CA Intermediate · Corporate and Other Laws · Acceptance of Deposits by Companies
Aarav Traders Pvt Ltd, a private company, wants to borrow Rs 8 lakh from its director Mr Aarav out of his own funds. Which statement is correct regarding whether this amounts to a deposit under the deposit Rules?
The amount is not treated as a deposit if the director gives a written declaration that the money is not out of funds borrowed or taken as loans or deposits from others. Not every receipt is a deposit, and neither the amount nor the interest rate is the test.
- AIt is a deposit because every receipt of money by a company is a deposit
- BIt is not a deposit if the director furnishes a declaration in writing that the amount is not funds acquired by borrowing or accepting loans or deposits from othersCorrect
- CIt is a deposit only if the amount exceeds Rs 50 lakh
- DIt is a deposit only if interest is paid at a rate above the bank rate
Explanation
Money received from a director is excluded from the definition of deposit if he gives a written declaration at the time of giving the money that it is not out of funds borrowed or accepted from others. Hence not all receipts are deposits. The Rs 50 lakh threshold and the interest rate test are not the criteria.
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