Scope and provision of Companies (Acceptance of Deposits) Rules, 1975 - Companies Law - Letter : No. 4/12/84‑CL‑X,

Letter : No. 4/12/84 ‑ CL ‑ X, dated 25 ‑ 7 ‑ 1984. Subject:- Public Deposits - Acceptance of ‑ Scope and provision of Companies (Acceptance of Deposits) Rules, 1975 explained Rule 3, Explanation : DETERMINATION OF PAID ‑ UP SHARE CAPITAL FOR THE PURPOSES OF RECKONING LIMITS UNDER SUB ‑ RULE (2) According to Explanation under rule 3, the permissible limits for acceptance of deposits under rule 3(2)(ii) of the said Rules are required to be computed with reference to the aggregate of the paid‑up share capital and free reserves appearing in the latest audited balance sheet of the company as reduced by the amount of accumulated balance of loss, balance of deferred revenue expenditure and other intangible assets, if any, as disclosed in the said balance sheet. This position was reiterated in the Department s letter No. 3/18/81‑CL‑X, dated 27‑7‑1981 addressed to the Institute of Company Secretaries of India wherein it was also clarified that any change arising after the date of the relevant balance sheet has to be disregarded. The question whether any change in the paid‑up share capital of the company occurring after the close of the financial year of the company should or should not be taken into account for the purpose of reckoning the limits under rule 3 has again been examined. There are several elements, other than the paid‑up share capital, which go into the computation of net worth on the basis of which the limits laid down under rule 3 for acceptance of deposits are worked out. By taking into account only the increase in the share capital of the company and at the same time ignoring the other components of the net worth, the position would get distorted. In view of the position set out above no change in the provisions of Explanation below rule 3 which have been reiterated in the Department s letter No. 3/18/81‑CL‑X, dated 27‑8‑1981, is considered necessary.