit trust deed.
Overlooking that 'indebtedness to the company or its group' is itself a disqualification — even an honest borrower cannot become trustee.

Bare-Act text Rule 7 · Companies (Acceptance of Deposits) Rules, 2014 · click to expand

Rule 7, Companies (Acceptance of Deposits) Rules, 2014 — Appointment of trustee for depositors.

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Appointment & Disqualification of Trustee for Depositors (Rule 7)

Worked example

⚠️ Common exam mistakes