Company Deposit Rules: What Every Director Must Know
Avoid heavy penalties and ensure your business funding is legally compliant.
In the landscape of Indian Corporate Law, how you bring money into your company matters more than how much you bring in. Under the Companies Act, 2013, simple loans can often be misclassified as "Deposits," triggering massive legal headaches.
📌 What exactly is a "Deposit"?
Simply put, a deposit is any money received by a company as a loan or advance. However, the law provides specific exemptions. If your funding doesn't fall into an "Exempt" category, it's a deposit—and deposits come with heavy strings attached.
✅ Safe (Exemptions)
- Loans from Directors (from own funds)
- Loans from Shareholders (Pvt Ltd)
- Loans from Banks/NBFCs
- Inter-corporate loans
⚠️ Risk Area (Deposits)
- Loans from outsiders
- Public funding without circulars
- Unadjusted business advances (>365 days)
🚨 The Price of Non-Compliance
The Ministry of Corporate Affairs (MCA) does not take deposit violations lightly. The consequences are severe:
- For the Company: Minimum fine of ₹1 Crore or twice the deposit amount.
- For Directors: Up to 7 years of imprisonment plus personal fines.
📋 Mandatory Compliance Checklist
| Requirement | Action Item |
|---|---|
| DPT-3 Filing | Annual return of deposits/exempted loans. |
| Director Declaration | Must confirm funds are not borrowed. |
| Repayment Reserve | Liquid funds kept for repayment. |
Need Expert Structure for your Director Funding?
Don't wait for an MCA notice. Get your DPT-3 filings and loan agreements vetted by professionals.
Gururaaja Sanjay & Co, Chartered Accountants
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