Set # 3

Topics:
Q #01
Define Partnership
Characteristics of Partnership
Q # 02
Merits and Demerits of Partnership
Q # 04
Registration of Partnership Firm
Q # 05
Kinds /Types of Partner
Q # 06
Partnership Agreement
Q # 07
Difference Between Partnership and Co-ownership
Q # 08
Dissolution of Partnership Firm

1
Q: Define Partnership? Explain Characteristics of Partnership.

INTRODUCTION:
Second form of business organization is called partnership. Partnership is an
association of two or more person who carry on business together for purpose of
earning profit.

DEFINITIONS:
1)
Partnership is an association of two to twenty people
who carry on business together for the purpose of earning profit.
(S.B
.thomes)
Main Points:
i. Partnership is an association
ii. Two to twenty people
iii. Carry on business
iv. Purpose of making profit
2)
Relations between people who have agreed to
share profit of business carry on by all or
anyone of them acting for all.
(Partnership act 1932)

Main Points:
i. Relation between persons
ii. Agreed to share capital
iii. Carry on by all
iv. Anyone of them acting for all
3)
Partnership is relation between persons,
who have agreed to carry on business, in
common with a view for private gain.
(L.H Haney)
Main Points:
i. Partnership is relation between persons
ii. Agreed to carry on business
iii. In common with view
iv. Private gain

2
 CHARACTERISTICS OF PARTNERSHIP
1. Capital:
The partners contribute capital as per agreement to run the business. The
interest of partners in business is to earn profit.

2. Change in business:
Business can be changed in partnership. Partners can be change the
partnership business with the consent of all partners.

3. Owner:
In partnership the number of members in ordinary business is two to
twenty. In case of banking business the members must be between two to ten.

4. Management:
The partnership business is not difference its partners. All partners have
equal right to take active part in the business activities. But any partner can
mange the work of partnership with the consent all partners.

5. Profit:
The partnership is started for the purpose of earning profit. The profits
and losses are shared in an agreed ratio. Where there is no agreement the profit
sharing ratio is equal.

6. Unlimited Liability:
The liability of partners is unlimited. The personal property of partners
can be sold to pay business loan.

7. Tax:
If partnership is registered under the income tax law, the profit if first
distributed among partner and then tax is charged. In case of unregistered
business, tax is charged on total profit income.

8. Transfer of Share:
Any partner can transfer his share from partnership with the consent of
all partners.

9. Easy Formation:
The formation of partnership is simple and easy. The consent of
partnership is required to set up partnership. There are no formalities for
formation of partnership.

10. Easy Dissolution:

3
 Partnership can be legally dissolution without any difficulty with consent
of all partners:

11. Registration:
The registration of partnership firm is not compulsory. It depends upon
decision of partners. The partnership comes into existence after oral or written
agreement.
12. Size of Business:
The size of business in partnership is normally medium. The size of
business can be expanding due to large capital and better management.

13. Risk of Business:

The business is not free from risk in case of loss. The amount of loss is
distributed in all partners.

14. Secrecy:
The business secret remains with the partners. There is not legal
requirement publish business account for the general public.
15. Status/ Legal Entity:
The partnership has no legal status. The life of partnership is linked
with partners if any partner dies, retire or bicorn insolvent the partnership is
dissolved.
16. Law:
This is special law working for partnership business in Pakistan.
Partnership business can be formed and registered under partnership Act 1932.
17. Agreement:
A partnership is the result of an agreement between two or more
persons. An agreement may be written or oral. The relationship between people
is created through an agreement.
18. Business (Object):
The partnership is started for the purpose of carry on business any legal
activities (Business) can be started without any legal formality.

CONCLUSION:

Partnership business can be expanding due to large capital and better

management and partners can earn maximum profit.

Question:
i) Explain the advantages of registration?

4
 ii) How may a partnership the registered?

The registration of partnership is not compulsory. It is beters to register the

business. Partnership can be registered under partnership Act 1932.

