NOP Limited, since its incorporation in 2002, is engaged in the production of premium quality glass bottles. According to financial results of the…

CA Intermediate · Corporate and Other Laws · RTP · May 2024
NOP Limited, since its incorporation in 2002, is engaged in the production of premium quality glass bottles. According to financial results of the company as on 31.3.2023 net worth of the company was 90 crore and turnover for the year 2022-23 was 510 crore. The company proposed to accept the deposits as on 1st February, 2024, which would be due for repayment on 30th September, 2028 from the public for expansion and redevelopment programs of company. Furthermore, the company has accepted a loan of 1.5 crore from Mr. P Kishore (Director) and the loan was to be repaid after 24 months. Company in its books of account, records the receipt as a loan under non-current liabilities. At the time of advancing loan, Mr. P Kishore affirms in writing that such amount is not being given out of funds acquired by him by borrowing or accepting loans or deposits from others and complete details of such loan transaction is furnished in the boards' report. On the basis of above facts answer the following questions: (i) Whether company was eligible to accept deposit from public? What is the criteria for acceptance of deposit and tenure for which deposit can be accepted? Whether the tenure decided by company was in accordance with provisions of the Companies Act, 2013? (ii) With reference to the loan advanced by Mr. P Kishore to company, state whether the same is to be classified as a deposit or not?

Suggested Answer and Working Notes:

(i) As per Rule 2 (1) (e) of the Companies (Acceptance of Deposits) Rules, 2014, the term “eligible company” means a public company as referred to in section 76 (1) of the Companies Act, 2013, which is 'eligible' to accept deposits from the public at large only if it meets the below-mentioned criteria. Accordingly: It should be a public company.It should have net worth of minimum 100crore or a turnover of minimum 500crore.It has obtained the prior consent by means of a special resolution passed in general meeting.The special resolution has been filed with the Registrar of Companies.An ordinary resolution is sufficient if an eligible company is accepting deposits within the limits specified under section 180 (1) (c). In the instant case, the turnover of NOP Limited is 510crore, hence it is eligible to accept deposits from the public. Tenure for which Deposits can be Accepted: A company is not permitted to accept or renew deposits (whether secured or unsecured) which is repayable on demand or in less than six months. Further, the maximum period of acceptance of deposit cannot exceed thirty-six months. The tenure for the proposed deposits dated 1st February, 2024 which would be due for repayment on 30th September, 2028, is not valid, as the maximum period of acceptance of deposit cannot exceed 36 months. Hence, it is not in compliance with the provisions of the Companies Act, 2013. (ii) In terms of Rule 2 (1) (c) (viii) of the Companies (Acceptance of Deposits) Rules, 2014, any amount received from a person who is director of the company at the time of giving loan to the company shall not be treated as deposit if such director furnishes to the company at the time of giving money, a written declaration to the effect that the amount is not being given out of funds acquired by him by borrowing or accepting loans or deposits from others and further, the company shall disclose the details of money so accepted in the Board's report. In the given case, the said deposits by Mr. P Kishore shall not be treated as deposit.

Topics: Acceptance of Deposits by Companies

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