Question

State, with reasons, whether the following statements is True or False.

A private company cannot accept deposits from public. 

Answer 1

This statement is True.

1. According to Provision of Section 58 (A) of the Companies Act, 1956 and Rules (2) of the companies Rules, 1975, the term ‘deposit’ means any deposit of money accepted and includes any amount borrowed by the company. The term ‘deposit’ however, does not include specific type of borrowings and security deposits.

2. Receiving the amount of deposits along with duly filled prescribed application by a company from the interested public in response to the advertisement given to invite deposits is called ‘acceptance of deposits’.

3. A public company can accept deposits from the public at large. The term ‘deposit’ is usually taken as ‘public deposit’ because the deposits are invited and accepted by the public company from the general public.

4. A private company cannot invite and accept deposits from the general public. However, it can accept deposits from its directors, relatives of directors and members provided it has satisfied certain conditions required by law.