Investment agreement
Ragavendra
(Querist) 18 February 2014
This query is : Resolved
I am having a proprietorship business, one of my friend wants to invest capital of Rs.3lac in my business for period of time he wants agreement on stamp paper stating that i will be paying him interest monthly. My question to the experts is that, is this legal? and if yes than what amount of stamp paper is required and do same required to notaries and for what reason?
R.V.RAO
(Expert) 18 February 2014
It is legal.
SOME LENDERS DEMAND demand promissory note and Post Dated Cheques,also.
stamping of agreements being state subject ,the stamp duty rates differ from state to state .it varies from Rs100 to Rs 300 .
get it on the higher side of say Rs 300/and get it notarised.
note it is not paper work alone,your genuine intentions to repay principal and timely servicing of interest is more important.
Anirudh
(Expert) 18 February 2014
Dear Mr. Raghavendra,
First and foremost you please clarify whether you need the funds (Rs. 3 lakhs) or not for running your business?
If the answer is YES, then instead of saying that your friend is interested in investing, say your friend is ready to lend you the money.
If you are a borrower of the funds, naturally the lender will expect an agreement saying that you received the money and also ready to pay interest at the agreed percentage at specified intervals (in this case every month).
Rs. 100/- stamp paper should be enough.
Please note, the amount is to be received by you in Cheque and not in cash, as Section 269SS of the Income Tax Act does not approve cash transaction in such cases.
Rajendra K Goyal
(Expert) 18 February 2014
Well advised by the expert Anirudh ji, agree to it.
Amount of Stamp paper for agreement differ from State to State, confirm for your State.
Ragavendra
(Querist) 18 February 2014
Thank you experts for your prompt response, I am located at Mumbai, answering to question raised by expert Mr.Anirudh, me and my friend both have mutual understanding on business proposal, the fact remains the same the person required to invest or lend money in my business, particularly for better view of experts below is the draft copy of agreement. please give your feedback.
DRAFT COPY
(To be executed on a non-judicial stamp paper of Rs 100/- or of appropriate value as per the Stamp Act applicable at the place of execution, whichever is higher)
This Agreement executed on this the ____ day of ________, 20 at ___________ by and between the parties with the following details:
COMPANY/FIRM
Name:
Owner:
Address:
INVESTOR
Name: M/s/Mr/Mrs.
Address:
The INVESTOR agrees to invest in the venture and policy of the COMPANY/FIRM for 12 months.
The invested amount: Rs_______________ (in words_________________ ____________________________________).
The INVESTOR understands the laws of investment and both the involved parties agrees to the following terms and conditions of this contract agreement:
• The FIRM agrees to have INVESTOR as one of the many INVESTORs for the investment related to the stock / derivatives / equity cash / commodities / forex /mutual fund business.
• The INVESTOR agrees to keep track of the developments of the venture or the policy during the course of the agreement
• The INVESTOR must put the invested amount in the bank account of the FIRM/ PROPERITOR as soon as the contract agreement commences.
• The INVESTOR will be paid 2.50% interest on invested amount either by cheque/cash monthly from next month the day of execution the agreement.
• The INVESTOR have the option of reinvesting interest paid amount to the capital invested and will be benefited with the interest (on capital investment + reinvested amount) of 2.50% from next month accordingly(Tick √ the box reinvest amount of interest paid).
(Signature of Investor)
• The INVESTOR agrees for the lock in period of invested amount till 3 month(any circumstances either withdrawal or termination), if INVESTOR wants to partly withdraw the invested amount(not more than 25% of capital invested) before LOCK IN period or maturity of agreement than will have to give a 15 day’s notice with specific reason & amount to be withdrawn.
• Either party to this Agreement may terminate this Agreement at any time without assigning any reason by giving 30 (thirty) days’ notice in writing to the other party.
• The INVESTOR must get the return of the capital amount within 5 working days of maturity of the agreement.
Both party shall strictly adhere to and abide the agreement clause; any amendment in the agreement by the OWNER will be bought to the notice of INVESTOR.
This Memorandum of understanding is covered by the laws of the Sovereign Republic of India and the States where the two parties are domiciled as Applicable. Any dispute will be attempted to be resolved amicably first, Then by mutually agreed Arbitration and finally under the law.
This agreement has been executed as on___________ and shall remain into effect for ____ months from execution date to Validation of agreement date: ___________
IN WITNESS WHEREOF, the parties hereto have set their hands and signatures on the day, month and year first above written
Signed for and on behalf of the Investor:
_____________________________________ __________________________
(Name of Investor) (Signature of Investor)
(Should be signed by individual / proprietor / designated partner(s) / designated director(s), as the case may be the guardian of the investor).
In the Presence of witness:
1. ______________________________
_____________________________
Name and Address Signature
Signed for and on behalf of the FIRM/ Proprietor:
__________________________________ __________________________
(Name of Proprietor) (Signature of Proprietor)
(Should be signed by Individual / Partner(s) / Proprietor)
In the Presence of witness:
1. _______________________________
_____________________________
Name and Address Signature
Anirudh
(Expert) 18 February 2014
You say that you are a proprietorship.
However, in the agreement you write as FIRM (the term FIRM is applicable only to a partnership firm).
Further more, individuals / Firms are prohibited from accepting deposits/investments.
Better take care on these aspects.
Guest
(Expert) 18 February 2014
As well advised earlier by above Expert yours could be only a Loan Agreement
R.V.RAO
(Expert) 18 February 2014
yes,as acceptance of deposits is regulated by special rules and your set up as trader or firm cannot be made eligible to accept same,go for a simple loan,in your individual capacity.
Ragavendra
(Querist) 18 February 2014
Thanks to all experts suggestion, will take note of the advise.
Guest
(Expert) 19 February 2014
Thanks for the appreciation
T. Kalaiselvan, Advocate
(Expert) 19 February 2014
I agree with the experts that as an investment in a company/firm's business activity, a fixed percent of interest as a return of investment cannot be predicted, if it is so, it amounts to a cheating or fraudulent activity. Instead of running a risk, better to obtain the amount as loan for interest as agreed upon.
R.V.RAO
(Expert) 20 February 2014
yes.sri kalaiselvanji,as you advised,the lender of the queriest is to be paid monthly interest (for the loan) only.
