The following are the extracts from the financial statements of BUI Private Limited, which is neither a start-up nor it is an associate or…

CA Intermediate · Corporate and Other Laws · PYQS · January 2025
The following are the extracts from the financial statements of BUI Private Limited, which is neither a start-up nor it is an associate or subsidiary company of any other company. Particulars Amount ₹ Authorised Capital: 10,00,000 Equity Shares of 100 each 10,00,00,000 Paid-up Share Capital: 8,00,000 Equity Shares of 100 each 8,00,00,000 Securities Premium Reserve Account 2,00,00,000 General Reserves 5,00,00,000 Term Loan from LMR Bank Limited 12,00,00,000 Cash Credit Loan (For Working Capital) 5,00,00,000 The company has never failed to file the Annual Return and Financial Statements with the Registrar. The company has already successfully repaid all the monies which were accepted earlier in the form of deposits along with due interest. Since the company was successful in implementation of its housing project by utilizing the money accepted in the form of deposits, the Board was interested to accepting deposits once more and take up another housing project in NOIDA since the members of the company were having sufficient surplus money which they wanted to invest in the company to start the project. However, their condition was that the same will be provided by them if the company accepts them in the form of deposits and the applicable provisions of the Companies Act, 2013 and Rules made thereunder are strictly complied with. But, the Board of Directors of BUI Private Limited were not in support of depositing any amount in any Deposit Repayment Reserve Account for the purpose of repayment of the said deposits, since the repayment was to be made out of the amount received from the customers who were going to book for the flats in the housing project. Two proposals came for review to the Board, out of which only one proposal was to be selected. The Board wanted you to advise them in choosing the appropriate deposit scheme. Proposal 1 - Acceptance of Deposits of 20,00,00,000, to be repaid with interest @ 7% per annum; Proposal 2 - Acceptance of Deposits of 14,00,00,000, to be repaid with interest @ 8% per annum. Referring to the applicable provisions of the Companies Act, 2013, the Rules made thereunder and the notifications issued in this respect, advise the Board stating the justification in support of your advice.

Suggested Answer and Working Notes:

(a) Exemption to certain Private Companies: Notification No. GSR 464 (E) dated 5th June 2015, provided certain exemptions to Private Limited Companies relaxing the provisions of the Companies Act 2013 with respect to certain restrictions for acceptance of deposits. The restrictions specified in the clauses (a) to (e) of sub-section (2) of section 73 with respect to certain restrictions for acceptance of deposits like issue of circular, filing the copy of such circular with the Registrar, depositing of certain amount and certification as to no default committed shall not apply to a private company. They are as follows: (A) which accepts from its members monies not exceeding one hundred percent of the aggregate of the paid-up share capital, free reserves and securities premium account; or (B) which is a start-up, for five years from the date of its incorporation; or (C) which fulfils all of the following conditions, namely:- (a) which is not an associate or a subsidiary company of any other company; (b) if the borrowings of such a company from banks or financial institutions or any body corporate is less than twice of its paid-up share capital or fifty crore rupees, whichever is lower; and (c) such a company has not defaulted in the repayment of such borrowings subsisting at the time of accepting deposits under this section. In the present case, BUI Private Limited was not in support of depositing any amount in any Deposit Repayment Reserve Account for the purpose of repayment of the deposits. Also, since BUI Limited does not satisfy the conditions given in clause (C) above, as its borrowings from banks is not less than twice of its paid-up share capital or fifty crore rupees, whichever is lower, (i.e. 8 crore*2= 16 crore and amount already borrowed is 17crore (i.e Term Loan of 12crore and Working Capital of 5crore), it has to go for the restricted amount as stated in clause (A) above, i.e. not exceeding one hundred percent of aggregate of the paid-up share capital, free reserves and securities premium account. Therefore, the maximum amount of deposit it can accept from members will be limited to 15 crore. In terms of the options given in the question, the company has no option but to choose Proposal 2 Acceptance of Deposits of 14,00,00,000, to be repaid with interest @ 8% per annum.

Topics: Acceptance of Deposits by Companies

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