Expert Advisory Committee
ICAI-Expert Advisory Committee
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3.1       Query

 

Acceptance of deposits along with share application money by

 a mutual benefit company.

 

1.A company was incorporated with its main object to accept deposits and advances to its shareholders only, being a mutual benefit company under the Companies Acceptance of Deposits Rules, 1975. This company is yet to be approved as a Nidhi Company under section 620-A of the Companies Act, 1956, for which it has applied.

 

2.The company runs a daily deposit scheme starting from Re. 1/- per day and people join the scheme by signing a common form for becoming a shareholder and a depositor.

 

3.The company is operating at more than 100 branches in remote areas. Being a new company, the collection of information from such remote branches takes at least 45 days, therefore, necessary information for maintaining a register of members and allotment of shares cannot be obtained before 90 days.

 

 4.According to the querist, as per the Companies Act, this company cannot accept deposits from persons other than its shareholders, whereas the company has accepted the share application money and the deposit of Re. 1/- per day to Rs. 10,000/- as fixed deposit.

 

5.The querist has sought the opinion of the Expert Advisory Committee on the following issues arising from the above:

 

                        (i)            Whether such a depositor can be called a shareholder?

 

                        (ii)            Whether it is legal action?

 

(iii) What is the remedy and correct procedure for acceptance of deposits in such company?

 

                                                                                     Opinion                                    December 29, 1989

 

1.The opinion of the Committee on the issues raised in para 5 above is as below:

 

(i) A person can be called a shareholder only when shares are allotted to or acquired by him.

 

(ii) The query is not clear. In any case the relevant requirements of the Companies Act, 1956, with regard to share capital deposits etc. have to be complied with unless specifically exempted by a Notification of the Government under section 620-A of the Companies Act.

 

(iii) The company should comply with provisions of section 58 A of the Companies Act, 1956, and the Rules made thereunder.

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