Acceptance of ‑ Scope and provision of Companies (Acceptance of Deposits) Rules, 1975 - Companies Law - Circular : Nos. 3/77

Circular : Nos. 3/77 [1/1/77 ‑ CL ‑ V and 4/5/77 ‑ CL ‑ XIV], dated 15 ‑ 4 ‑ 1977. Subject:- Public Deposits - Acceptance of ‑ Scope and provision of Companies (Acceptance of Deposits) Rules, 1975 explained Rule 3(2) : WHETHER SHARES PREMIUM ACCOUNT TO BE TREATED AS PART OF COMPANY S PAID ‑ UP SHARE CAPITAL OR FREE RESERVES Rule 3 provides that, for the purpose of calculating the net owned funds of a company, the aggregate of its paid‑up capital and free reserves of the company shall be taken into account to enable the company to take deposits within the ceiling laid down therein. It has been represented to the Department that the amount shown in the share premium account in the balance sheet of a company should form part of its free reserves for the purpose of the said rules. This question has been examined and it is clarified that the balance shown in share premium account will be treated as part of the company s paid‑up share capital and not its free reserves having regard to the provisions of section 78(1).