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Question
Answer the following question:
Explain the provisions related to circular or advertisement for inviting deposits.
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Solution
If a company invites deposits from its members, it issues a circular. But if it invites deposits from the public, the company has to issue an advertisement. The provisions related to circular or advertisement for inviting deposits are as follows:
(a) Contents of circular or advertisement: Statement about the financial position of the company. The portion of secured and unsecured deposits of fresh issues.
Credit rating obtained from a Credit Rating Agency (only for an eligible public company). Details of the scheme. Name of Deposit Trustees.
Amount due towards deposits of any previous deposits accepted by the company.
(b) Filing of circular or advertisement with Registrar of Companies: Company has to file a copy of the circular or advertisement with the Registrar of Companies.
The advertisement or circular shall be signed by the majority of directors or their authorized agents.
(c) Issue of circular or advertisement: The Company can issue circular or advertisement, only after 30 days of filling a copy of the circular or advertisement with the Registrar of Company (ROC).
A company can send the circular to all its members by registered post, speed post, or electronically.
In addition, the company has to publish the circular as an advertisement in newspapers in English and vernacular language.
(d) The validity of Circular or Advertisement: The circular or advertisement shall be valid till the expiry of six months from date of closure of financial year or till the financial statement of the company is laid before AGM of the company, whichever is earlier. After that, fresh circular or advertisement should be published Rule 46) of Companies (Acceptance of Deposits) Rules, 2014.
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