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Justify the following statement. Companies have to create a charge on their tangible assets while issuing secured deposits.

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Question

Justify the following statement.

Companies have to create a charge on their tangible assets while issuing secured deposits.

Short/Brief Note
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Solution

Justification:

  1. Every company accepting deposits from the public shall create a charge on its tangible assets of an amount not less than the number of deposits accepted in favour of the deposit holders in accordance with such rules as may be prescribed.
  2. The charge should be created within 30 days of accepting the deposits.
  3. The minimum amount of security should be equal to the amount not covered by Deposits Insurance. The security is created in favour of the Deposit Trustee.
  4. Thus, it is rightly justified that, companies have to create a charge on tangible assets while issuing secured deposits.
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Terms and Conditions for Acceptance of Deposits
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Chapter 5: Deposits - Exercises [Page 92]

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