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Type of Company

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Raghav Kulkarni

Company Secretary

32 Points Posted on 06 April 2010

Hello,

A private limited company runs a scheme of sale of products such as a 30days Scheme in which the company invites general public for subscribing the scheme with a membership fees and after 30 days the product is given to the member under a lucky draw system.

I would like to know, whether that amounts to Chit under Chit Fund Act or it amounts to transactions under Money Laundering. If this company is making defaults, how come other branded companies are running such schemes?

Please advice.

Regards,

RAGHAV KULKARNI

Replies (1)

CS GK Murty

Company Secretary

225 Points Posted on 07 April 2010

No, If you go through the definition of Chit fund co., the funds are sourced from within the members of the company not from outsiders and the services being rendered shall be for and within the members. But in this case, I am sure it does not amount to money laundering activity but i do think the shcme so adopted by the company is one of the activities concerned with the sale of products, nothing else. The point to ponder is they are not selling by force. Buyers should know the pros and cons of it.

Further, if it is incorporatated under sec. 3(1)(iii) of the companies act, 1956, then certainly it is a body corporate.