# Rule 6 — Creation of Security for Secured Deposits

When a company invites secured deposits, it must protect depositors through a legal charge on its assets.

## Key requirements

1. Time-limit: Within 30 days from the date of acceptance of deposits.

2. Mode of security: Charge on the company's assets by way of:

Mortgage, OR
Hypothecation only.

3. Adequacy of security: The total value of the security (whether by way of deposit insurance, or charge, or both) must be not less than the amount of deposits accepted PLUS the interest payable thereon.

## Consequence of not securing

If deposits are not secured (or only partly secured), they must be expressly described as 'unsecured deposits' in every circular, advertisement, form, or document relating to invitation or acceptance.

Worked example

### Example 1

Example — Sufficiency of Security

A company accepts secured deposits of ₹10 crore at 9% interest p.a. for 36 months. What is the minimum charge value it must create?

Solution: Total interest over 3 years ≈ ₹2.7 crore. The charge must cover at least ₹10 cr + ₹2.7 cr = ₹12.7 crore (principal + interest payable). A lower charge would breach Rule 6.

⚠️ Common exam mistakes

Treating any form of security as acceptable — Rule 6 specifically permits only mortgage or hypothecation.
Counting only the principal in the security value — interest payable must also be covered.
Missing the 30-day deadline — late creation of charge defeats the protective intent of Rule 6.
Forgetting to label the deposit as 'unsecured' in all subsequent documents when security is partial or absent.

Bare-Act text Rule 6 · Companies (Acceptance of Deposits) Rules, 2014 · click to expand

Rule 6, Companies (Acceptance of Deposits) Rules, 2014 — Creation of security.

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Creation of Security for Deposits (Rule 6)

Worked example

⚠️ Common exam mistakes