Q.What is an 'Eligible Company'? Explain the conditions to be satisfied by a company before it can accept deposits from the public under Section 76.

Not every company may invite deposits from strangers — only a public company that has already proved itself financially, and cleared a stricter approval bar, is permitted to.

These conditions are additional to, and stricter than, the ordinary-resolution conditions Section 73(2) imposes on member deposits.

Section 76 of the Companies Act, 2013 carves out the second exception to Section 73(1)'s general prohibition — permitting a company to invite deposits from the public at large, not just its members — but restricts this to a defined class of company, the 'eligible company,' meaning a public company (never a private one) having a net worth, or a turnover, of not less than the amount the Rules prescribe.

Before inviting deposits from the public, an eligible company must obtain the prior consent of its members by a SPECIAL resolution passed at a general meeting — a materially stricter bar than the ordinary resolution Section 73(2) requires for member deposits — and must file a copy of that special resolution with the Registrar of Companies before making any invitation. Beyond this, the company must: issue a circular or, more commonly, a public advertisement in Form DPT-1, published in one English-language newspaper and one vernacular-language newspaper circulating in the state where its registered office is situated; obtain, before the invitation, a credit rating from a recognised credit rating agency, disclose it to depositors, and obtain a fresh rating every year for as long as the deposits remain outstanding; appoint one or more trustees for depositors and execute a deposit trust deed (Form DPT-2) at least seven days before the circular or advertisement is issued; and maintain the same Deposit Repayment Reserve Account Section 73(2) requires, along with deposit insurance where prescribed and security where the deposits are secured.

The stricter regime reflects the far larger and less-informed pool of investors a public invitation reaches, compared with a company's own members, and only a company of proven financial scale is judged reliable enough to be trusted with strangers' money on this basis.

A frequent mistake is stating that any company can be an 'eligible company' — the Act restricts this status to PUBLIC companies only, never private ones. Students also sometimes confuse the ordinary resolution of Section 73(2) with the special resolution Section 76 mandates, or forget that the credit rating must be renewed every year, not obtained only once.