# Deposits from Members under Section 73

## 1. Relaxation for Private Companies

Certain compliance requirements — issuing a circular, filing with the ROC, depositing reserve amount, and certifying no default — do NOT apply to a private company in the following situations:

### Case A — Members' Money within Limit

A private company accepts money from its members not exceeding 100% of the aggregate of:

> PUSC + Free Reserves + Securities Premium

### Case B — Start-up Company

A private company that is a start-up, for 5 years from its incorporation.

### Case C — Composite Conditions (ALL must be satisfied)

1. The company is not an associate or subsidiary of any other company.

2. Its borrowings from banks, financial institutions, or any body corporate are less than the lower of:

2 × PUSC, OR
₹50 crore.

3. It has not defaulted on repayment of such borrowings at the time of accepting deposits.

> Compliance Note: Even where relaxation applies, the company must still file details of money accepted with the ROC in Form DPT-3.

## 2. Repayment of Deposits

Every deposit must be repaid with interest as per the agreed terms.
On default, the depositor may approach the NCLT for a recovery order.

## 3. Use of Deposit Repayment Reserve Account (DRRA)

Funds in DRRA shall be used only for repayment of deposits. No other application is permitted.

## 4. Tenure of Deposits

Particulars	Period
Minimum tenure	6 months
Maximum tenure	36 months
Exception (short-term)	3 months, only if deposit amount < 10% of (PUSC + FR + SP)

## 5. Maximum Amount Acceptable from Members

Normal cap: 35% of (PUSC + FR + SP).
Private / IFSC companies: Up to 100% of (PUSC + FR + SP).
Full Exemption from cap (No upper ceiling) for:
A private start-up company, for 10 years from incorporation.
A private company satisfying ALL the composite conditions stated above (non-subsidiary/associate + low borrowings + no default).
Filing in DPT-3 still mandatory.

## 6. Trustee for Depositors

Required for public deposits.
Trustee must call a meeting of depositors when:
At least 1/10th of depositors (by value) request it, OR
A default occurs.

## 7. Other Important Compliances

Interest must not exceed RBI's prescribed rate for NBFCs.
Depositor must submit a declaration that the deposit is not made from borrowed money.
Deposits can be in joint names (max 3) with clauses like "Jointly" or "Either or Survivor".
Nomination is permitted.
A deposit receipt must be issued within 21 days of deposit/renewal, containing: date, name, amount, interest rate, maturity date.
Form DPT-3 must be filed by 30th June every year.
Terms of deposit cannot be modified to the detriment of the depositor after acceptance.
Disclosure: Public companies disclose directors' contributions; private companies disclose contributions from directors OR their relatives.
Default in repayment attracts 18% p.a. penal interest.

## 8. Punishment for Contravention (General)

Fine up to ₹5,000.
Additional fine of ₹500/day for continuing default.

Worked example

### Example 1

Example — Start-up Exemption:

ABC Pvt. Ltd. is a DPIIT-recognised start-up incorporated on 1-Apr-2022. On 1-Apr-2025 (3rd year), it accepts ₹3 crore from members against PUSC + FR + SP of ₹1 crore — i.e., 300% of the aggregate.

Analysis: Being a start-up within 5 years of incorporation, the requirements of issuing circular, DRRA, etc., do NOT apply. Further, for start-ups, the 35%/100% cap is waived for the first 10 years. Hence ABC can accept this amount. However, Form DPT-3 must still be filed.

### Example 2

Example — Composite Conditions Test:

XYZ Pvt. Ltd. has PUSC = ₹30 crore. Its borrowings from banks = ₹40 crore. It is a subsidiary of LMN Ltd.

Analysis: 2 × PUSC = ₹60 crore; the lower of (₹60 cr, ₹50 cr) = ₹50 cr. Although borrowings (₹40 cr) are below ₹50 cr, XYZ FAILS Condition 1 (it is a subsidiary). Hence relaxation under Composite Conditions is NOT available. The 35% cap and full compliance regime apply.

### Example 3

Example — Short-Term Deposit:

PQR Ltd. has (PUSC + FR + SP) = ₹100 crore. It wants to accept a ₹8 crore deposit for a tenure of 4 months.

Analysis: 10% of ₹100 cr = ₹10 cr. Deposit (₹8 cr) is within this 10% ceiling, AND tenure (4 months) is ≥ 3 months. Hence the short-term exception is satisfied — the deposit is valid.

⚠️ Common exam mistakes

Confusing the relaxation conditions: students often forget that all three composite conditions must be satisfied cumulatively (not alternatively) for a private company to claim exemption.
Applying the 35% cap to private companies — private companies (and IFSC companies) can accept up to 100% of (PUSC + FR + SP) from members.
Forgetting that Form DPT-3 is mandatory EVEN when other compliance reliefs are available.
Misreading the start-up exemption period — 5 years for procedural reliefs but 10 years for the upper deposit cap.
Treating 2 × PUSC or ₹50 crore as 'higher of'; it is actually the LOWER of the two for the borrowings test.
Forgetting that the minimum tenure exception of 3 months requires BOTH the 10% cap and the minimum tenure to be satisfied together.

Bare-Act text Section 73 · Companies Act, 2013 · click to expand

Section 73 of the Companies Act, 2013 — Prohibition on acceptance of deposits from public. A company may, subject to passing of a resolution in general meeting and subject to such rules as may be prescribed in consultation with the Reserve Bank of India, accept deposits from its members.

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Deposits from Members (Sec. 73) — Relaxations, Repayment & Limits

Worked example

⚠️ Common exam mistakes