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Banking Laws and Procedures
Presentation
ByCh. Naseer Ahmad
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Banker Customer relationship.
Banker means a person transacting the
business of accepting, for the purpose of
lending or investment of deposit of moneyfrom the public repayable on demand or
otherwise and withdrawable by cheques,
draft, order or otherwise and includes any
Post office Saving Bank.
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Customer.
A person having contractual relationship
with the bank is a customer.
To be a customer one should have anaccount with the bank, ie current deposit ,
saving or PLS TDR account.
A person visiting the bank for depositing
utility bills or availing of remittances
services is not a customer of the bank.
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Qualification of a customer.
He should not be a minor and must haveattained the age of majority. section -3 ofMajority Act of 1875 a person is deemed
to have attained majority when he ascompleted his age of 18 years.
He should be person of sound mind for
making a contract. He should not have been debarred fromentering into a contract.
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Bankers rights towards the
customer. Right to lien, lien is the right to retain the
property belonging to another untill the
debt due from the later has been paid. Right of set-off, set off means adjusting
debit balance against credit balance in
other accounts of the same borrower.
Set-off is a statutory right of the bankers.
Right to charge for their services.
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Right to Lien.
According to section 171 of the contract
Act-1872, a bankers general lien is of a
peculiar type as it exceeds to all thesecurities placed with him by the
customer.
The general lien of the banks is something
more than an ordinary lien, it is consideredas an implied pledge.
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Conditions to exercise right of lien.
The property of the customer must come
into the hands of the banker as a banker
of the customer. There should not be any entrustment for
special purpose.
Banker should obtain possession lawfully.
There should be no agreement
inconsistent with the right of lien.
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Following are subject to bankers
lien. As a matter of practice the bankers
generally obtain a letter of lien dulysigned by the customers when some fund
and non-fund based facility is given to thecustomer against the following.
Bills, cheques and documents for collection.
Bearer bonds and coupons which are left forcollection.
Coupons only where the bonds are in safecustody.
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Contd.
Promissory note , B/E Treasury Bills ,coupons and bonds deposited with the bankwithout any particular intention.
Securities left after adgustment of anadvance or loan.
Dividend warrants, or stock and debentures,certificates issued in the name of bankr under
the instruction of the purchaser/ customer. Shares purchased by the bank for the
customers.s
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Following are not subject to lien.
When it is not the property of the customerand the banker is not aware of the fact.
Bills of exchange and other securitiesdeposited for a special purpose.
On credit balance in respect of contingentliability of bills not yet due.
Over articles or deposits left for safecustody.
Over securities for sale.
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Right of Set-Off.
In the event of death and bankruptcy of
the customer, the banks right of set-off
comes into operation without restrictions.
In case of active accounts the banker
cannot set-off the debit balance of one
account against the credit balance of other
account without serving a reasonablenotice to the customer.
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Contd.
In order to establish an immediate right of
set-off in the operative accounts banker
should obtain a written authority from his
customers.
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This right can be applied when,
The customer is running the account andthe cheque book is in the possession ofthe customer the banker requires to issue
a notice before the exercise of this right. In case of deceased account the banker
can transfer the credit balance to the
account having a debit balance beforepaying the amount to the legal heirs of thedeceased.
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Following can be subject to set-off.
Debit balance of Trust account against
the credit balance of trustees personal
account.
A deposit account can be set-off against
an over-draft account.
If all the joint account holders have given
individual guarantee, a joint account can
be set-off against individual account.
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Bankers duties towards the
customer. To honor the cheque if customer maintains
sufficient balance and cheque is in order.
To pay the financial return to the customer as
per agreement.
To provide the information about the account to
the customer in the form of account statement
and balance enquiry etc.
To maintain the secrecy of the customer
account.s
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Banks can disclose the secrecy in
the following situations. Under compulsion of law. Banks canprovide the account details under thewritten instructions of session judge or
income tax Commissioner or any othercompitent court of law.
Duty to public to disclose. If it is in the
interest of the public during nationalemergencies, a bank can make suitabledisclosure about some customer.
