Banning of Unregulated Deposits Ordinance, 2019 A presentation by: CA Gursheen Bindra Ghai At the Aurangabad Branch of WIRC of ICAI

What is the difference between an Ordinance and Act? Lok Sabha (Lower House) Bill Rajya Sabha (Upper House) Bill Parl. not in session Direct President assent On the request of Union Cabinet

Why was this ordinance introduced? Ponzi Schemes Scam Illicit Deposits

What is a deposit under BUD Ordinance? Money received by way of an advance or loan or any other from, By any deposit taker, with a promise to return after a specified period of time or otherwise, Either in cash/kind/in the form of any specified service With or without any benefit in the form of interest, bonus, profit or any other form,

But it doesn’t include… Loan from Scheduled or Co-Operative Bank Loan from PFI or NBFC or Regional Financial Institutions or Insurance companies

c) Amount received from/Guaranteed by Government or amount received from a statutory authority constituted under an Act of Parliament or State Legislature. d) Amounts received from foreign governments /institutions or via transactions covered under FEMA. e) Capital Contributions of partners of partnership firms or LLP’s f) Loan received by an individual from relative or loan received by firm by the relatives of any of its partners

g) Credit received by buyer from seller on sale of (moveable or immovable) property h) Amounts received by an asset reconstruction company under SCRA i) Voluntary Contributions received by political parties j) Periodic payments made by members of Self-help groups k) Any other amount collected as prescribed by State Government

l) Amounts received in the course of business and having genuine connection with the same including: Refundable Advance for supply or hire of goods or provision of services ii) Advance received against sale or transfer of immoveable property subject to the fact that it is adjusted against the total consideration. iii) Security or Dealership deposit iv) Advance under long term projects for supply of capital goods except for those specified under (ii)

Please note: To be refunded within 15 days

What is an Unregulated Deposit? Any deposit, accepted or solicited by any deposit taker, by way of business, and the deposit is NOT a regulated deposit as per Schedule 1 of this ordinance.

For Example: Transaction not covered in ordinance Personal Use Friend Transaction covered in ordinance Business Use Friend

Person Who is a Depositor? Any person who makes a deposit under this ordinance. Individual HUF Company Trust Partnership Firm LLP AOP & AJP Co-Operative Society (Reg. under any relevant Act)

What kind of deposit takers are under the purview of this Ordinance? Any individual or group of individuals Proprietary Concern A partnership firm (registered or unregistered) An LLP A Company An AOP A Trust (both private and public) A Co-op Society or Multi State Co-Op Society Any other arrangement Receiving or soliciting deposits

But it doesn’t include… A Corporation incorporated under an Act of the Parliament A Banking Company, State Bank of India, a Regional Rural Bank, a Co-operative bank or a multi-State Co-operative bank as defined in the Banking Regulation Act

Which are the Nine regulators as per this ordinance?

the following schemes introduced by these regulators will be considered as Regulated Deposits.

A summary of what we have discussed:

What will be the disclosures required? Central Government to designate an authority responsible for Creating , Maintaining & Operating an online database of information of deposit takers pan India. The information may be shared by a Regulator/Competent Authority as authorised by the Designated Authority. The deposit taker, who commences or carries on this business after the commencement of this ordinance shall be required to intimate the Designated Authority in the manner as may be prescribed in due course.

Penal Provisions of the ordinance: Sec 3 = Accepting or Soliciting Unregulated Deposits (banned by the ordinance) Sec 4 = Fraudulent Default in repayment under Regulated Deposit Scheme

So to sum up…

Any Questions?