How bank deals with the partnership firm, joint account holders, trust and joint stock company or Discuss those measures which a banker should adopt while opening and operating the following accounts 1. joint stock company 2. partnership 3. joint account holders 4. trust
JOINT STOCK COMPANY :-
It is an association of individuals for the purpose of profit. The members contribute capital. This common capital is divided in to shares. Each member is a shareholder. These shares are transferable. While opening such account the banker should be very careful and he should adopt the following precautions :
1. Checking Of Documents :-
a. A banker must check the following documents of the certificates of incorporation. It is issued by the registrar of Joint Stock Company.
b. Certificate of business commencement.
c. Memorandum of Association.
d. Articles of Association.
2. Checking Of Resolution :-
Resolution of the company must be checked. It most be signed by the chairman and secretary of the company. It must contain the following documents :
i. The name of authorized persons who will operate the account of the company.
ii. The name of persons who will execute the documents on behalf of the company.
iii. All types of conditions related to powers about borrowing lending, mortgaging delegated by the company must be checked carefully by the banker.
3. Directors Accounts In The Same Bank :-
Accounts of company and personal accounts of the directors should be in the same bank. A bankers should keep an eye that there should be no wrongful conversion of funds between the two.
4. Checking Of Limit :-
A banker must check that a company may not use the power of borrowing than the fixed limit.
5. Winding Up Case :-
If company is wound up and liquidator is appointed the banker will stop the payments till the instructions of the liquidator.
6. Charges With In Prescribed Limit :-
The banker of a company will also check that company has got the charges of mortgages with in the prescribed limit or not.
PARTNERSHIP ACCOUNT :-
Partnership is created by oral or written agreement. It is the relation between persons to share the profits of the business. Partnership may be carried on by all the members or by a single on behalf of the others. If partnership deed is not clear then it is settled according the partnership Act 1932.
While opening the partnership account following precautions must be taken by the banker :
1. The account must be opened in the name of firm.
2. Partnership deed and changes made in it time to time must be studied carefully by the banker.
3. It is necessary that all the partners should sign on all the documents.
4. All the instructions about the operation of the account must be signed by all the partners.
5. The specimen signatures on cards must be taken from the partners and authorized person who will operate the accounts.
6. In case of advancing loan and execution of guarantee deed the banker will obtain the signatures of all the partners.
7. A banker must observe the various provisions of Partnership Act in case of death, entry or withdrawal of any partner.
8. A declaration and consent must be taken by the banker from all the partners in regard to the drawing and disbursement.
Any person may create trust if he is competent to do any contract. But trust is created only for lawful purposes. A trust must be for properly transferable to the beneficiary.
Following precaution must be adopted by the banker while opening an account :
1. Examination of trust deed.
i. A banker should study the deed carefully.
ii. Objectives of the trust.
iii. Appointments and powers of the trustees, rights of trustees.
iiii. Names of trustees, and their limitation of powers.
2. A banker must open the account in the name of trust.
3. All the trustees should sign on the application form and signatures card.
4. The banker should get clear instructions that who will operate the account.
5. A banker must study the provisions related to delegation of powers of trustees.
6. The banker must study the legal provisions also in regard to the advancing loan.
JOINT ACCOUNT HOLDER :-
This account is opened by more than one person. All the persons who operate account are called joint account holders. It can be operated by one person or by all or according the instructions.
The joint account holders should not be trustees or partners in business. These account holders may also change the instructions.
Following precautions must be adopted by the banker :
i. A banker must get clear instructions that who can with draw from the account.
ii. The banker must get clear instruction in the following cases :
a. Over draft facility.
b. Account holder death.
c. Insane or insolvent.
d. Suspension or termination of account.
e. Personal liability of individual and joint account holder.
HUSBAND OB WIFE JOINT ACCOUNT :-
This account is opened by husband and wife. This account is different from an ordinary joint account.
i. The banker most study the purpose of opening this account.
ii. In case of death of one, the survival is entitled to receive the balance of the account if the purpose of opening the account was economic.
iii. If husband and wife has borrowed the money jointly then the bank must insist on their personal and joint liability.