Registration Procedure

Application Basic Information

Signatures Registration fee

Partnership Submission of
agreement form
Verification of Certificate of
form Registration
1. Application:
A partnered form must be obtained from registrar office for
registration.

2. Basic Information:
Application form must be filled by partners and provide following
information.
Name of business
Date of join
Place of business
3. Signature:
The application must be signed by each partner or by their agent.

4. Registration Fee:
A prescribed fee must be paid for registration.

5. Partnership Agreement:
A partnership agreement must be prepared in writing. Agreement
includes all the term and conditions of business.
6. Submission of Form:
Application form with agreement and copies of I.D cards must be
submitted to registrar.

5
 7. Verification of Form:
After the submission of form to registrar. The registrar verifies the
information given in the form.
8. Certificate of Registration:
If registrar is satisfied with information given the wills issue the certificate of
registration.
ADVANTAGES OF
REGISTRATION

G en eral A d van tag es Leg al A d van tag es

Protection of
Public Confidence Partners
Protection of
Credit facility Firm
Protection of
Tax Advantage Creditor
Protection of New
Clear Term Partners
Govts. Protection of Outgoing
Facility partners
Goodwil
l

GENERAL ADVANTAGES
1. Public Confidence:
If partnership is registered, public shows more confidence on business. Business
can get credit benefit from public.
2. Credit Facility:
Partnership business can get more credit facility due to registration. Business
financial institution shows more confidence on registered business.
3. Tax Advantage:
If partnership business is registered, the profit is distributed among all partners
and then tax is changed on personal income of partners so the registered
business pays less tax as compared to unregistered business.
4. Clear Term:
Written agreement is required for the registrations of partnership due to written
agreement terms are clearer to partners.
5. Governments Facility:
Registered business gets more facilities from government. P0Government
provides facilities like protection and credit facilities.

6
6. Goodwill:
Goodwill are reputation of a partnership firm increase due to registration no
other business can use the name of registered business.

LEGAL ADVANTAGES

1. Protection of Partners:
All partners can go to the court of law against each other for any dispute among
them.
2. Protection of Firm:
The registered firm can file case against debtors, creditors and any partner for
any breach ( ) of agreement.
3. Protection of Creditors:
The creditor can easily receive their amount from any partner. The names of the
partners are stated in the registration.
4. Protection of New Partners:
New partners can go to the court for the protection of his rights in the business.
5. Protection of Outgoing partner:
Retiring partner can send a notice to registrar. After this notice the retiring
partner is free from all responsibilities.

Disadvantages/ disabilities/ Effects of Non-Registration.

Effects of Non-Registration

P artn ers Firm Th ird p arty

1. Partners:
A partner of an unregistered firm is not allowed to file a suit in the court against
other partners and firm.
2. Firm:
An unregistered firm cannot file case against other business.
3. Third party:
The third party has right to file case against unregistered firm and its partners.

Conclusion:

7
Registration of partnership is not compulsory by law. But it is in the benefit of
partner to register the business.

Q: Explain different kinds/ types of partners?

INTRODUCTION
Partnership business is started for the purpose of earning profit. In partnership
business different types of partners can share the profit of the business.
According to partnership Act 1932 different kinds of partners may be entered in
partnership business according to their requirements.

DEFINITION:

A person who invests capital is called partner.

