RECENT AMENDMENTS IN
COMPANIES (ACCEPTANCE OF DEPOSITS) RULES, 2014
Attention
all Start-up Companies, it’s time to hear good news on ease of doing business. There
is amendment in deposit rules which permits the start ups to raise funds
through corporate bonds or other convertible instruments for 10 years
1)
References
·
Rule
2 of the Companies (Acceptance of Deposits) Rules, 2014
·
Rule
3 of the Companies (Acceptance of Deposits) Rules, 2014
·
Companies
(Acceptance of Deposits) Amendment Rules, 2020 vide MCA Notification dated 07th
September, 2020
2)
Transaction
not be considered as Deposit
·
Rule
2 (1) (c) of the Companies (Acceptance of Deposits) Rules, 2014 gives the
definition of the term DEPOSIT as “deposit includes any receipt of money by way
of deposit or loan or in any other form, by a company”
·
At
the same time, it also provides for a number of exceptions i.e. transactions
which shall be not be considered as deposits.
·
Recently,
MCA vide a notification dated 07th September, 2020, amended one of
such exceptional transaction.
·
Which
states that:
an amount of twenty
five lakh rupees or more received by a start-up company, by way of a
convertible note (convertible into equity shares or repayable within a period
not exceeding Ten Years from
the date of issue) in a single tranche, from a person would not be regarded a
deposit.
·
Prior
to this amendment, the time period was of five years, which has now been amended
to TEN YEARS.
·
It
is a big relaxation because it means that now a start-up company can repay the
convertible note even within 10 years and it would not be considered as
deposit.
3)
Maximum
limit for acceptance of Deposit
·
Rule
3 (3) of the Companies (Acceptance of Deposits) Rules, 2014 specifically
mention a condition to accept a deposit that:
No company referred to in sub-section
(2) of section 73 shall accept or renew any deposit 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 thirty five per cent of
the aggregate of the Paid-up share capital, free Reserves and securities
premium account of the company.
·
Provided
that, a Specified IFSC Public company and a private company may accept from its
members monies not exceeding one hundred per cent. of aggregate of the paid up
share capital, free reserves and securities premium account and such company
shall file the details of monies so accepted to the Registrar in Form DPT-3.
·
As
per the amendment, a private company, which is a start-up, for TEN YEARS from the date of its
incorporation, is not required to comply with this condition of maximum limit
for acceptance of deposit.
·
Earlier
to this notification, a private company, which is a start-up, for FIVE YEARS,
is not required to fulfill this condition. But now, the scope has been widened.
4)
CONCLUSION
After
carefully considering the above two amendments, it is quite clear that they are
specifically targeted to the start-up companies. And, it is a quite good and
appreciable step to boost their business and also to hold the hands of the
entrepreneurs of every start-up in this pandemic of Covid-19. This amendment
has been step forward when DPIIT introduced new definition of Start up in the
month of February 2019
