# Acceptance of Deposits from Members — Section 73(2)
Section 73(2) lays down the procedure that any company (other than those exempted under Section 73(1)) must follow to accept deposits from its members.
## Step-by-Step Procedure
### Step 1: Pass an Ordinary Resolution
The company must pass an ordinary resolution in a general meeting authorising the acceptance of deposits from members.
### Step 2: Issue Circular to Members [Sec 73(2)(a) + Rule 4]
The circular must contain:
- Financial position of the company
- Credit rating obtained
- Total number of depositors and amount due on previous deposits
- Other prescribed details
Mode of Circulation:
- Registered post (with acknowledgment due) or Speed post, OR
- Electronic mode
- Publication in an English newspaper AND a vernacular newspaper (widely circulated in the State)
Auditor's Certificate (Form DPT-1): Statutory auditor must certify no default in deposit repayment/interest payment. If there was a default, the certificate must confirm:
- Default has been rectified, AND
- 5 years have passed since rectification
Validity of Circular: Valid until the earliest of:
- 6 months from FY closure
- Date when financial statements are presented at AGM (or last date AGM should have been held)
A fresh circular must be issued each financial year.
### Step 3: File Circular with RoC
File copy of circular with RoC within 30 days BEFORE issuance.
### Step 4: Open Deposit Repayment Reserve Account (DRRA)
Deposit at least 20% of deposits maturing during the next financial year in a separate bank account by 30th April each year.
### Step 5: Certify No Default
Certify no default in repayment of deposits or interest. If earlier default occurred, confirm rectification + 5 years passed.
### Step 6: Provide Security (if applicable)
- Secured deposits → require charge on tangible assets
- Unsecured deposits → must be clearly disclosed in the circular
## Relaxation for Private Companies
The requirements of (a) issuing circular, (b) filing with RoC, (c) DRRA deposit, and (d) certifying no default do NOT apply to a private company if:
Option A: It accepts money from members ≤ 100% of (PUSC + Free Reserves + Securities Premium)
Option B: It is a start-up, for 5 years from incorporation
Option C: It meets ALL of the following:
- Not a subsidiary or associate of any other company
- Borrowings from banks/FIs/corporates < 2 × PUSC OR ₹50 crore (whichever is lower)
- No default in repayment of such borrowings at time of accepting deposits
> Even under exemption, the company must file Form DPT-3 with details of money accepted.
## Maximum Amount Acceptable from Members
| Type of Company | Limit |
|---|---|
| Normal companies | 35% of (PUSC + FR + SP) |
| Private companies & IFSC companies | Up to 100% of (PUSC + FR + SP) |
| Start-up private companies (10 yrs from incorporation) | No limit (with DPT-3 filing) |
| Eligible private companies (meeting all conditions above) | No limit (with DPT-3 filing) |
## Tenure of Deposits
| Type | Period |
|---|---|
| Minimum | 6 months |
| Maximum | 36 months |
| Short-term exception | 3 months allowed if amount < 10% of (PUSC + FR + SP) |
## Repayment & Default
- Every deposit must be repaid with interest as per agreed terms.
- On failure to repay → depositor may approach NCLT for recovery order.
- Penal interest on default: 18% p.a.
- DRRA funds can be used only for deposit repayment.
## Trustee Requirements
- Trustee provisions apply for public deposits (Sec 76), not Sec 73 deposits.
- Trustee must call a meeting of depositors if requested by ≥ 1/10th of depositors or on default.
## Other Special Points
- Interest rate cannot exceed RBI ceiling for NBFCs.
- Depositor's application must declare the amount is not from borrowed money.
- Joint holding allowed (max 3 persons) with clauses like "Jointly" or "Either or Survivor".
- Nomination facility available.
- Deposit receipt within 21 days of acceptance/renewal — showing date, name, amount, interest rate, maturity date.
- DPT-3 filed annually by 30th June to report deposits accepted.
- Terms cannot be changed post-acceptance if detrimental to depositor.
- Disclosure of director-money in financial statements (public companies); disclosure of money from directors/relatives (private companies).
## Punishment for Contravention
- Fine up to ₹5,000
- ₹500 per day for continuing contravention