Companies prohibited from accepting deposits & scope of Chapter V
## Companies to which the Deposit Chapter does NOT apply
Chapter V of the Companies Act, 2013 (Sections 73–76A) governs acceptance of deposits. Certain entities are excluded from the chapter because they are governed by separate regulators:
Excluded Entity
Reason / Regulator
Banking Company
Governed by Banking Regulation Act / RBI
Non-Banking Financial Company (NBFC)
Governed by RBI
Housing Finance Company
Governed by NHB / RBI
Chit Fund Companies
Governed by Chit Funds Act
Collective Investment Schemes
Governed by SEBI
Mutual Funds registered with SEBI
Governed by SEBI
Alternative Investment Funds (AIFs)
Governed by SEBI
Domestic Venture Capital Funds
Governed by SEBI
Infrastructure Investment Trusts (InvITs)
Governed by SEBI
Real Estate Investment Trusts (REITs)
Governed by SEBI
Start-up Company (Convertible Note up to ₹25 lakhs in single tranche)
DPIIT-recognised, special carve-out
## Which company can accept deposits — from whom?
Type of Company
From PUBLIC
From MEMBERS
Private Company
No
Yes (subject to Sec. 73 + Rules)
Eligible Public Company
Yes (Sec. 76)
Yes (Sec. 73)
Non-eligible Public Company
No
Yes (Sec. 73)
## Meaning of "Eligible Company" (Rule 2(1)(e))
A public company is eligible to accept deposits from the public if it satisfies BOTH:
1. Net Worth ≥ ₹100 crore OR Turnover ≥ ₹500 crore, AND
2. Has passed a Special Resolution in General Meeting (and filed it with ROC before issuing the circular/invitation).
> Only an eligible public company can tap public deposits; every other public company is restricted to deposits from members.
Worked example
### Example 1
Q. A private limited company with paid-up capital of ₹2 crore wants to raise ₹50 lakh by way of deposits from outsiders (not members). Can it do so?
A. No. A private company is prohibited from accepting deposits from the public under Section 73(1). It can only accept deposits from its members, directors, or their relatives, subject to Section 73(2) and the Deposit Rules.
### Example 2
Q. XYZ Ltd. is a public company with net worth ₹120 crore. Its turnover is only ₹80 crore. It has not passed any resolution in GM. Can it accept deposits from the public?
A. No. Although it satisfies the net-worth test (≥ ₹100 cr), it has NOT passed the required Special Resolution in GM. Both conditions of Rule 2(1)(e) must be satisfied. It is therefore not an eligible public company and cannot accept public deposits under Sec. 76.
### Example 3
Q. A DPIIT-recognised start-up issues a convertible note of ₹20 lakh in a single tranche to an angel investor. Is this a deposit?
A. No. Convertible notes of ₹25 lakh or more in a single tranche received by a start-up (within 10 years of incorporation), convertible within 10 years, are excluded from the definition of deposit. Even ₹20 lakh — being below the threshold — would fall foul of the carve-out condition. (Carve-out works when amount ≥ ₹25 lakh in a single tranche.)
⚠️ Common exam mistakes
Confusing 'eligible company' with merely 'large company'. The Special Resolution is an INDEPENDENT condition — net worth alone is not enough.
Assuming private companies can never accept deposits. They can — but only from MEMBERS, directors, and relatives of directors (not from the public).
Forgetting that the chapter does NOT apply to Banking companies, NBFCs, HFCs, etc. — students wrongly apply Sec. 73/76 to a bank's term deposits.
Treating the start-up convertible-note exemption as universal — it applies only up to 10 years from incorporation and only when each tranche is ₹25 lakh or more.
Bare-Act text Section 73(1) read with Rule 1(3) of Companies (Acceptance of Deposits) Rules, 2014 · Companies Act, 2013 · click to expand
Section 73(1): On and after the commencement of this Act, no company shall invite, accept or renew deposits under this Act from the public except in a manner provided under this Chapter. Provided that nothing in this sub-section shall apply to a banking company and non-banking financial company as defined in the Reserve Bank of India Act, 1934 and to such other company as the Central Government may, after consultation with the Reserve Bank of India, specify in this behalf.