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Contd.
In the interest of the bank. Sometimes banks
sue their customers to recover the NPLs, they
may have to disclose some aspects of the
customers account. Express or implied consent of customer.A
customer may issue standing instructions to his
banker to supply information of his account to
some professional bodies for a certain period ie
for balance sheet preparation or audit
requirements.
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Contd.
Common courtesy to other banks. This
is required to exchange business related
information among the banks
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Account OpeningProducts and
Procedures
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Types of Customers
The bankers customers can beconveniently divided into two groups:
PersonalCustomers: These includeprivate individuals, agents, professionals,married women etc.
ImpersonalCustomers: These arecomprised of various types of companies,corporations, associations, societies etc
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PLSSaving Bank General Rules
1. In PLS Saving Account the minimum
balance requirement is determined bythe bank for , charitable institutions,
provident and other benevolent funds.
2. A minimum balance is required by the
bank to be maintained to qualify for
sharing of profit/loss.
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SB A/C general Rules.
3-Only one account is to be opened in onename. This, however, does not restrictthe opening of more than one account by
a person in the names of minor children.4-PLS Saving Accounts should not be
opened in the name of Local Bodies,Autonomous Corporation, Companies,Firms or other institutions except for theirProvident and Benevolent Funds.
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CONT.
5-The profit in PLS Savings Accounts is paid halfyearly, as per the rates declared by the bankafter the end of the half year as on 30th June
and December 31, on the basis of lowestbalance maintained in the account between theclose of 6th day and the last day of every month.
6-No finance even on temporary basis shall beallowed in PLS Saving Accounts.
7-Service charges Rs.50/-per month to be chargedat month end if the balance drops during themonth.
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Current Deposits Accounts
General Rules
1. Minimum initial deposit requirement is
determined by the banks as per their
policy.
2. No profit is paid by the Bank on current
deposit accounts
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Personal accounts include:
1. Minor
2. Illiterate Person3. Joint Account
4. Pardah Nasheen Lady
5. Agent
6. Administrator and Executor
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Documents to be obtained in light
of PR-M1
1. Attested photocopy of computerized NIC or
passport of the individual by a gazetted officeror an officer of the bank/DFI.
2. In case the CNIC does not contain a
photograph, the bank/DFI should also obtained
in addition to CNIC any other document suchas driving license etc. that contains a
photograph.
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Documents.
3-In case of a salaried person, attested copy of his
service card or any other acceptable evidence
of service, including, but not limited to a
certificate of the employer.4-In case of an illiterate persons, passport size
photographs of the new account holder
besides taking his right and left thumb
impressions on the specimen signature card.
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BasicBanking
Account.
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Basic Banking account
Generic name : BasicBanking Account(BBA)
BPD Circular No. 30 of 2005 November 29, 2005
In order to facilitate and provide basic banking facilitiesto the low income people in Pakistan, SBP vide BPDCircular No. 30 dated November 29, 2005 advised thecommercial banks operating in Pakistan will introduceBasic Banking Accounts (BBA) facility with the
following features:-
1. The minimum initial deposit will be Rs 1000.
2. Will be non-remunerative account.
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Features of BBA.
3- No limit on minimum balance. In cases, where balancein Unique Account remains nil for a continuous six-month period, such accounts will be closed.
4- No fee for maintaining Unique Account.
5- Maximum two deposit transactions and two chequingwithdrawals are allowed, free of charge, throughcash/clearing per month.
6- Unlimited, free of charge, ATM withdrawals from thebanks own ATMs. In case of withdrawal from BBAthrough the ATM machines of other banks, therespective/other bank may recover charges for suchtransactions.
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BBA contd.
7- For the existing banking accounts, banks mayget the consent of all their customers whetherthey wish to maintain a BBA with them or aregular full service banking account with its
accompanying terms and conditions.8- In case an account holder does not give his/her
consent for a BBA, his/her account will betreated as a regular full service bankingaccount.
9- Statement of account will be issued once in ayear.
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BBA
The above features represent the minimum set
of services which the banks shall provide to their
BBA customers.
