Question

"It is said to be an artificial person created by law, having a separate entity with perpetual succession and common seal". What is it? Elaborate up points lighted features:
"Banking is much more than merely exchanging money. Modern commercial banks also offer an array of unconventional allied services to its business clients." Enunciate the statement highlighting at least five of such services.

Answer 1

Definition of a Company:

Section 2 (20) of the Companies Act, 2013 defines a company as "a company incorporated under this Act or under any previous company law." Important previous companies laws are the companies laws passed in 1956. After passing of the Companies Act, 2013, all these acts have been repealed. The definition contained in the Act does not throw any light on the features of a company.

Thus, a company may be defined as "an incorporated association which is an artificial -person created by law, having a separate entity, with a perpetual succession, a common seal, capital divided into transferable shares and carrying limited liability."

Services provided by commercial banks to its business clients are as follows-

(1) Agency Functions:

Implies that commercial banks act as agents of customers by performing various functions, which are as follows:

(i) Collecting Checks:

Refer to one of the important functions of commercial banks. The banks collect checks and bills of exchange on the behalf of their customers through clearing house facilities provided by the central bank.

(ii) Collecting Income:

Constitute another major function of commercial banks. Commercial banks collect dividends, pension, salaries, rents, and interests on investments on behalf of their customers. A credit voucher is sent to customers for information when any income is collected by the bank.

(iii) Paying Expenses:

Implies that commercial banks make the payments of various obligations of customers, such as telephone bills, insurance premium, school fees, and rents. Similar to credit voucher, a debit voucher is sent to customers for information when expenses are paid by the bank.

(2) General Utility Functions:

Include the following functions:

(i) Providing Locker Facilities:

Implies that commercial banks provide locker facilities to its customers for safe keeping of jewellery, shares, debentures, and other valuable items. This minimizes the risk of loss due to theft at homes.

(ii) Issuing Traveler’s Checks:

Implies that banks issue traveler’s checks to individuals for traveling outside the country. Traveler’s checks are the safe and easy way to protect money while traveling.

(iii) Dealing in Foreign Exchange:

Implies that commercial banks help in providing foreign exchange to businessmen dealing in exports and imports. However, commercial banks need to take the permission of the central bank for dealing in foreign exchange.

(iv) Transferring Funds:

Refers to transferring of funds from one bank to another. Funds are transferred by means of draft, telephonic transfer, and electronic transfer.