Terms, Conditions and Limits Governing Deposits

Even once a company is entitled to accept deposits — whether from members under Section 73(2) or from the public under Section 76 — the Companies (Acceptance of Deposits) Rules, 2014 fix the outer commercial terms on which it may do so, so that neither the period, the amount, nor the return offered is left entirely to the company's own discretion.

As to period, a deposit must ordinarily be accepted or renewed for a period of not less than six months and not more than thirty-six months. The Rules carve out one narrow exception to the six-month floor: a company may accept deposits repayable earlier — for a period as short as three months — to meet a genuine short-term working-capital requirement, but only up to ten per cent of the aggregate of its paid-up share capital, free reserves, and securities premium account, and never as a matter of routine practice. This period range reflects the deposit's place among the sources of corporate finance studied in the previous chapter — genuinely medium-term, longer than routine working-capital borrowing but shorter than a debenture or bond typically runs.

As to the amount, the Rules cap how much a company may accept in the aggregate, expressed as a percentage of the company's own financial base — its paid-up share capital, free reserves and securities premium account taken together — rather than as a flat rupee figure, so the ceiling automatically scales with the size of the company. A company other than an eligible company may accept deposits from its members up to an aggregate not exceeding thirty-five per cent of this financial base. An eligible company, by contrast, is subject to a tighter individual limit on member deposits — not exceeding ten per cent of the same aggregate — but may accept deposits from members and from the public together up to a combined ceiling of twenty-five per cent of that aggregate, reflecting the larger overall scale at which an eligible company is permitted to raise deposits, balanced against a more conservative limit on any one category of depositor. …