The banks are; however, free to add moreservices, if they wish.
The banks are also free to charge, as per their
existing policy, for any service/transaction over
and above the minimum set of services of a
BBA, if they wish.
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Minors
Account
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Minors account
Who is a minor?
According to Pakistani Law, a person isregarded as a minor until he has attained
the age of 18 years. Under section 3 ofMajority Act, 1875, if a competent court oflaw appoints a guardian for this person orproperty or both before his age of 18years, the majority extends to the age of21 years.
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Who is a Guardian?
A person lawfully invested with the power, andcharged with the duty of taking care of the
person and managing the property and rights ofanother person who for defect of age,understanding or self control is consideredincapable of administering his own affairs.
One who legally is responsible for the care andmanagement of the person, or the estate, orboth of a child during its minority.
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Types of Guardian
1. Natural Guardian.
2. Testamentary Guardian.
3. Statutory Guardian.
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Minor- important points
Guardian and Ward Act about Guardian &
Minor.
Sec. 3 of Majority Act- 1875, about the ageof Minor.
Sec. 11 of Contract Act- 1872 capacity to
enter into a contract.
Sec. 26 of NIA -1881 a minor can bind
others.
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Points to remember.
Sec 184 of Contract Act- 1872 a Minor
being an agent.
Sec. 183 of Contract Act-1872 Minorcannot appoint an agent
Sec. 30 of Partnership Act-1932 Minor and
Partnership.
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Minor A/C.
Account opening procedure:
The natural guardian who signs both Account
Opening Form and Specimen Signature Card can
open an account in the name of minor. Title of Account:
The title of account should clearly indicate both
the names of minor as well as guardian in the
following manner: Zafar Islam (minor) Islam-ud-Din (guardian)
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Minors Account.
SpecialInstructions:
The guardian will continue to operate the
account even if minor attains the age ofmajority.
Documents
Computerized National Identity Card ofGuardian
Form B of minor
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Minor.
In case guardian is appointed by the court of law thenattested copy of guardianship certificate be obtained andplaced on record.
SpecialCare
The age of minor should not be recorded either inAccount Opening Form or any other document.
In case the account has been opened under thedirectives of the court, operations should strictly beallowed in accordance with the clauses of guardianshipcertificate.
No overdraft is allowed in minors account
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ILLITERATEPersonsAccount
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Accounts of Illiterate persons
Before opening such accounts the illiterate
persons should be informed that he/she cannot
issue cheques in favor of any other person
Account opening procedure:
Title of Account:
Name of account holder should be written in
block form SpecialInstructions:
Personal Withdrawal
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Documents
1. Two attested photographs to be obtained
one for pasting on AOF and other on S.S.
Card.
2. Computerized National Identity card of
account holder.
3. Vernacular letter on form FM 014.4. Right and left hand thumb impressions on
SS Card.
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A/C of Illiterate persons.
Thumb Impressions for operationpurpose
Male Left hand thumb impression.
Female Right hand thumbimpression.
SpecialCare:
01-Before opening such account the illiterateperson should be informed that he/she cannotissue cheques in favor of any person.
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Illiterate A/C contd.
02-It should be ensued that the illiterate
persons should not be allowed to operate the
account unless they personally come to the
branch and put their thumb impression on thecheque in presence of bank officials.
03-Accounts of persons signing in raw hand
must also be treated as the accounts of
illiterate persons
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Joint
Accounts
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Joint Accounts
What is the difference between a joint
account and a partnership account?
Be careful as to who will operate the
account
Death of one account holder:
Survivors are entitled to receive the whole
amount.
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Contd.
Devolution under section 45 of Contract Act
1872.
A cheque drawn & signed by all the survivors be
paid. A cheque drawn by heirs of the deceased party
or less than all survivors shall not be paid.
If there is Overdraft & loan is unsecured, bankshall lodge claim against all survivors and legal
heirs of deceased.
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Insolvency of one account
holder
Operation in account shall be ceased.
Payments shall be made on the joint directions
of Official assignee and solvent parties.
