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Regulatory Alert: Amendment to Acceptance of Deposits Rules from members

25 September 2017

The Ministry of Corporate Affairs (‘MCA’) vide a notification dated 19 September 2017, has amended Rule 3 (3) of the Companies (Acceptance of Deposits) Rules, 2014 permitting certain types of companies to accept deposits as under:

  • In addition to a private company, a Specified IFSC public company is permitted to accept monies (deposits) from its members up to 100% of the sum of paid up share capital, free reserves and securities premium.

Specified IFSC public company is an unlisted company which is licensed to operate by the Reserve Bank of India or Securities Exchange Board of India or Insurance Regulatory Development Authority of India from the International Financial Services Centre (‘IFSC’) located in an approved multi services Special Economic Zone (‘SEZ’) set up under the SEZ Act.

  • Start-up private companies raising monies from its members for 5 years from its incorporation
  • Private company raising monies from its members which fulfils ALL the following conditions:
    • is not an associate or subsidiary of any other company;
    • if the borrowing of such a company from the banks or financial institutions or any body corporate is less than twice its paid-up share capital or fifty crore rupees, whichever is lower; and
    • has not defaulted in the repayment of such borrowings subsisting at the time of accepting deposits under section 73

Further, it is specified that ALL the companies accepting deposits (irrespective of limits) will be required to file the details of monies accepted to the Registrar of Companies (‘RoC’) in Form DPT-3.

BDO Comments:

The amendment is a welcome relief to the promotors / shareholders of the start-ups who do not want to block their funds in the equity of the company and generally infuse money after borrowing from their friends and relatives. Similarly, closely held companies would also be able to raise monies from any source without restrictions, subject to meeting certain requirements. These measures would improve the ease of doing business in India. Further, permitting IFSC to raise monies from its members is another step to give impetus to IFSC regime.