New curbs on company deposits

The central government announced the companies ammendment rules on March 30, 1978. This rules have resulted in imposing the following curbs on the acceptance of company deposits.

(i) With effect from 1st April 1980, the overall limit from public would be 25% of the aggregate of the paid. The amount with which the bank opens in actual cash of value up capital and reserves as reduced by miscellaneous expenses as appearing in the latest audited balance sheet of the company. The amount of accumulated balance of loss, balance of deferred revenue expenditure and other intangible assets shall be deducted from the aggregate of the paid up capital and free reserves. The term accumulated loss should also include amount of unprovided loss should also include amount of unprovided depreciation. Besides, the company can accept deposits from its shareholders upto 10% of the aggregate paid by capital and reserved as reduced by miscellaneous expenses as appearing in its latest audited balance sheet.

(ii) The minimum period for which companies will be able to accept deposits will be 36months.

(iii) The companies have been asked to deposit in scheduled banks or invest in specified securities a sum not less than 10% of the amount of its deposits maturity during the year ( from 1 st April to 31st March) . This measures has been taken with a view to safeguarding the interest of the depositors. The amount set aside shall not be used for any purpose other than for the repayment of the deposits maturity during the years refers to above.

(iv) Rule 2(b)(IV) of rules (1975) has been ammended to bring within the purview of the rules or intercompany deposits which stand at present excluded except any deposits received from another company by a company which has gone into commercial production and has not accepted any deposits from the public.

(v) The Revised deposits rules prescribed detailed info to be published in the newspaper while inviting deposits from the public with a view to giving out more details relating to the financial position of the company. This step will enable intending depositors to have a proper appreciation of the financial position of the company. The form to be filled with the registered of companies has been amplified to disclose more information.

(vi) From 1 st April 1978, a company will have to indicate in its advertisement inviting deposits that it has no overdue deposits other than unclaimed deposits or include a statement showing the amount of such overdue deposits. A declaration will also be given to the advertisement to the effect:

(a) That the company has complied with the provision of the rules.

(b) That complaince with the rules doesn't imply that repayment of deposits is guaranteed by the central government.

(c) That the deposits accepted by the companies are unsecured and rank with other unsecured liabilities.