If account is Overdrawn, bank has claim on the
estate of the insolvent and banker should inform
the Official Assignee about the same. Cheque drawn by the insolvent are returned with
reason Account Holder Insolvent.
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Contd.
Cheque drawn by the solvent account
holders are returned with reason Mr. X
insolvent.
Insanity of one account holder:
Mandate to operate ceases.
Operation in account should be ceased.
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Contd.
Devolution does not apply here.
These are the accounts of two or more
persons who are neither partners nor
trustees.
Account opening procedure:
Title of Account:
Title of account should mention the namesof all the joint account holders.
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SpecialInstructions
At the time of opening the account clear
and specific instructions should be
obtained regarding operation of the
account and payment of the balance at the
death of one or more joint account holders
in the following manner:
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Special instructions.
1. The account shall be operated by any joint
account holders singly.
2. By either or survivor singly.
3. By any two or more joint account holders orby any two or more survivors jointly.
4. By all the joint account holders jointly.
5. By all the survivors jointly.
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Contd.
These instructions as far as possible should be obtainedin the handwriting of the parties concerned, under thesignatures of all the joint account holders. Documents:
National Identity Card of all the joint account holders. Mode ofSignature:
All joint account holders are required to sign as applicant and inthe column of special instructions.
Specimen signatures of only those joint account holders are
required who are authorized to operate the account.
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Special Care.
1. The operating instructions should be noted on AOFand SS card boldly and authenticated by deposit incharge.
2. All the operations in the account must be strictly inaccordance with the operating instructions given byall joint account holders.
3. In the event of death of any of the joint accountholders, the survivor(s) be asked to close the oldaccount and open a fresh one in the name of the
surviving joint account holders, depending upon theoriginal instructions regarding operation of theaccount.
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Special Care contd.
4-Cheques drawn by the deceased joint account holderand presented after his death should be returnedunpaid with the reason DrawerDeceased.
5-Cheques drawn by surviving joint account holdersmay be paid, if drawn strictly in accordance with theoriginal operating instructions and otherwise in order.However, no financing facility should be allowed.
6-If the original instructions do not allow for the payment
of balance amount to survivors then all the debitoperations on the joint account should be stopped.
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Contd.
7-If Bank receives an order issued at the request of the
heirs of the deceased joint account holder to stop
payment of the balance amount in the joint account,
then no withdrawal should be allowed and the matter
should be referred to Head Office.
8-A garnishee orderreceived against only one of the
joint account holders should not apply to the joint
account unless it contains the names of all the joint
account holders as judgment debtors. In any case thematter should immediately be referred to the Head
Office for further instructions.
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Contd.
Joint liability:
A joint liability is not individual but
collective; it is the liability of all
together
Joint and several liabilities:
A joint and several liability is not only
collective but also individual
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Proprietorship
Account
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Accounts of Proprietorship
Concerns:
A sole proprietorship concern is a businesscarried on by an individual owner in his ownname or trade name.
It is usual in such cases to take a declarationfrom the sole proprietor that no person otherthan himself has any interest in the business asa proprietor or otherwise and he, as the soleproprietor will personally be liable for all dealingsand obligations in the name of the business.
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Account opening procedure
Title of Account
Title of account must be in the name of
proprietorship concern
In the case of proprietorship concern, the
special instructions should cover the style
of the account and the name of the person
who will operate the account as soleproprietor.
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SpecialInstructions
F
or example, if the account to beopened is in the name of
Islamabad Cloth Store, the
person who is the sole proprietorshould declare as such.
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Documents
1. National Identity card of proprietor
2. Letter of request to open the account on the
letter head of proprietorship3. Account opening form (pink)
4. Declaration for proprietorship concern (PartII, printed on the reverse of AOF)
5. Third Party Mandate, in case any otherperson has been authorized by theproprietor to operate the account.
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DOCUMENTS.
