An Introspective Analysis on Acceptance of Deposits by a Company: When and How
KIIT School of Law, Bhuvneshwar, India.
Volume III – Issue I, 2021
A Company is a juristic person or a separate legal entity, in the eyes of law and it runs it business with the help of the directors, who standing in a fiduciary relationship with the company, has its mind and will. Like other forms of business such as Partnership, Sole Proprietorship etc, a Company, amongst other things, requires capital in order to run its business. In the words of most prominent Company Jurists and Economists as a Company exists in the society to make profits and nothing more and so by this type of interpretation of the existence of a Company, capital becomes all the more important. But then the question arises as to where from the Company would get its capital to run its business in a smooth manner, the answer to that quite evidently is “Public Deposi”which in its simplest terms means to get money from the public or to put it in the terms of business it means an arrangement between the company and the public whereby the public entrusts the money with the money, with a view to get profits in return. The Companies Act, 2013 read with the Companies (Acceptance of Deposit) Rules, 2014 regulates the manner in which a Company can accept deposits from the public. At this juncture it is indispensible to mention that under the Indian Company Law regime only a Public Company is eligible to invite deposits from the public, and such companies as generally under the heavy scrutiny of the MCA and SEBI as Public Money is involves. The Companies Act, 2013 read with the Companies (Acceptance of Deposit) Rules, 2014 allows a company not only to accept deposits from the public, but also allow it to accept it from its members. This paper would elaborate and analyze both situations. A Company may accept funds from public in various ways and forms such as by issuing of shares in its various forms such as equity shares, preference shares etc., by issuing Debentures in different forms such as convertible and non-convertible debentures etc. this paper would discuss and analyze the forms of deposits as a source of fund a company can accepts and its effect on the Capital Structure of the Company and also how it affects the company in the long run in running its business.