The Ministry of Corporate Affairs has come out with a notification on 15th September, 2015 making an amendment to Companies (Acceptance of Deposits) Second Amendment Rules, 2015. Earlier, deposits from directors in case of all types of companies, public or private, were exempted under the Companies (Acceptance of Deposits) Rules, 2014 (“Deposit Rules”).
The new amendment states that – “any amount received from a Person who, at the time of the receipt of the amount, was a director of the company or a relative of the director of the private company: Provided that the director of the company or relative of the director of the private company, as the case may be, from whom money is received, furnishes to the company at the time of giving the money, a declaration in writing 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 the company shall disclose the details of money so accepted in the Board's report.

Henceforth, the amount received from the relatives of directors has been excluded from the purview of definition of ‘deposits’.

The MCA vide an exemption Notification dated June 5, 2015 had exempted private company from accepting any amount from its members, subject to a condition that such amount shall not exceed 100% of the net worth

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With the new amendments, the current position with respect to acceptance of deposits is summarised as under:

  1. Amount accepted from Shareholders of a Public Company is not exempted and have to comply fully with the Deposit Rules.
  2. Amount accepted from Directors of a Public Company is exempted under Rule 2(1)(c)(viii) of the Deposit Rules.
  3. Amount accepted from Relatives of directors of a Public Company is not exempted and have to comply fully with the Deposit Rules.
  4. Amount accepted from Shareholders of a Private Company is exempted to the extent of 100% of the net worth.
  5. Amount accepted from Directors of a Private Company is exempted under Rule 2(1)(c)(viii) of the Deposit Rules.
  6. Amount accepted from Relatives of directors of a Private Company is exempted.

However, along with this relaxation, an added compliance requirement has been mandated by the Ministry of Corporate Affairs that the company should disclose the details of the money so accepted in its Board’s Report.