In an attempt to safeguard investors from fraudulent money-collection schemes, the government on Tuesday proposed mandatory insurance cover for public deposits garnered by companies and a penalty of up to 18% annual interest for defaulters.
The premium of the deposit insurance c company deposits over would need to be paid by companies and a penalty at an annualised interest rate of 15% would be slapped on those which do not provide a deposit insurance to their depositors. The proposed measures, which form part of the draft rules for the new Companies Act, also bar the firms from promising huge returns and hefty agent commissions in excess of the prevailing rates prescribed by RBI for such deposits.
Releasing the draft rules, the corporate affairs ministry said that action would be initiated against the companies that fail to comply with the new rules, called Regulations for Acceptance of Deposits by Companies. Besides, any violating company and each of its officers and other persons, who could be in default, would be punishable with be fined Rs 10,000, with a further fine for continuing default of Rs 1,000 for every day of contravention . Under the deposit insurance scheme, the companies would need to enter into a contract to insure the total principal amount as also the promised interest component for the depositors. However, premium to be paid for such insurance cannot be recovered from the depositor and the money has to be paid by the company.
Source: Times of India
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