Rules 4 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Before a company invites deposits it has to issue a circular in Form DPT-1, get it to the Registrar well ahead, offer security if the deposits are secured and take a signed application from each depositor. Rules 4, 6 and 10 set those steps. This article states them as amended up to G.S.R. 663(E) dated 29 August 2022 per the MCA e-book; later amendments should be checked. Rule 5, on the manner and extent of deposit insurance, is omitted and has no text today (omitted from 15 August 2018).
A company under section 73(2) issues a circular in Form DPT-1 to all members; an eligible company issues a circular in the form of an advertisement in English and vernacular newspapers. It must be issued in the Board's name, and a copy signed by a majority of directors must reach the Registrar at least thirty days before issue. It stays valid only until the earlier of six months after the financial year closes or the AGM date. Secured deposits need a charge on Schedule III assets in favour of a trustee, and every depositor submits an application with a declaration that the money is not borrowed.
Rule 4: the circular or advertisement
| Sub-rule | Requirement |
|---|---|
| (1) | Every company under section 73(2) intending to invite deposits from its members issues a circular to all members by registered post with acknowledgement due, speed post or electronic mode, in Form DPT-1. The circular may also be published in English in an English newspaper and in the vernacular language in a vernacular newspaper with wide circulation in the State of the registered office. |
| Proviso to (1) | A statutory auditor's certificate is attached to DPT-1 saying the company has not defaulted in repayment of deposits or in payment of interest on deposits accepted before or after the commencement of the Act. If it did default, the certificate says the company made good the default and a period of five years has lapsed since. Inserted with effect from 15 August 2018. |
| (2) | Every eligible company intending to invite deposits issues a circular in the form of an advertisement in DPT-1 in an English newspaper with country wide circulation and a vernacular newspaper with wide circulation in the State of its registered office, and places it on its website, if any. |
| (3) | Every company inviting deposits from the public uploads a copy of the circular on its website, if any. |
| (4) | No circular or advertisement is issued, or allowed to be issued by anyone else on the company's behalf, unless it is issued on the authority and in the name of the Board of directors. |
| (5) | It is not issued unless, not less than thirty days before the date of issue, a copy signed by a majority of the directors as constituted when the Board approved it (or their agents authorised in writing) has been delivered to the Registrar for registration. |
| (6) | The circular is valid until the earliest of six months from the close of the financial year in which it is issued, the date the financial statement is laid before the company in AGM, or, where the AGM has not been held, the latest day on which it should have been held under the Act. A fresh circular is issued in each succeeding financial year. |
The Explanation fixes the dates: for an advertisement, the date of issue of the newspaper in which it appears is the date of issue, and for a circular the effective date of issue is the date of dispatch. That matters for the thirty-day count in sub-rule (5): count back from the newspaper date or the dispatch date. The rule does not say how the thirty days are to be computed beyond "not less than thirty days before the date of such issue", so keep the delivery date and the issue date on the file.
The e-book records that sub-rule (2) was substituted on 29 June 2016 to add "country wide circulation" and website placement; the earlier wording is not the rule. For the return that follows deposits, see our guide on how to file DPT-3, and our compliance documentation team can prepare the circular papers and Board approvals.
Rule 5: omitted
Rule 5, on deposit insurance, is omitted from 15 August 2018. Rule 3(7) and rule 6 still speak of deposit insurance in their text; those words are quoted as printed.
Rule 6: creation of security
Sub-rule (1). For security, every company under section 73(2) and every eligible company inviting secured deposits provides for security by way of a charge on its assets referred to in Schedule III of the Act, excluding intangible assets, for the due repayment of the deposit and interest, for an amount not less than the amount remaining unsecured by the deposit insurance.
- Proviso: where deposits are secured by a charge on those assets, the deposits and the interest payable must not exceed the market value of such assets as assessed by a registered valuer.
- Explanation I: the company ensures that the total value of the security, by deposit insurance, by charge or by both, is not less than the deposits accepted and the interest payable.
- Explanation II: pending notification of section 247(1) and finalisation of valuers' qualifications and experience, valuation of stocks, shares, debentures and securities is done by an independent merchant banker registered with SEBI or an independent chartered accountant in practice with a minimum experience of ten years. Check the current valuer position; our post on section 247 covers the Act.
Sub-rule (2). The security (not being a pledge) for the deposits is created in favour of a trustee for the depositors on specific movable property of the company, or specific immovable property wherever situated, or any interest in it. The trustee's appointment and duties are in rules 7 to 9.
Rule 10: the application form
Under sub-rule (1), from the commencement of the rules, no company shall accept or renew any deposit, secured or unsecured, unless an application, in such form as specified by the company, is submitted by the intending depositor. Under sub-rule (2), the form contains a declaration by the intending depositor that the deposit is not being made out of any money borrowed by him from any other person. The rule leaves the layout of the form to the company; it prescribes only the application and the declaration.
Example
Evergreen Foods Limited, a public company, wants to invite deposits as an eligible company. Its Board approves the circular; a majority of directors sign a copy, and the company delivers it to the Registrar thirty-one days before the English and vernacular newspapers carry the advertisement. The circular is placed on its website. Secured deposits are backed by a charge on Schedule III assets, valued by a registered valuer, in favour of a trustee. Each depositor submits an application with the declaration that the money is not borrowed. The circular lapses on the earlier of six months after the year closes or the AGM date, and a fresh one is issued for the next year.
Need help with a deposit circular?
The circular, the auditor's certificate, the Registrar copy and the depositor forms must all be ready together. For help with the documents, see our compliance documentation service.
Key takeaways
- A DPT-1 circular goes to all members; an eligible company issues an advertisement in two newspapers.
- Board authority and a copy signed by a majority of directors, with the Registrar thirty days before issue.
- Validity ends at the earliest of six months after year-end or the AGM date; a fresh circular is needed each year.
- Secured deposits need a charge on Schedule III assets in favour of a trustee, with the market value cap from a registered valuer.
- Every depositor submits an application with a not-borrowed declaration.
Read next
- Rules 7–9: trustee for depositors, duties and meeting of depositors
- Rule 3: terms of deposits, period, limits and interest
- Section 73: prohibition on acceptance of deposits
- Section 76: deposits by an eligible company
Disclaimer: Based on the Companies Act, 2013 rules named above as consolidated in the MCA e-book (consulted on 3 October 2026), with the later notifications the article names. Later amendments, fees, forms and the Companies Act, 2013 provisions referred to should be checked. This article is general information, not legal advice; check the official text before acting.