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HSC Board - Meaning, Importance, Advantages & Disadvantages of Public Deposit.

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    1. 2. a. b. c. 3. 4. 5. 6. 7. 8. 9. Meaninq: -Deposits are a loan received by the company from an investor on certain terms and conditions about repayment of principal amount wit interest. -Deposits are accepted only by public companies. Private companies are restricted to accept the deposits from general public. Q.l what are the provision and rules of companies Act1956 with respect to Acceptance of Public deposits? Or Write Short Notes on Acceptance of Public Deposit? There are some restrictions or limitations on the acceptance of such deposits: A company can accept deposits up to 25% of the total of its paid up share capital and free reserve. A company can accept deposits in the form of Unsecured debentures Deposits from its members and Deposits guaranteed by the directors up to 10% of the total of its paid up capital and free reserves. In all, a company can accept deposits up to 35% of the total of its shares capital and free reserves. A government company can accept deposits up to 35% of paid up capital and free reserves. The application for deposits must be made.. Private company cannot accept deposits from the general public. A company cannot accept deposits payable on demand. A company can accept deposits for a minimum period of 6 months and maximum period of 3 years i.e. 36 months. On acceptance of deposits company must issue a deposit receipt with 8weeks from the date of receipt of money to the depositors. 10. A maximum rate of interest payable on deposit is 12.5% p.a. as per the Companies Amendment Rules 2001. 11. Company can pay brokerage on deposits collected, through brokers, depending on period of deposits at the following rate: Term u tol ears more than 1 More than 2 ear ear Percenta e 1% 1.5% 2% 12. Company must file with the Registrar, a return of deposits duly certified by the auditor of the company on 31st March every year. A copy of such return must also be submitted to the Reserve Bank of India. 13. Any deposit received by a company against the provision of the Act must be paid back by the company within 30 days of the deposits.
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    1. 2. 3. 4. 5. 6. 7. a. b. c. d. e. f. g. 8. 9. Q.2 what is the provision and rules of companies Actl 956 with respect to Invitation of Public deposits? Company can invite deposits according to the provisions which are laid down by Companies (Amendment) Act 1988 and Companies rules 1975 which are as follows: A company whose capital is less than Rs 1 crore as their own fund is prohibited from inviting public deposits. A company who has made default in repayment of any deposit or interest on such amount can't invite deposits. A company can invite or accept deposits from the public only after the publication of an advertisement. Company must issue an advertisement specifying the financial conditions, management structure and other specified Details. Advertisement inviting deposits must be published in one leading English newspaper and one regional newspaper in the area or state in which the registered office of the company is situated. All provisions of companies Act 1956/2013 applicable to prospectus are applicable to such advertisements. The advertisement must be issued in the name of Board of Directors of the company. The advertisement contains the following:- Name of the company Date of incorporation of the company The nature of business carried on by the company. Brief particular of management of the company Names, occupations of the directors and addresses Profits and dividend declared in last 3 years by the company. Declaration that the company has complied with provisions of the rules. An advertisement must be signed by the majority of directors of the company and is valid for a period of 6 months. A copy of the advertisement/statement in lieu of prospectus should be filed with the Registrar of Companies. Q.3 Renewal of Deposits? Meaninq: -The depositor may renew the deposit on completion of the term of deposit. The term 'Renew' implies, 'to acquire again'. Accordingly the renewal of deposit means acceptance of the deposits by the company for further period. Thus the renewal of deposit refers to issuing new deposit receipt in cancellation receipt for old deposit on maturity of old deposit on repayment. The depositor has to submit the application in writing to renew the deposit. He has to also give a declaration to the effect that the amount is not being deposited out of the funds acquired by him by borrowing or accepting deposits from any other person.
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    1. 2. 3. 4. i) ii) iii) iv) (B) i) ii) iii) iv) Secretarial duties related to Renewal of Deposits:- (RARE) Board Resolution: -If the company intends to renew deposits instead of refunding it. The resolution in the Board Meeting in this regard is to be passed. Approval from Depositors: -The secretary has to prepare printed application forms for Renewal of Deposits and the same forms are to be sent to all depositors at least one month before the maturity date. Renewal Receipts: -After receiving the application form for renewal, the secretary has to prepare renewal receipts and is to be sent to the depositors. Entries in register of Depositors: -The secretary has to make the entries of renewal of deposit in the Register of Depositors. Q.4 Repayment of Deposits? Meaninq: -Company accepts the deposits from the general public on certain terms and conditions. The deposit is accepted for a specific period which is specified in the advertisement. The rules pertaining to the repayment of deposits are also given in companies (Acceptance of Deposits) Rules, 1975 revised from time to time are as under. Maintenance of Liquid Assets: -Every company should deposit or invest a sum not being less that 15% of the amount of its deposit in A current account or other deposit account with any scheduled bank or In unencumbered securities of the central or any state government or In unencumbered securities mentioned in the Indian Trust Act. In unencumbered bond issued by the HDFC bank. Repayment of Deposits: - Every deposit received by a company should be repaid according to the terms and conditions of the deposits. Repayment made before 6 months is not allowed. Repayment made between 3 months and 6 months will be allowed without interest on the deposits. Repayment after six months will be given 2% less interest than the rate of interest applicable. v) A company must intimate the depositor's details of maturity, at least 2 months before the deposit. vi) Repayment can be made after lock-in-period of 6 months by normal companies. Q.5 what are the advantages of deposits? 2. 3. 4. 5. 6. Meaning: -The term 'Public deposit' means any money collected by a company in the form of deposits or loans from the public. The advantages are as follows: Lower Cost: -The rate of interest on deposits is lower than the rate of interest on loans from banks. Unsecured: - Deposits are unsecured loans and thus no charge is to be created on the assets of the company. Control: - Deposits do not provide the depositors any control over the company and thus the owners retain the ownership in their existing ratios. Tax Savinqs: -Interest paid on public deposits by the company is deducted as expenses while calculating taxable income. Thus, the tax liability of the company is reduced. Workinq Capital: -Deposits act as an important source of raising working capital for the company. Increase in shareholders Return: - The interest cost of deposits is lower than loans from banks which increase the profits and thereby return to shareholders.
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