Amendment to the Companies (Acceptance of Deposit) Rules, 2014

Under Rule 3 of the Companies (Acceptance of Deposit) Rules, 2014 (‘Deposit Rules’), a company is prohibited from accepting or renewing deposits from its members if the amount of such deposits, together with the amount of other deposits outstanding as on the date of acceptance or renewal of such deposits, exceeds 35% of the aggregate of the paid-up share capital, free reserves and securities premium account of the company; provided that in case of private companies the applicable limit was 100% instead of 35%. Rule 3 of the Deposit Rules has been amended pursuant to the MCA notification dated September 19, 2017, whereby the enhanced limit of 100% has been extended to a Specified IFSC Public Company.[1] The following classes of private companies have been exempted from the 100% limit as well:

i.  a private company which is a start-up, for five years from its incorporation; and

ii.  a private company which is not an associate or subsidiary of any other company; and the borrowings of such company from banks, financial institutions or body corporate is less than twice of its paid up share capital or INR 50 Crores, whichever is less; and such a company has not defaulted in the repayment of such borrowings subsisting at the time of accepting deposits under Section 73.

[1]     An unlisted public company licensed to operate by a regulatory authority from the International Financial Services Centre located in an approved multi services Special Economic Zone.

Published In:Inter Alia - Quarterly Edition - October 2017 [ English Chinese japanese ]
Date: October 1, 2017