Eligible Companies and Acceptance of Deposits from Members / Public (Sections 73 & 76)

# Acceptance of Deposits — Section 73 (from Members) and Section 76 (from Public)

## 1. Who may accept deposits?

The Companies Act draws a three-fold distinction:

### Who is an 'Eligible Company'?

A public company is an eligible company if it has:

• a net worth of at least ₹100 crore, OR
• a turnover of at least ₹500 crore,

AND it has passed a Special Resolution in the General Meeting authorising the invitation of deposits from the public, and filed the SR with the Registrar before making any such invitation.

An ordinary resolution suffices where the company accepts deposits within the limits specified under Section 180(1)(c) (i.e., within the aggregate of paid-up capital, free reserves and securities premium).

## 2. Section 73 — Prohibition on Acceptance of Deposits from Public

• General rule (Section 73(1)): No company shall invite, accept or renew deposits from the public except in the manner provided under this Chapter.
• Exception: the prohibition does not apply to:
• Banking companies,
• Non-Banking Financial Companies (NBFCs) as defined in the RBI Act and regulated by RBI, and
• any other company as the Central Government may, after consultation with RBI, specify.

## 3. Acceptance of Deposits from Members — Section 73(2)

A company (other than an eligible public company) may accept deposits only from its members by:

### Step 1 — Authorisation

Pass an Ordinary Resolution in a general meeting authorising acceptance of deposits.

(For an eligible company inviting deposits from the public, a Special Resolution is required.)

### Step 2 — Issue circular to members

• Issue a circular to the members showing prescribed particulars.
• The circular must include the financial position of the company, credit rating obtained, total number of depositors and amount due in respect of any previous deposits accepted by the company, and any default committed by the company in repayment of such deposits or interest.

### Step 3 — File circular with Registrar

• File a copy of the circular along with the statement with the Registrar at least 30 days before the issue of the circular to members.

### Step 4 — Deposit Repayment Reserve Account

• On or before the 30th day of April each year, deposit a sum not less than 20% of the amount of deposits maturing during the following financial year in a scheduled bank in a separate account called the Deposit Repayment Reserve Account.
• This amount shall be used only for the purpose of repayment of deposits.

### Step 5 — Certify no default

• Certify that the company has not committed any default in repayment of any earlier deposit or interest thereon. If there was an earlier default, it must have been made good and 5 years elapsed since the date of making good the default.

### Step 6 — Security (if applicable)

• Provide security or charge on the assets of the company (other than intangible assets) for due repayment of the deposit and interest. If no security is offered, the deposits must be marked as unsecured deposits and stated as such in every circular, advertisement, etc.

## 4. Section 76 — Eligible Public Company accepting deposits from public

An eligible public company may invite, accept or renew deposits from the public subject to:

• A Special Resolution in the General Meeting,
• Compliance with all conditions of Section 73(2) (mutatis mutandis),
• Compulsorily obtaining a credit rating every year from a recognised credit rating agency, and
• Filing a copy of the rating with the Registrar.
• A deposit trustee must be appointed and a deposit trust deed executed.

## 5. Quick Compliance Snapshot