Secretary
8 months ago
Can we distribute the excess fund kept in FD (other than as Sinking fund) among all our existing members
A.Dear Client,
It is mandatory and highly recommended that a housing society create a sinking fund, which it can do by collecting financial contributions at a fixed rate from each of its members on a monthly basis and then accumulating it over the years so that a substantial amount is generated. A sinking fund means, the money set aside in a separate account to pay off a debt, a way to generate funds for a depreciating asset, to pay off a future expense, or repay long-term debt. It is a financial technique of ensuring that a monetary lack does not arise causing any hardships in case of insufficient funds. In other words, it literally saves an organized legal entity from ‘sinking’ in debt. With respect to cooperative housing societies, a sinking fund is to be generated in specific ways and used for a particular purpose. While a housing society is expected to set aside other funds such as a reserve fund, repair and maintenance funds, and education and training funds, a sinking fund is to be utilized when structural repairs are needed. When a reconstruction/alteration, heavy repairs, or additions need to be carried out (with inputs, guidance, and opinion of the Architect), the Sinking Fund kicks in as a go-to fund. So, decisions over the distribution of the excess fund kept in FD among all the existing members of the Society other than a Sinking fund are required to be discussed, negotiated, and approved on a majority vote during general body meetings after inviting feedback and opinions from the members of the society to protect the common interest of members and considering the wellbeing of the Society.
It is mandatory and highly recommended that a housing society create a sinking fund, which it can do by collecting financial contributions at a fixed rate from each of its members on a monthly basis and then accumulating it over the years so that a substantial amount is generated. A sinking fund means, the money set aside in a separate account to pay off a debt, a way to generate funds for a depreciating asset, to pay off a future expense, or repay long-term debt. It is a financial technique of ensuring that a monetary lack does not arise causing any hardships in case of insufficient funds. In other words, it literally saves an organized legal entity from ‘sinking’ in debt. With respect to cooperative housing societies, a sinking fund is to be generated in specific ways and used for a particular purpose. While a housing society is expected to set aside other funds such as a reserve fund, repair and maintenance funds, and education and training funds, a sinking fund is to be utilized when structural repairs are needed. When a reconstruction/alteration, heavy repairs, or additions need to be carried out (with inputs, guidance, and opinion of the Architect), the Sinking Fund kicks in as a go-to fund. So, decisions over the distribution of the excess fund kept in FD among all the existing members of the Society other than a Sinking fund are required to be discussed, negotiated, and approved on a majority vote during general body meetings after inviting feedback and opinions from the members of the society to protect the common interest of members and considering the wellbeing of the Society.
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