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By CA Aslam Pasha

Q1. What is Deposit and Investment?
In general terms, Deposit means a credit of the depositor thereby giving the depositor the right to money and creating a debtor-creditor relationship that is to be returned to the depositor.
Raising money by way of share capital money raised as security deposit earnest money and advance against goods or services and subscriptions to chits are not treated as deposits
Deposit is defined under Companies Actas follows.
Section 2(31) of the Companies Act,2013 defines deposit as under “deposit” includes any receipt of money by way of deposit or loan or in any other form by a company, but does not include such categories of amount as may be prescribed in consultation with the Reserve Bank of India.
In general terms, Investment means the investing of money or capital in order to gain profitable returns, as interest, income, or appreciation in value.
To further our knowledge we also need to understand the meaning of Collective Investment Scheme provided by SEBI.
A Collective investment scheme is any scheme or arrangement, which satisfies the conditions, referred to in sub-section (2) of section 11AA of the SEBI Act. Any scheme or arrangement made or offered by any company under which the contributions, or payments made by the investors, are pooled and utilised with a view to receive profits, income, produce or property, and is managed on behalf of the investors is a CIS. Investors do not have day to day control over the management and operation of such scheme or arrangement.

Q2. What is an Investment Company?
Investment Company is a company which pools funds from various sources including publicand invests it into better profitable options and distributes back the returns asprofits or losses with such sources including public.
These companies employ fund managers who professionally manage the funds.
As per explanation (a) to section 186 of the Companies Act, 2013, “Investment Company” means a company whose principal business is the acquisition of shares, debentures or other securities.
SEBI further provides meaning to an Investment Management Company as follows.
A Collective Investment Management Company is a company incorporated under the provisions of the Companies Act, 1956 and registered with SEBI under the SEBI (Collective Investment Schemes) Regulations, 1999, whose object is to organise, operate and manage a Collective Investment Scheme.

Q3. Are these investment companies regulated?
There are lot of rules and regulations these companies need to follow mainly their governing bodies are either RBI or SEBI.
Because public money is called for by these companies, RBI deals with these companies very strictly and all banks including national or multinational whoever accept deposits from public are regulated by RBI viaBanking Regulation Act 1949.
Companies which accepts deposits directly or indirectly or through share capital are regulated by SEBI.
Entities that can raise public deposits which are regulated.
RBI allows banks, cooperatives and some non-banking finance companies (NBFCs) to accept deposits. RBI issues special licences to these NBFCs including housing finance companies for raising deposits up to a certain limit. Some companies are authorised by the ministry of corporate affairs to raise deposits from the public.
Cooperative credit societies and salary earners’ societies can accept deposits only from their members. Others are not legally allowed to raise deposits. NBFCs registered with the RBI are not allowed to raise deposits unless by way of a deposit accepting certificate.
Unincorporated bodies like individuals, partnership firms and other association of individuals cannot raise deposits, even if they do financial business.

Q4. What are the type of entities that can register themselves under SEBI or RBI to carry on the activities of investments / accepting deposits?
Under RBI
· Limited /Private Limited Company as NBFC
· Banking Company under banking Regulation
Under SEBI
· Limited Company (Listed on Stock Exchange )
Q5. What are the types of registration required for this type of investment companies
· NBFC ““License
· Banking -License
· Listed Company – Registration under Regulated Stock Exchange.
CA Aslam Pasha can be contacted at Pasha and Co, Charted Accountants, Mob: 09886143191, Off: 080-65702376, Email: [email protected].