Acceptance of Deposits — Company Law Notes

Acceptance of Deposits

Before banks, companies often borrowed directly from the public by taking “fixed deposits” — and many collapsed, wiping out small savers. The Act now wraps deposit-taking in heavy safeguards, because a depositor, unlike a secured lender, has little protection if the company fails.

Acceptance of deposits (ss.73–76)

A deposit is money received by a company by way of deposit or loan (with exclusions like bank loans, government money, and share-application money). Deposit-taking is tightly regulated:

Private companies may accept deposits from their members subject to conditions.
Eligible public companies may accept deposits from the public only if they meet net-worth/turnover thresholds and obtain a credit rating.
Safeguards — a company must issue a circular, create a Deposit Repayment Reserve (a percentage of deposits maturing next year kept in a scheduled bank), provide deposit insurance/security, file returns, and repay on time.
Default — penalties and personal liability of officers; the depositor may approach the NCLT.

This regime exists to protect vulnerable depositors — the necessary background to why secured debentures and floating charges (topics 6–7) are the safer, preferred route for company borrowing.

Section 73(2): a company may accept deposits from its members subject to passing a resolution, issuing a circular, creating the deposit repayment reserve and providing for repayment, among other conditions.

In Simple Terms: A “deposit” is a company borrowing straight from members or the public. Because depositors are unsecured and exposed, the Act (ss.73–76) surrounds it with conditions — reserves, insurance, disclosures and returns — so that only sound companies can take deposits and savers are protected.

flowchart TD
    ROOT["Deposits (ss.73-76)"]:::root
    ROOT --> A["Private co: from members (conditions)"]:::leaf
    ROOT --> B["Eligible public co: from public (thresholds + rating)"]:::leaf
    ROOT --> C["Safeguards: circular, repayment reserve, insurance, returns"]:::mid
    ROOT --> D["Default -> penalty + NCLT relief"]:::mid2
    classDef root fill:#FFF8DC,stroke:#000,color:#000;
    classDef mid fill:#DCFCE7,stroke:#166534,color:#000;
    classDef mid2 fill:#FDE2E2,stroke:#991B1B,color:#000;
    classDef leaf fill:#E6F3FF,stroke:#1E3A8A,color:#000;
    linkStyle default stroke:#888,stroke-width:1px;

Case Laws

(Deposit regulation is statutory; cite ss.73–76 and the Companies (Acceptance of Deposits) Rules 2014.)

📄 Full notes + Question Bank (₹199) — every topic in depth, model answers to all past KSLU questions, in one printable PDF. Get the bundle · 10 Solved Problems · All Company Law topics