DEPARTMENT OF TECHNICAL EDUCATION ANDHRA PRADESH

Name Designation Branch Institute Year/Semester Subject Subject code Topic Duration Sub topic Teaching Aids : G.Rajeswari. : Senior Lecturer. :Commercial and Computer Practice : Government Polytechnic, Srikakulam. : V semester. : Banking. : CCP 504(B). : Customer services in Banks : 50mts. : Banker's duty in case of joint stock companies : PPT, Animation
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Banker’s duty in case of Joint Stock Companies
Objectives:On completion of this Topic, you would be able to:
 Understand the duties of a banker in case of Joint stock companies

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Recap

In the previous class, you have learnt the banker’s duties in case of illiterates and joint account holders. They are:
 Illiterate persons can open bank accounts.  While opening bank accounts for illiterates, banks take their thumb impressions and photographs.

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Recap

 The illiterates has to attend personally to draw money from the bank.  When two or more persons open an account jointly, it is called a joint account.

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Recap
The joint account may be operated in any of the following ways.
i. ii. iii. By all the depositors jointly By either or survivor of them By former or survivor of them

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Recap

 The alteration should bear the signature of the drawer.  The balance in joint account may be payable to:  All of them or the survivor or survivors of them Either or any one or more of them or the survivor or survivors of them

 Nomination facility is also available for joint account.

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Known to Unknown

 What is a joint stock company?  Why it is formed?  What is the minimum and maximum number of members in a joint stock company?  Who are the real owners of a joint stock company?  How the management of a company is carried out?  Say some names of joint stock companies?  Who manage the joint stock companies?
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Meaning of a joint stock company:

A joint stock company is an artificial person created by law.

 It has a separate existence different from that of the members, who constitute it.  The members are called shareholders.  It has a common seal.

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Meaning of a joint stock company: It can sue others and can be sued.  From birth to death; it is governed by law.  As it is an artificial creation, it cannot act by itself.  It has to act only through human agents.  Because of the above features, it requires a special treatment in the hands of the banker.

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Banker’s duty in case of Joint stock companies
Preliminary Steps: Before opening an account, the banker should find out whether the company has a legal existence or not. For this purpose he has to refer to the Certificate of Registration. Then, the banker should obtain the latest copies of the Memorandum of Association and Articles of Association.
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 

Preliminary Steps: These documents reveal the objects of the company, its capital, its name, its registered office, its directors, and their addresses, its borrowing powers, duties and liabilities of officers and so on.  So, the banker must carefully inspect them and gather necessary particulars.

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Preliminary Steps:-

 These documents reveal the objects of the company, its capital, its name, its registered office, its directors, and their addresses, its borrowing powers, duties and liabilities of officers and so on.  So, the banker must carefully inspect them and gather necessary particulars.

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Preliminary Steps:-

 In addition to the above, the banker must get a copy of the prospectus of the company.  The banker should also verify the Certificate of Commencement of Business in case of public limited companies.

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Preliminary Steps: In case, the banker has any doubt with regard to any of the documents mentioned above, he can refer the matter to the Registrar of Joint Stock Companies and get it clarified.  In case, the company is a new one, the banker should carefully note whether the names of the first directors have been mentioned in the document or not.

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Preliminary Steps: In case of an existing company, the banker should ask copies of the recent balance sheet and profit and loss account, to know the financial soundness of the company.  After having satisfied himself with these preliminary steps, the banker can safely open an account.

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Copy of the Board’s Resolution:-

Along with the application to open an account in the company’s name, the banker should obtain a certified copy of the resolution passed by the Board of Directors of the company containing the following in regard to the opening of a bank account: b) c) Appointing company the bank concerned as the banker of the

Naming the person or persons who are authorized to operate the bank account on behalf of the company

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Copy of the Board’s Resolution:-

a)

Stating the names of the persons who are authorized to execute the documents on behalf of the company, or in whose presence the seal of the company will be affixed on the documents. Authorizing the advance and stating all details of such advance, e.g. Limit, security, rate of interest etc., Stating the names of the persons who are authorized to deposit the title deeds in case of equitable mortgage.

b) c)

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The borrowing powers of the Company:-

a) A prudent banker will look into the borrowing powers of a company before lending money. b) Every trading company has an implied power to borrow and mortgage its property. c) This power is exercised by the Board of Directors.

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The borrowing powers of the Company:-

b) Generally, the Articles of Association of the company puts a limit on the borrowing powers of the directors as well as the company. c) If the Directors borrow money over and above their borrowing powers, it is ‘ultra-vires’ the directors.

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The borrowing powers of the Company:-

b) It may or may not be ratified later c) If it is not ratified by the company, and also when the borrowings is ultra-vires the company, then the company will not be liable

d) Hence, the banker should carefully note the borrowing powers of the company

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The borrowing powers of the Company:-

b) To be on safe side, the banker should obtain a certificate from the Chairman of the company to the effect that the proposed advances are within the scope of the unutilized powers of the directors

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Summary
 Before opening an account in the name of a Joint Stock Company, a Banker should find out whether the company has a legal existence or not  He has to verify the Certificate of Commencement and Certificate of Registration for this purpose  The banker should also verify the Memorandum of Association and Articles of Association  If it is an existing company, he has to obtain the Profit and Loss Account and Balance Sheet for verifying the financial soundness of the company.
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Summary
 Along with the application to open the account, the banker should obtain a certified copy of the Board’s resolution regarding the appointing the bank concerned as the banker of the company.  He should see that the resolution should contain the names of persons who are authorized to operate account on behalf of the company.  A prudent banker will look into the borrowing powers of company before lending money.
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Summary
 Before opening an account in the name of a Joint Stock Company, a Banker should find out whether the company has a legal existence or not.  He has to verify the Certificate of Commencement and Certificate of Registration for this purpose.  The banker should also verify the Memorandum of Association and Articles of Association.

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Quiz
1. Who are the real owners of a Joint Stock Company? a) Debenture holders b) Equity shareholders c) Preference Shareholders d) All of the above

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Quiz
1. As a first step, the banker should verify which of the following document to open an account for a Joint Stock Company? a) Certificate of Registration b) Legal opinion c) Order d) None
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Quiz
1. Along with the application, the banker has to obtain the following document from the Company? a) A copy of the Board’s resolution b) Fit certificate c) Plan approval d) None
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Quiz
1. A prudent banker will look into the following before lending money. a) Borrowing powers of the company b) Directors addresses c) Directors bank balance d) All the above.

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