Prohibition on acceptance of deposits from public:
Section 73. (1) On and after the commencement of this Act, no company shall invite, accept or renew deposits under this Act from the public except in a manner provided under this Chapter:
Provided that nothing in this sub-section shall apply to a banking company and non-banking financial company as defined in the Reserve Bank of India Act, 1934 (2 of 1934) and to such other company as the Central Government may, after consultation with the Reserve Bank of India, specify in this behalf.
In case of Private Company – Clause (a) to (e) of Sub-section 2 of Section 73 shall not apply to private Companies which accepts from its members monies not exceeding one hundred per cent, of aggregate of the paid-up share capital and free reserves, and such company shall file the details of monies so accepted to the Registrar in such manner as may be specified. (Notification dated 5th June, 2015.)
Exceptions/ Modifications/ Adaptations:
Clause (a) to (e) of Sub-section 2 of Section 73 shall not apply to private Companies:-
- which accepts from its members monies not exceeding one hundred per cent. of aggregate of the paid-up share capital, free reserves and securities premium account; or
- which is a start-up, for five years from the date of its incorporation; or
- which fulfils all of the following conditions, namely: –
- which is not an associate or a subsidiary company of any other company;
- if the borrowings of such a company from banks or financial institutions or anybody corporate is less than twice of its paid up share capital or fifty crore rupees, whichever is lower; and
- such a company has not defaulted in the repayment of such borrowings subsisting at the time of accepting deposits
- Provided that the company referred to in clauses (A), (B) or (C) shall file the details of monies accepted to the Registrar in such manner as may be specified.(Notification Dated 13th June, 2017)
Section 73 (2): A company may, subject to the passing of a resolution in general meeting and subject to such rules as may be prescribed in consultation with the Reserve Bank of India, accept deposits from its members on such terms and conditions, including the provision of security, if any, or for the repayment of such deposits with interest, as may be agreed upon between the company and its members, subject to the fulfillment of the following conditions, namely:—
- issuance of a circular to its members including therein a statement showing the financial position of the company, the credit rating obtained, the total number of depositors and the amount due towards deposits in respect of any previous deposits accepted by the company and such other particulars in such form and in such manner as may be prescribed;
- filing a copy of the circular along with such statement with the Registrar within thirty days before the date of issue of the circular;
- depositing, on or before the thirtieth day of April each year, such sum which shall not be less than twenty per cent. of the amount of its deposits maturing during the following financial year and kept in a scheduled bank in a separate bank account to be called deposit repayment reserve account;]
- certifying that the company has not committed any default in the repayment of deposits accepted either before or after the commencement of this Act or payment of interest on such deposits and where a default had occurred, the company made good the default and a period of five years had lapsed since the date of making good the default and
- providing security, if any for the due repayment of the amount of deposit or the interest thereon including the creation of such charge on the property or assets of the company:
Penal Provisions for Contravention of Section 73 or Section 76:
Where a company accepts or invites or allows or causes any other person to accept or invite on its behalf any deposit in contravention of the manner or the conditions prescribed under section 73 or section 76 or rules made there under or if a company fails to repay the deposit or part thereof or any interest due thereon within the time specified under section 73 or Section 76 or rules made there under or such further time as may be allowed by the Tribunal under Section 73.
The prohibition on the acceptance of deposits from the public, as outlined in the Companies Act, 2013, plays a critical role in maintaining the integrity of the corporate sector and protecting the interests of the public. By regulating who can accept deposits and under what conditions, the Act aims to prevent fraudulent activities, ensure financial transparency, and foster a safer business environment. Companies must adhere strictly to the provisions of the Act if they wish to accept deposits, and any violation can result in severe penalties.
Section 73 vs Section 76 — Quick Comparison
| Aspect | Section 73 | Section 76 |
|---|---|---|
| Who can accept | Companies accepting from members (subject to prescribed rules and conditions) | Eligible public companies may accept deposits from the public (as per prescribed rules) |
| Key documents / disclosures | Issue circular to members; file the circular with Registrar before issue; disclose financial position & prior deposits | Public invitation requires prescribed disclosures and compliance akin to Section 73 plus additional eligibility conditions |
| Deposit Repayment Reserve | Maintain at least 20% of deposits maturing next FY in a separate bank account (by 30 April each year) | Similar reserve requirement applies as per rules when public deposits are accepted |
| Security / charge | Provide security, if any, and create charge on assets when applicable | Security/charge and rating/eligibility conditions apply as prescribed for public deposits |
| Exemptions / carve-outs | Banking companies, NBFCs and notified companies excluded; certain reliefs for private companies (e.g., acceptance from members within specified limits; start-up window; conditions-based relief) | Available only to eligible public companies; sectoral exemptions (e.g., banks/NBFCs) continue under their regulators |
| Penalties | Contravention or failure to repay within time invites penal provisions under the Act | Contravention or delay in repayment of public deposits also triggers penal provisions |
Note: Keep numeric caps, eligibility tests and rating requirements aligned with the latest Companies (Acceptance of Deposits) Rules before publishing.
How Deposit Compliance Works (At a Glance)
Case Study — When a Private Company Gets it Wrong
Scenario: A private company, short on working capital, accepts deposits from unrelated persons (non-members) through a website form, without issuing the prescribed circular to members or filing it with the Registrar, and without creating the 20% Deposit Repayment Reserve by 30 April.
What went wrong:
- Accepted public money though only members’ route under Section 73 was available to it.
- Skipped mandatory circular + ROC filing and deposit reserve.
Outcome (Illustrative Tribunal Order): The company was directed to refund deposits with interest within a stipulated period, pay penalties under the Act for contravention, and file compliance affidavits. Directors were cautioned that continued default could invite prosecution and disqualification.
This case study is illustrative to show typical consequences. Align actions with current rules and any specific tribunal directions in your jurisdiction.