While opening bank account of proprietorships, therequirements laid down for individuals in PR M-1 shouldapply except the requirements mentioned at No.(3) ofthe Annexure regarding proof of business. SBP, vide
BPRD Circular Letter # 30 dtd. 26-09-2007 has omittedparagraph No.(5) of PR M-1 regarding the requirementof introduction for opening new account.
Banks / DFIs should exercise extra care in view of thefact that constituent documents are not available in such
cases to confirm existence or otherwise of theproprietorships.
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Contd.
Amendment vide SBP, BPD Circular No. 05
dated July 08, 2006
While opening bank account of proprietorships,
the requirements laid down for individuals, shallapply except the requirement pertaining to proof
of service. Banks / DFIs should exercise extra
care in view of the fact that constituent
documents are not available in such cases toconfirm existence or otherwise of the
proprietorships.
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Mode ofSignatures
Signatures of proprietor as applicant and
on Declaration For Proprietorship (part-II)
are obtained in individual capacityof the
proprietor.
Specimen signatures and signature on the
special instructions are obtained in theofficial capacityof the proprietor.
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Special care
1. The death of sole proprietor will result infreezing all operations (debit) in his account
and any authority delegated by him to a thirdperson for operation of his account will come toan end.
2. The account of proprietorship concern shouldbe handled like individual deceased personsaccount, in the event of the death of theproprietor.
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Special Care.
3-In the event of the death of the proprietor
the account status should be changed to
Deceased Account in the Unibank
System by selecting option from themenu of Non-Financial Transactions
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Partnership
Firm Account
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Accounts of Partnership Firms
Legal Considerations:
Definition ofPartnership: (section 4,
Partnership Act, 1932)
Partnership is a relation between
persons who have agreed to share profits
of a business carried on by all or any ofthem acting for all.
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Partnership
Persons who have entered into
partnership with one another are called
individually partners and collectively a
firm the name under which the businessis carried on is called the firm name.
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Partnership contd.
It is important to create liability; all the
transactions must be apparently entered into
in the interest of the firm for the purpose of its
business and in the name of the firm.Therefore the act of a partner in order to be
binding upon the firm must be:
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Insolvency of Partners.
If all the partners or all but one partnerbecome insolvent, the firm is compulsorily
dissolved, and the operations on the accountshould be stopped.
It must therefore, be noted that insolvency ofone or more partners does not necessarily
dissolve the firm, provided at least two ofthem remain solvent. (if original instructionsallow for this)
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Contd.
According to section 34 (1) where a
partner in a firm is adjudicated as an
insolvent he ceases to be a partner on the
date on which orders of the adjudication ismade, whether or not the firm is thereby
dissolved.
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Contd.
It is laid down in section 42 (d) that subject to the
contract between the parties the firm is dissolved
by the adjudication of a partner as an insolvent.
where there is an agreement that the firm shallcontinue on the insolvency of a partner the only
effect is that the insolvent partner is dropped out
and the remaining partners continue as such
without dissolution of their partnership.
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Contd.
In case of insolvency of a partner the
cheques signed by him be returned unpaid
for confirmation by the other partners.
Cheques signed by the solvent partners
may be paid against credit balance in the
account provided the cheques are drawn
in accordance with the original operatinginstructions.
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Contd.
Subject to any agreement between partners,
a partnership is dissolved by the death of any
partner. The date, time and source of
information should be recorded in AOF, SSCard and the status of the account should be
changed to Deceased in the system.
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Contd.
Cheques signed by the deceased partner and
presented after his death should be returned
unpaid with the reasons Drawer Deceased.
In case of debit balance operations should bestopped and matter be taken up with the
Head Office/Higher authorities.
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Contd.
The surviving partners should be asked to
close the existing account and open a new
account.
The insanity of a partner does not dissolve the
firm automatically. The lunacy Judge is
competent to dissolve the firm. The general
principle is that the lunatic partner is by anagreement is retired from the business.
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DISSOLUTION OF THE FIRM
The dissolution of firm means the dissolution of
partnership between all the partners of the
firm. There are various ways in which thedissolution of the firm may take place.
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Partnership contd.
