The concept of deposits is well regulated under the Companies Act, 2013 under which the companies accept the capital in the form of deposits made by the general public or through its own members as a form of repayment obligation. But this does not include all the forms of deposits under companies act, 2013 which are received by a company. The act specifies the acceptable form of deposits to ensure proper compliance and reduce conflicts about the various kinds of deposits. These exemptions enable businesses to access funds through various permissible channels without falling under the strict regulatory framework applicable to deposits.
What do you Mean by Deposits under Companies Act?
The term deposits under companies act, 2013 stand as a form of receipt of money made by way of loans or any other manner by a company as mentioned under Section 2 (31) of the Companies Act, 2013. This also includes the various categories of receipts as prescribed by the Companies Act, 2013 which is made in consultation with the Reserve Bank of India. This guide will discuss the amounts not considered deposits under companies act, 2013 as a general understanding. Management, including the definition and acceptance of deposits, is very much regulated under Sections 2(31) and 73 to 76 of the Companies Act, 2013, followed by the Companies (Acceptance of Deposits) Rules, 2014.
- Section 2 (31) refers to deposits as receipts that are made through deposits or in the form of loans that are received by any other means by the company.
- Section 73 talks about the acceptance of deposits through its members but is regulated by certain terms and conditions.
- Section 74 further mandates for the repayment of the said deposits which was accepted before the commencement of the Companies Act, 2013.
- Section 76 refers to the public companies who shall accept the deposits by the public but only under specific conditions.
- There also includes various types of exclusions that are capital received from the government, loans from financial institutions and advance received through goods and services.
What Amounts are not Considered as Deposits?
The below-mentioned provides for the amounts which are not considered deposits under Section 2(31) of the Companies Act, 2013:
Amounts Received from the Central Government
This includes the amount which is received from the Central Government, State Government or any other local authorities that will not be considered as a form of deposit. One can include the subsidies, grants and loans from the government bodies. All these types of funds are made in general for the developmental and supportive form of various commercial borrowings.
Securities and Bonds
All the money is raised from commercial holdings including the bonds and other debentures. Even the issuance of the secured form of debentures is also regarded as the same it further also includes the convertible debentures. Thus this form of instrument is further regulated as per the securities followed by the law and also involves the proper form of repayment obligations.
The Inter Corporate Loans and other Deposits
This includes the loans and the deposits which are made or received from other corporations in the form of funding made by the holding or a subsidiary company. Thus the transactions are further governed by the various inter-corporate financing norms and regulations which are not to be considered as a form of deposits.
The Share Capital and Securities Premium
The deposits that are received towards the shares which are issued by a company, also include the share application money which stands pending for the allotment in the form of securities premium. Thus these are called equity contributions also which are not payable in the form of loans and are not to be considered as a form of deposits.
Advances and Repayments
This includes the payments that are received in the form of advances towards the goods and services that also include the customer advances and other orders for the products followed by the advances made towards the projects. The optional form of payment also includes the other forms of payments that are made for business activities and are not considered as a form of borrowing.
Security Deposits
The deposits are made for security towards the tenants, suppliers and other customers. It also includes the rent for security deposits or the other performance guarantees, followed by the only act of securing the obligation further are not treated as a form of financial borrowing and thus will not be considered as a form of deposit under the Act.
Capital from Banks and Financial Institutions
This talks about the loans and credit from the facilities that are taken from the financial institutions. This also includes the loans followed by the working capital and other banking facilities. The transactions and the borrowings are governed by the financial agreement and will not be considered under the Companies (Acceptance of Deposits) Rules, 2014 under this Act.
The Employee Welfare Contributions
The contributions are made by the company under the various managed welfare schemes which also include the provident fund deductions followed by the pension contributions. The amount which is made in fiduciary is also considered for the benefit of the employees which will not be regarded as a form of deposits under companies act, 2013.
The Trade and Business Receipts
This includes the payments which are received during the operation of business. One can take the example of available trade credits followed by instalment sales, thus these all can be considered as a form of investment funds that comes as a form of trade transactions and are not considered as a form of deposits under companies act, 2013.
Money from Subscription
The funds or the capital is received for subscribing to the applicable securities that are pending as a form of allotment, this also includes the share subscription and other funds. Thus this form of the capital fund is regarded as an investment fund that is awaiting the allocation of shares and is further not considered a form of deposits under companies act, 2013.
Premium Insurance and Policy Funds
The funds that are collected from the insurance policies include life insurance premiums and other kinds of health coverage funds. The amount and capital received are the funds that are regularly regulated under the insurance laws and are not considered as a form of deposits under companies act, 2013.
Non Refundable Advances
This comes with the payments which are made under the contract under which the refunds are not expected. It also includes the booking amounts for the long-term supply for the contracts and the said funds are committed towards the contractual obligations and, thus are not considered as an eligible form of deposits under companies act, 2013.
Conclusion
The exclusion of certain amounts from the definition of deposits under companies act, 2013 plays a critical role in ensuring transparency, financial stability, and legal compliance for companies operating in India. These exclusions of deposits under companies act, 2013 help distinguish between operational revenues, statutory obligations, and actual deposits, enabling businesses to maintain proper financial records and reduce regulatory risks.
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