Investment agreement

This query is : Resolved

Ragavendra (Querist)
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18 February 2014 I am located at Mumbai, one of wants to invest capital of Rs.3lac in to 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? 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

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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01 August 2024 Your draft investment agreement is largely comprehensive and covers the essential elements for a legal and clear understanding between you and the investor. Here’s a breakdown addressing your queries and suggestions for improvement:

### **1. Legality:**
Yes, it is legal to have an investment agreement where you pay interest to an investor. Such agreements are common in various business settings. However, there are a few considerations:
- **Interest Rates:** Ensure the interest rate complies with any regulatory norms, especially if it’s significantly higher or lower than prevailing market rates.
- **Compliance:** Ensure the investment terms align with the Companies Act, 2013, if it involves a company, and other applicable laws.

### **2. Stamp Duty:**
- **Stamp Paper:** In Maharashtra, a non-judicial stamp paper of Rs. 100/- is generally used for such agreements. However, confirm this with the latest provisions of the Maharashtra Stamp Act, as the required amount might change.
- **Notarization:** While notarization is not mandatory, it adds an extra layer of authenticity and can help in legal proceedings if disputes arise. Notarization involves a notary public verifying the identities of the signatories and the authenticity of the document.

### **3. Revised Draft Agreement:**

Here’s a revised draft incorporating some suggested changes:

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**INVESTMENT AGREEMENT**

**This Agreement** is executed on this ___ day of ________, 20__, at ___________ by and between:

**COMPANY/FIRM:**
Name: [Name of Firm]
Owner: [Owner Name]
Address: [Address]

**INVESTOR:**
Name: [Investor Name]
Address: [Investor Address]

**WHEREAS** the INVESTOR agrees to invest Rs. [Amount] (in words: [Amount in Words]) in the COMPANY/FIRM for a period of 12 months.

**NOW, THEREFORE, the parties agree to the following terms and conditions:**

1. **Investment Amount:**
- The INVESTOR agrees to invest Rs. [Amount] in the COMPANY/FIRM.

2. **Interest Payments:**
- The COMPANY/FIRM agrees to pay the INVESTOR 2.50% monthly interest on the invested amount. Payments will be made via [Cheque/Cash] starting from the first month after the execution date.

3. **Reinvestment Option:**
- The INVESTOR may choose to reinvest the interest payments into the principal amount. If chosen, the reinvested amount will earn interest at the same rate.

4. **Lock-in Period:**
- The INVESTOR agrees to a lock-in period of 3 months. Early withdrawal of up to 25% of the capital requires a 15-day notice with a specified reason.

5. **Termination:**
- Either party may terminate this agreement with a 30-day notice without assigning any reason.

6. **Return of Capital:**
- The INVESTOR will receive the return of the capital within 5 working days after the maturity of the agreement.

7. **Dispute Resolution:**
- Disputes will be resolved first through amicable means, then through mutual arbitration, and finally under applicable laws.

**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:**

[Signature]
[Name]
[Address]

**Signed for and on behalf of the COMPANY/FIRM:**

[Signature]
[Name]
[Address]

**In the Presence of Witnesses:**

1. [Name and Address of Witness 1] [Signature]
2. [Name and Address of Witness 2] [Signature]

---

### **Additional Considerations:**

- **Legal Review:** Have a legal professional review the agreement to ensure it complies with all applicable laws and regulations.
- **Documentation:** Keep copies of all signed documents and correspondence related to the investment.

By addressing these points, you ensure the agreement is legally sound and provides clear terms for both parties.