ADVERTISEMENTS AND CIRCULARS FOR DEPOSIT

In last post here, we discussed terms and conditions for deposit accepted by a company. General provisions under the companies Act 2013 was earlier discussed here. In this post, we will discuss advertisement or circular issued by a company for acceptance of deposit.

Circular and Advertisement:

Every company referred to in sub-section (2) of section 73 intending to invite deposit from its members shall issue a circular to all its members by registered post with acknowledgement due or speed post or by electronic mode in Form DPT-1. The circular may, additionally, be published in English language in an English newspaper and in vernacular language in a vernacular newspaper having wide circulation in the State in which the registered office of the company is situated.

Every eligible company intending to invite deposits shall issue a circular in the form of an advertisement in Form DPT-1 for the purpose in English language in an English newspaper and in vernacular language in one vernacular newspaper having wide circulation in the State in which the registered office of the company is situated.

Every company inviting deposits from the public shall upload a copy of the circular on its website, if any.

No company shall issue or allow to issue or cause to be issued on its behalf, any circular or a circular in the form of advertisement inviting deposits, unless issued on the authority and in the name of the Board of directors of the company.

No circular or a circular in the form of advertisement shall be issued by or on behalf of a company unless, not less than thirty days before the date of such issue, there has been delivered to the Registrar for registration a copy thereof signed by a majority of the directors of the company.

Validity Period of Circular or Advertisement:

A circular or circular in the form of advertisement issued shall be valid until the expiry of six months from the date of closure of the financial year in which it is issued or until the date on which the financial statement is laid before the company in annual general meeting or, where the annual general meeting for any year has not been held, the latest day on which that meeting should have been held in accordance with the provisions of the Act, whichever is earlier, and a fresh circular or circular in the form of advertisement shall be issued, in each succeeding financial year, for inviting deposits during that financial year.

The date of the issue of the newspaper in which the advertisement appears shall be taken as the date of issue of the advertisement and the effective date of issue of circular shall be the date of dispatch of the circular.

Form DPT – 1:

The circular or circular in the form of advertisement shall contain the following:

1. GENERAL INFORMATION

a. Name, address, website and other contact details of the company;

b. Date of incorporation of the company;

c. Business carried on by the company and its subsidiaries with the details of branches or units, if any;

d. Brief particulars of the management of the company;

e. Names, addresses, DIN and occupations of the directors;

f. Management’s perception of risk factors;

g. Details of default, including the amount involved, duration of default and present status, in repayment of –

i) statutory dues;

ii) debentures and interest thereon;

iii) loan from any bank or financial institution and interest thereon.

2. PARTICULARS OF THE DEPOSIT SCHEME

a. Date of passing of board resolution;

b. Date of passing of resolution in the general meeting authorizing the invitation of such deposits;

c. Type of deposits, i.e., whether secured or unsecured;

d. Amount which the company can raise by way of deposits as per the Act and the rules made thereunder, and the aggregate of deposits actually held on the last day of the immediately preceding financial year and on the date of issue of the Circular or advertisement and amount of deposit proposed to be raised and amount of deposit repayable within the next twelve months;

e. Terms of raising of deposits: Duration, Rate of interest, mode of payment and repayment;

f. Proposed time schedule mentioning the date of opening of the Scheme and the time period for which the circular or advertisement is valid;

g. Reasons or objects of raising the deposits;

h. Credit rating obtained; Name of the Credit Rating Agencies, Rating obtained, Meaning of the rating obtained, Date on which rating was obtained.

i. Extent of deposit insurance, ; Name of the Insurance Company, terms of the insurance coverage, duration of coverage, extent of coverage, procedure for claim in case of default etc.

j. Short particulars of the charge created or to be created for securing such deposits, if any;

k. Any financial or other material interest of the directors, promoters or key managerial personnel in such deposits and the effect of such interest in so far as it is different from the interests of other persons.

3. DETAILS OF ANY OUTSTANDING DEPOSITS

a. Amount Outstanding;

b. Date of acceptance;

c. Total amount accepted;

d. Rate of interest;

e. Total number of depositors;

f. Default, if any, in repayment of deposits and payment of interest thereon, if any, including number of depositors, amount and duration of default involved;

g. Any waiver by the depositors, of interest accrued on deposits;

4. FINANCIAL POSITION OF THE COMPANY

a. Profits of the company, before and after making provision for tax, for the three financial years immediately preceding the date of issue of circular or advertisement;

b. Dividends declared by the company in respect of the said three financial years; interest coverage ratio for last three years (Cash profit after tax plus interest paid or interest paid)

c. A summary of the financial position of the company as in the three audited balance sheets immediately preceding the date of issue of circular or advertisement;

d. Audited Cash Flow Statement for the three years immediately preceding the date of issue of circular or advertisement;

e. Any change in accounting policies during the last three years and their effect on the profits and the reserves of the company.

5. A DECLARATION BY THE DIRECTORS THAT-

a. the company has not defaulted in the repayment of deposits accepted either before or after the commencement of the Act or payment of interest there on;

b. the board of directors have satisfied themselves fully with respect to the affairs and prospects of the company and that they are of the opinion that having regard to the estimated future financial position of the company, the company will be able to meet its liabilities as and when they become due and that the company will not become insolvent within a period of one year from the date of issue of the circular or advertisement;

c. the company has complied with the provisions of the Act and the rules made thereunder;

d. the compliance with the Act and the rules does not imply that repayment of deposits is guaranteed by the Central Government;

e. the deposits accepted by the company before the commencement of the Act have been repaid (or will be repaid along with interest within ____ days (days to be specified) and until they are repaid, they shall be treated as unsecured and ranking pari passu with other unsecured liabilities).

f. In case of any adverse change in credit rating, depositors will be given a chance to withdraw deposits without any penalty.

g. the deposits shall be used only for the purposes indicated in the Circular or circular in the form of advertisement;

h. the deposits accepted by the company (other than the secured deposits, if any, aggregate amount of which to be indicated) are unsecured and rank pari passu with other unsecured liabilities of the company.