Section 73 of CA 2013 : Section 73: Prohibition On Acceptance Of Deposits From Public

Explanation using Example

Imagine a situation where ABC Pvt. Ltd., a company that manufactures electronic gadgets, decides to raise funds for expanding its production line. Instead of taking a loan from a bank, the company opts to accept deposits from its members (shareholders). To comply with Section 73 of the Companies Act, 2013, ABC Pvt. Ltd. conducts a general meeting where the shareholders pass a resolution allowing the company to accept deposits.

Before accepting any deposits, ABC Pvt. Ltd. prepares a detailed circular that includes the company's financial position, credit rating, and information about previous deposits. This circular is sent to all members and a copy is filed with the Registrar of Companies 30 days before its issuance to the members.

The company also sets aside 20% of the amount of deposits that will mature the following financial year, placing this sum in a separate bank account called a deposit repayment reserve account by the 30th of April, as mandated by law.

Furthermore, ABC Pvt. Ltd. ensures it has not defaulted on any previous deposit repayments and, if it had, that the default was rectified and five years have passed since then. The company also decides to provide a charge on its property as security for the repayment of the deposits.

Members who are confident in the company's future prospects decide to deposit money, and ABC Pvt. Ltd. accepts these funds, agreeing to repay them with interest according to the agreed terms. If, for some reason, the company fails to repay these deposits or the interest thereon, the depositors have the right to approach the Tribunal for recovery of their dues.

The deposit repayment reserve account is used strictly for the repayment of these deposits, ensuring that members' funds are safeguarded.