Amendment in Companies (Acceptance of Deposit) Rules, 2014
As per the recent amendment made in Rule 2(1)(c)(xvii) of Companies (Acceptance of Deposit) Rules, 2014, deposit means any receipt of money by way of deposit or loan or in any other form, by a company but does not include an amount of Rs. 25 lakh or more received by a startup company by way of a convertible note (convertible into equity shares or repayable within a period not exceeding ten years from the date of issue) in a single tranche, from a person.
In other words, as per the recent amendment in the said rules, in case of a “convertible note,” the period of its conversion into equity or its repayment has been increased from five years to ten years.
Furthermore, a company can accept deposit from its members subject to a maximum limit of 35% of the aggregate of paid up share capital, free reserves, and securities premium account of the company. However, this does not apply to a private company, which is a startup for ten years from the date of its incorporation. In other words, a private company, which is a startup can accept deposit from its members for a period of 10 years from the date of its incorporation without any maximum limit.
The above mentioned period has been increased from 5 years to 10 years by a recent amendment in Rule 3(3), second proviso, clause (i).