As a general rule in case of death, insolvency or
insanity of any of the partners the case must
immediately be referred to the higher authorities
for the legal/expert opinion. NumberOfPartners: The number of partners
in a firm is limited by law which cannot be less
than two or more that twentyin any business
(other than banking)
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Countermand OfPayment
One partner has been empowered to
countermand the payment of any cheque
drawn by him or the others and the banker
is bound to comply with the instructions.
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Account opening procedure
Title of Account.
Title of account must be in the name of the firm
as declared by the partners. OperationalInstructions:
Operations on the account must be allowed strictly in
accordance with the instructions given in Partnership
Mandate & Declaration (part III) in terms of section 25 of
Partnership Act of 1932 and partnership deed.
According to partnership deed, if given.
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Documents
1. Attested copy of NIC of all the partners.
2. Attested copy of Partnership Deed duly signed by
all the partners of the firm.
3. Attested copy of Registration Certificate with the
Registrar ofFirms. In case the partnership is
unregistered this fact should be clearly mentioned
on the Account Opening Form.
4. Third party mandate, if 3rd party is authorized tooperate the account.
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Mode ofSignature
1. Signatures of all the partners are obtained in
their individual capacity as applicant.
2. Partnership Mandate and Declaration (PartIII) is to be signed by all the partners in their
personal or individual capacity.
3. Specimen signatures are to be obtained in
the official capacity.
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Special Care.
1. When a partnership account is opened, followingconsiderations should be kept in mind by the banker:
2. A partnership should not consist of more than 20
persons.3. One partner is entitled to open an account for the firms
business provided that he opens in the firms name.
4. One partner has the power to stop the payment ofcheques drawn by him or another and the
5. Banker is bound to comply with the instructions by thatpartner.
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Joint
Stock
Companies.
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Account of Joint Stock Companies
Definition ofLimitedCompany:
Section 2 of the Companies Act, 1913, defines
Company as an association of individuals forthe purpose of profit, possessing a common
capital contributed by the members constituting
it, such capital being commonly divided into
shares, of which each possesses one or moreand which are transferable by the owners.
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Types of Companies.
UnlimitedCompanies
In such companies the liability of each
member, like partnership is unlimited.
Since there is a great risk, such
companies are not operating in Pakistan.
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Companies Limited By Shares.
These are the companies limited by shares. The
liability of a shareholder is to the amount of his
share. PublicLimitedCompany: A Public Limited
Company has to be registered as a joint stock
company under Companies Ordinance 1984. the
minimum number of member is 7, while there isno restriction on the maximum number of
members.
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Private Limited Company
It is a Company where the right to
transfer the shares of its members is
restricted. The maximum number of
members (shareholders) is fifty. While theminimum is two.
Difference between Public &
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Difference between Public &
Private Ltd. Companies.
Private Ltd. Co.
1-generally formed bypersons/ friendshaving closerelations.
2-Membership min=2max=50
3-Publication ofprospectus is notrequired.
Public Ltd. Co.
1- it may be formed byany group fromgeneral public.
2- Membership min=7max. unlimited.
3-Publication ofprospectus is a legalobligation.
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Differences contd.
4-Subscription isrestricted to membersonly.
5-It can start operationswithout Certificate ofCommencement ofBusiness.
6-There is no obligation
to get the accountsaudited
4- Subscription is opento general public.
5-Not allowed to startbusiness withoutCertificate ofCommencement ofBusiness.
6-It is legal obligation to
get the accountsaudited.
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Differences contd.
7-Transfer of shares isrestricted amongmembers.
8- Election of Directorsin not necessary.
9- Statutory meetingsare not necessary.
7- Shares aretransferable to anybody.
8-Election of Directorsis legal requirement.
9- Statutory meetingsare necessary min.once in a year &
within 6 months fromthe date ofincorporation.
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Company Limited By Guarantees
The members undertake to contribute to
the assets of the company such amounts
as may be agreed upon, in the
Memorandum and Articles of Association.
in the event of the company being wound
up.
Such company may or may not have theshare capital in addition to the guarantee.
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Single Member Company.
