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CA Intermediate · Corporate and Other Laws · Acceptance of Deposits by Companies

Kaveri Engineering Ltd, a public company, received ₹40 lakh from its director Mr. Nair. Mr. Nair gave the company a written declaration that the amount was not given out of funds acquired by borrowing or accepting loans or deposits from others. How is this amount treated under the Companies (Acceptance of Deposits) Rules, 2014?

The ₹40 lakh is not a deposit. The Deposit Rules exclude money received from a director if the director gives a written declaration at the time of lending that the money is not out of funds borrowed or accepted from others. No special resolution or shareholding is needed.

  1. AIt is a deposit, because every sum received from a director is a deposit
  2. BIt is not a deposit, because a sum received from a director with such a written declaration is excluded from depositsCorrect
  3. CIt is a deposit unless the Board of Directors passes a special resolution
  4. DIt is not a deposit only if Mr. Nair is also a member holding more than 10% of the voting power

Explanation

The definition of deposit excludes an amount received from a director of the company if the director furnishes a written declaration at the time of giving the money that it is not out of borrowed funds. Mr. Nair has given this declaration, so the amount is outside the definition. No board special resolution or shareholding condition is required.

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