A Chit fund is a kind of savings scheme practiced in India. A chit fund company is a company that manages, conducts, or supervises such a chit fund, as defined in Section of the Chit Funds Act, 1982.

Chit fund business in India is regulated under the Chit Fund Act, 1982. As per the Act, a “Chit” means a transaction whether called chit, chit fund, chitty, kuri or by any other name by or under which a person enters into an agreement with a specified number of persons that every one of them shall subscribe a certain sum of money (or a certain quantity of grain instead) by way of periodical instalments over a definite period and that each such subscriber shall, in his turn, as determined by lot or by auction or by tender or in such other manner as may be specified in the chit agreement, be entitled to the prize amount. A transaction is not a chit if some alone, but not all, of the subscribers get the prize amount without any liability to pay future subscriptions or all the subscribers get the chit amount by turns with a liability to pay future subscriptions.

IT IS RECOMMENDED THAT THE PROMOTERS OF THE CHIT FUND COMPANY FIRST START A PRIVATE LIMITED COMPANY WITH THE OBJECTIVE OF OPERATING A CHIT FUND BUSINESS.

1. Director:

• Minimum no. of directors required are 2 out of which 1 shall be Indian Resident.
• Directors are the managers and they are responsible for day to day functioning of the company.
• Director Identification No. (DIN) and Digital Signature Certificate (DSC) are required to be a director of the company
• Any person can be a director of the company including family members

2. Shareholder:

• Minimum no of shareholders required are 2.
• Director and Shareholders can be the same.
• Shareholders are the owners of the company

3. Capital:

• There are 2 types of capital i.e. Authorize Capital (It is the capital up to which company is authorize to raise from the member and it can be increase as and when required.), Paid Up Capital (It is the capital which is paid up by the members of the company and it can be increase as and when required.)
• There is no such requirement for minimum capital, hence the company can be formed with the capital starting from INR 1.

4. Registered Office:

• Any place can be made as the registered office of the company even the residential place can be used as the registered office of the company.

Note: A chit fund business can only be commenced after obtaining chit fund business registration from the relevant State Registrar.