A single member Company SMC meansa private company which has only onemember.
It is incumbent on the person forming thecompany to file with the Registrar at thetime of incorporation names of twoindividuals to act as nominee director and
alternate nominee director of the companyin the event of his heath.
S C
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Joint Stock Companies.
Formation ofJoint Stock Companies:
These companies may be formed in any of the
following ways: CharteredCompanies: These companies are
incorporated under a Royal Charter, and have
very wide powers. This is the oldest form but is
becoming extinct gradually. For example EastIndia Company.
d
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contd.
StatutoryCompanies: These companies are
incorporated under a special piece of law. Such
a company is not governed by the Companies
Ordinance, but by the special law under whichthey are incorporated. For example State bank
of Pakistan.
RegisteredCompanies: these companies are
incorporated under the Companies Ordinance1984. These companies are being governed by
all the provisions of the Companies Ordinance.
A t i d
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Account opening procedure.
Title of Account:
Title of account should be exactly in the
same name and style as mentioned on the
memorandum and article of association:
Special Instructions:
All the special instructions should be given
to the bank in the form of resolution ofBoard of Directors.
D t
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Documents.
1. Up to date Memorandum & Article of
Association (certified by
Director/Companys Secretary affixed by
companys seal)
2. Certificate of Incorporation
3. Certificate of Commencement ofBusiness (for Public Ltd. Cos only)
D t
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Documents.
4-Resolution of Board of Directors passedunder companys seal to open account.Duly minuted in the minute book (As per
specimen given on AOF)5- Copies of CNIC/Passports of all the
directors/authorized signatories (attestedby companys secretary)
6-List of directors on Form 29 issued by theRegistrar Joint Stock Company.
C tifi t f I ti
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Certificate of Incorporation
The Companys Certificate ofIncorporation is a very importantdocument.
It gives the evidence of the existence ofthe company. Therefore, before having atransaction with a company a banker mustsatisfy himself that the company is in
existence for which the directors purportsto act, and which they purport to bind.
C td
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Contd.
Neither a public nor a private limited company
has any legal existence until Certificate of
Incorporation has been obtained.
Any contract purported to be made beforeincorporation cannot be ratified after
incorporation for the reason that ratification can
be made only in respect of contracts entered into
on behalf of the principal who was in existenceat the date of the contract.
Memorandum & Articles of
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Memorandum & Articles of
Association The Memorandum of Association is the most
important document as it is the charter of thecompany.
It sets out the objectives for which a joint stock
company is formed. It governs the company with regard to its
dealings with the outside world and defines thescope of its activities. It usually has:1. Name of the company with the word Limited
affixed to the last word in its name.2. Place with full address of its registered office
3. Object of the company.
A t i td
4-Amount of capital and its distribution into
shares
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Account opening contd.shares.5-Declaration of the fact that the liability of the
members is limited.
A ti l f A i ti
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Articles of Associations
Contains rules and regulations for the internal
management of the company and generally
contain:1. General powers of the company vested in the
directors.
2. Election, rotation and retirement of directors.
3. Procedure for calling of the meetings and passing
of resolutions.
4. Methods and principles of declaration of dividends.
M d f Si t
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Mode of Signature.
In official capacity (with the rubber stamp) on allthe documents, such as AOF, SS Card, Cheque-book requisition slip etc. SpecialCare
The opening of account for share subscriptionby a company shall be subject to prior approvalof Head Office.
Due care and caution should always beexercised to ensure that cheques payable to
limited companies are collected for the credit ofcompanys account and not foe personalaccount of any director / employee etc.
Opening of Single Member
C A t
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Companys Account
Securities and Exchange Commission of
Pakistan has allowed sole proprietorships to
convert themselves into a Companythrough
Single MemberC
ompanies Rules 2003. It isquite a new phenomenon rather Pakistan has
become the first country in Asia to experiment
this new idea. This revolutionary initiative carries
some great benefits like: Distinct legal entity separate from single member
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Contd
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Contd.
Higher credibility
Documented and regulated
Protection to personal assets
Better access to capital markets etc. etc