A company with a net worth exceeding Rupees.1 Crore can accept fixed deposits from the public in accordance with Companies (Acceptance of Deposit) Rules 1975.
Deposit is a source of short term finance of the company. It is used to meet short term working capital requirements of the company.
A company can accept deposits for a minimum period of 6 months. The maximum period of deposits is 36 months.
The company has to pay regular interest on the deposits at a fixed rate.
The company is liable to repay the principal amount on maturity.
POSITION 0F DEPOSITOR IN A JOINT STOCK COMPANY -
1. Unsecured creditor: Fixed deposit holder is an unsecured creditor of the company. He provides deposits to the company for a short period of time. He is not entitled to participate in the management of the company.
2. Interest: Fixed deposit holder is eligible to receive interest on a regular basis on the deposit amount. The rate of interest depends on the market conditions of the capital market and also on the deposit's tenure. The maximum rate of interest payable by a company is subject to the prevailing regulations at the time of acceptance of deposits.
3. Security: A company deposit is an unsecured borrowed capital for the company. However, the deposit holder has priority over the equity shareholders in repayment of capital. The repayment of capital to shareholders cannot be done before repayment of capital to all the depositors.
4. Repayment: A company must ensure that deposits are repaid on maturity. Default in repayment of deposit can result in punishment in the form of a fine and/or imprisonment.
Deposit is a source of short term finance of the company. It is used to meet short term working capital requirements of the company.
A company can accept deposits for a minimum period of 6 months. The maximum period of deposits is 36 months.
The company has to pay regular interest on the deposits at a fixed rate.
The company is liable to repay the principal amount on maturity.
POSITION 0F DEPOSITOR IN A JOINT STOCK COMPANY -
1. Unsecured creditor: Fixed deposit holder is an unsecured creditor of the company. He provides deposits to the company for a short period of time. He is not entitled to participate in the management of the company.
2. Interest: Fixed deposit holder is eligible to receive interest on a regular basis on the deposit amount. The rate of interest depends on the market conditions of the capital market and also on the deposit's tenure. The maximum rate of interest payable by a company is subject to the prevailing regulations at the time of acceptance of deposits.
3. Security: A company deposit is an unsecured borrowed capital for the company. However, the deposit holder has priority over the equity shareholders in repayment of capital. The repayment of capital to shareholders cannot be done before repayment of capital to all the depositors.
4. Repayment: A company must ensure that deposits are repaid on maturity. Default in repayment of deposit can result in punishment in the form of a fine and/or imprisonment.
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