# Conditions for Accepting Deposits from Members — Section 73

Before a company accepts a member deposit, five conditions must be ticked. Memorise these by the mnemonic C-F-D-C-S (Circular → File → Deposit reserve → Certify → Security).

## The Five Conditions

### (a) Issue a Circular to Members

The circular must include:

Financial position of the company
Credit rating obtained
Total number of depositors
Amount due on previously accepted deposits
Other prescribed particulars

### (b) File with the Registrar

File a copy of the circular (with the statement) with the Registrar within 30 days BEFORE the issue of the circular.

### (c) Deposit Repayment Reserve Account

By 30th April every year, deposit a sum ≥ 20% of the amount of deposits maturing during the following financial year.
Keep it in a scheduled bank in a separate account.

### (d) Certify No Default

Certify that there has been no default in the last 5 years in repayment of deposits or interest.

### (e) Provide Security (Optional)

Security may include a charge on the property/assets.
If not secured (or only partially secured), the deposit must be expressly described as "unsecured deposits" in every circular/advertisement/document.

## Exemption: Which Private Companies Skip (a)–(d)?

Clauses (a) to (d) do NOT apply to private companies that fall in any of these three categories:

(A) Up to 100% of Net Worth route

Accepts from members up to 100% of aggregate Net Worth, and
Files monies accepted in Form DPT-3 with the Registrar.

(B) Start-up route

Is a start-up, for 5 years from incorporation.

(C) Small Independent Pvt Co. route — ALL three conditions must be met:

(i) Not an associate/subsidiary of any other company,
(ii) Borrowings (from banks/FIs/body corporate) < lower of [2 × Paid-up Share Capital] or [₹50 crore],
(iii) No default in repayment of such borrowings subsisting at time of accepting deposits.

Even exempt companies must file Form DPT-3 with the Registrar.

## Repayment & Tribunal Remedy

Sub-section 2: Every deposit must be repaid with interest per agreed terms.
Sub-section 3: On default, the depositor may apply to the Tribunal (NCLT) for an order directing payment / damages.
Sub-section 4: Deposit Repayment Reserve Account can only be used for repayment of deposits — no diversion.

Worked example

### Example 1

Example 1 — DRR Calculation: PQR Ltd has deposits maturing in FY 2025-26 amounting to ₹50 crore. By 30 April 2025, PQR must park at least ₹10 crore (20% × ₹50 cr) in a scheduled bank in the Deposit Repayment Reserve Account.

### Example 2

Example 2 — Exemption Eligibility: A 3-year-old private start-up wants to accept member deposits without issuing a circular or maintaining the 20% reserve. Permitted? Yes — Category (B) exempts start-ups for 5 years from incorporation, but it must still file Form DPT-3.

### Example 3

Example 3 — Borrowings Test: Sigma Pvt Ltd has PUSC of ₹40 crore. 2 × PUSC = ₹80 cr; ₹50 cr is lower. So borrowings cap for Category (C) = ₹50 crore. If Sigma's borrowings are ₹30 crore (and other conditions met), it can claim exemption from (a)–(d).

⚠️ Common exam mistakes

Calculating 20% on TOTAL deposits instead of only deposits MATURING in the next financial year.
Missing the 30-day window — the circular must be filed BEFORE issue, not after.
Confusing the 5-year no-default certificate (Section 73) with the 5-year start-up exemption window (Rule).
Forgetting that even an EXEMPT private company must file Form DPT-3.
Choosing the higher of [2×PUSC] or [₹50 cr] in Category (C) — the section uses 'whichever is LOWER'.

Bare-Act text Section 73(2), (3), (4) · The Companies Act, 2013 · click to expand

Section 73(2): A company may, subject to the 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 on such terms and conditions, including the provision of security, if any, or for the repayment of such deposits with interest, as may be agreed upon between the company and its members, subject to the fulfilment of the following conditions, namely:— (a) issuance of a circular to its members... (b) filing a copy of the circular along with such statement with the Registrar within 30 days before the date of issue of the circular... (c) depositing... such sum which shall not be less than 20% of the amount of its deposits maturing during the following financial year... (d) certifying that the company has not committed any default in the repayment of deposits accepted... (e) providing security, if any, for the due repayment of the amount of deposit or the interest thereon...

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Conditions for Acceptance of Deposits from Members (Section 73)

Worked example

⚠️ Common exam mistakes