Types of Borrower

Home Assignment

Submitted To:

Indra Chapagain

MBA-BF Programme

Tribhuvan University

Submitted By:

Ojasbi Pangeni

MBA-BF Programme

Butwal,

16 April 2020
 Types of Burrower
1. Minor
A minor is a person who hasn’t completed the age of 18 years. A minor cannot be
compelled to pay money borrowed by him/her even though he/she had misrepresented
his/her age. If any security for the loans has been given by a minor, the security cannot be
enforced. Neither the minor personally nor his other personal property can be made liable
for the acts of the firm unless he repudiates his liability as a partner within six months of
his attaining majority or within six month of his knowledge that he was admitted to the
benefits of the partnership, whichever date is later, the erstwhile minor will thereafter be
considered as a partner and will be liable in that capacity with retrospective effect from
the date he was admitted to the benefits of the partnership. If a firm which includes a
minor, goes bankrupt, proceedings may be taken against the firm other than minor partner
or against the adult partners. Joint account with infant can be treated as Ordinary Joint
Account but he cannot be made personally liable for overdraft. A minor can act as an
agency. His acts will bind the principal and other parties but he is not liable.

2. Illiterate Person

 An illiterate person is competent to contract like any other person

 Cheque book is not issued to illerate depositor for cash payment
 Cheque book can be issued for making statutory payments, postdated cheques
for repayment of installments of loan. In such cases, the cheques will be crossed
account payee and thumb impression of the illiterate depositor will be verified on
such cheques at the time of issue of cheque book by competent authority of the
bank
3. Married Women
Nepalese married woman can enter into any valid contract and can acquire, hold and even
dispose of the property belonging to her absolutely. There is no distinction between a
man and female (Spinster, Widow or married woman) as far as contractual capacities are
concerned. She cannot bind her husband unless she acted as agent or had borrowed for
necessities of life or for household. Husband can escape if he proves that there were no
 necessities or she was forbidden to borrow. In case of overdraft there is no personal
remedy against a married woman as she cannot be committed to prison for non-payment
of judgment debt. In short, the banker avoid overdraft, unless, securities are offered
belonging to her absolutely.

4. Partnership Firms
Partnership is defined in the as ‘the relation between persons who have agreed to share
the profit of the business carried on by all or any of them acting for all.” No partnership
can consist of more than 20 persons. In the case of a firm carrying on Banking business,
the maximum permissible number is 10 persons. If a firm includes one or more
partnership firms, the partners of all such firms and the partners of the original firm, are
being added individually as members of the partnership. It may be mentioned here that a
partnership firm cannot become a partner of another firm because it is not a legal person.
However, the partners may be partners in another firm in their individual capacity lost
sight of when proposals for advances to partnership firms are considered. When a
partnership includes a limited company, the company is to be treated as one member
only.
 Who can became a partner : individual, partnership firm, limited company
 Who cannot become a partner: minor, insolvent, insane, cannot become partner
because they are not competent to contract.
 Any change in the operational authority is also with the consent of all partners
 Partners cannot delegate authority
 Death of a partner: on the death of a partner, the partnership is dissolved.

5. Limited Companies
 A limited company is an artificial person with perpetual succession incorporated
under the companies act
 Company is a legal person, created through process of incorporation for which
Register of Companies issues Certificate of Incorporation
 Shareholders are owners of the Company and directors are agents of the company
to manage company
  A limited company may be private limited or public limited. Members in a private
limited company: minimum 2, maximum excluding employees employees can be
50.
 Members in a public limited company: minimum 7 and there is no ceiling on
maximum number
 Public company: when minmum 51% shares with government.
 Documents for opening the account: Memorandum of Association, Articles of
Association, Certificate of Corporation, Certificate of Commencement of
Business ( only for public limited companies) and Board Resolution. No
introduction is required as Certificate of Incorporation is enough introduction.
However, KYC norms to be the account.
 Memorandum of Association : it contains name of the Company, its authorized
capital, registered office and liability of shareholders, objects of the company.
 The directors cannot delegate their authority to any other person.
 In case a director dies, the cheques signed by him presented for payment can be
paid if these are dated prior to his death.
 If a director stops authority of other director it is of no use. Bank will allow
operations as per Board Resolution
 Cheque favouring company should not be credited to the personal account of the
director. Such cheques should not be paid in cash. These should be credited to the
account of company only.

6. Family

Family is neither a legal person nor a natural person. It is not created by agreement. It is not
incorporated under any act. It is from a common ancestor and membership is by birth or
adoption.

 The eldest member of family is the Karta and others are coparceners. Operational
authority to operate the account is with Karta.
  Karta can appoint any other coparcener or third party to conduct business of family
and/or operate the account.
 Coparcener cannot stop payment of the cheque unless he is authorized to operate the
account. Karta is personally liable.
 The liability of a coparcener is limited up to his share in the firm. He is not liable
personally. Family cannot be partner as per Supreme Court Judgement

7. Proprietorship Firm
A Sole proprietorship is a business that an individual owner conducts in his/her own
name or a trade name. Lenders usually obtain a declaration from the proprietor of he/she
is the sole owner of the business, that no other person has any interest in the business, and
that he/she is personally liable for all dealings and obligations in the name of the
business.