8
 Kinds of
Partners

Active Minors
Partner Partner

Silent Major
Partner Partner
Secret Partner in profit
Partner only

Sleeping Limited
Partner Partner

Sevier Quasi
Partner Partner

Junior Nominal
Partner Partner

Salaried
Partner

Incoming
Outgoing Partner
Partner

Kinds of Partners:
There are different kinds of partners.
1. Active Partner:
A partner who takes active parts is the management of business is called active
partner. He invests capital is the business. He shares profit and loss of business.
He is responsible for partnership deed.
2. Silent Partner:
A partner who does not take part is the management of business is called silent
partner. He invests capital in business. He shares profit and loss of business. He
is responsible for partnership deed.
3. Secret Partner:
A partner who does not known to public as a partner is called secret partner. He
invests the capital in the business. He shares the profit and loss. He is
responsible for loan. He takes part in the management of business.
4. Sleeping Partner:

9
A partner who does not take part in the management of business and also not
known to public as a partner of business is called Sleep partner. He invests the
capital and share profit and loss of the business. He is responsible for business
deed.
5. Senior Partner:
A person who is senior from age, capital and experience is called senior partner.
6. Junior Partner:
A person who is junior from age, capital and experience is called junior
partner.
7. Outgoing Partner:
A partner who has retired from partnership business is called outgoing partner.
Outgoing partner may retire from partnership business in any position.
8. Minor Partner:
A partner who is below 18year of age is called minor partner. He only receives
profit of the business. He is not responsible for loans and losses of the business.
He cannot take part in the management of the business.
9. Incoming Partner:
A partner who is newly entered in partnership business is called incoming
partner. Incoming partner may enter in partnership business in any position.
10. Major Partner:
A partner who is above 18 of age is called major partner. Major partner may be
entered in the business in any position.
11. Partner in profit only:
A partner who receives only profit of business is called partner in profit only. He
only receives profit of business. He con not takes part in management. He is not
responsible for loans and losses of the business.
12. limited Partner:
A partner who has limited liability is known as limited partner. He shares profit
of business. He is not responsible for loans and losses of the business. He con
not takes part in the management of the business.
13. Quasi Partner:
A partner who has retired from partnership business, but he does not with draw
his capital from partnership business is called quasi partner. He invests the
capital and receives only profit of the business. He is not responsible for loans
and losses of business. He cannot take part in the management.
14. Nominal Partner:
A parson whose name is used as partner of business due to his goodwill called
nominal partner. He does not invest capital and receives only the share profit of
the business. He cannot take part in the management.
15. Salaried Partner:
A partner who provides services to business is called salaried
partner. He does not invest capital and can take active part in the

10
 management of business. He is responsible for losses and liabilities of
business.

CONCLUSION:

According to partnership Act 1932 different kinds/ types of partners may be

entered in partnership business on the basis of age, capital, experience or their
name can be used as partners due to their goodwill. All the partners can enter
the partnership business according to their requirements.

Question:
1. Define Partnership Agreement and provisions/ contents of partnership
agreement?

INTRODUCTION:

Partnership agreement is the most important character of partnership business.

Partnership agreement includes all the condition of partnership business.

DEFINITIONS:

According to partnership Act 1932;

1.
The document which includes all the provisions of partnership business
is partnership agreement or deed.
2.
The document which decides the rights and duties of partners is called
partnership agreement.

Provision of Partnership Agreement

Following is the brief description of provision of partnership agreement or deed.
1. List of Partner:
List of partners must be written in partnership agreement.
2. Loans:
The details of loans most be written in partnership agreement.
3. Location:
The locution of business must be mentioned in agreement.
4. Total Capital:
The details of total capital must be written in partnership agreement.

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5. Profit Ratio:
The details of profit ratio must be written in partnership agreement.

6. Easy Rule of Change:

The procedure of change in business must be written in partnership agreement.
7. Statement of Accounts:
The name and address of person who will settle the accounts of business among
all partners must be written in the partnership agreement.
8. Head Office:
The name and address of head office must be written in the partnership
agreement.
9. Amount of Drawing:
The amount of drawing must be written in the partnership deed.
10. Audit of Accounts:
The name and address of auditor must be mentioned in partnership deed.
11. Amount of Profit:
The amount of profit which must be distributed among the employees/
shareholders of business must be mentioned in partnership deed.
12. Witness:
The name, address and NIC number of person who will give the witness of
partners must be written in the partnership agreement.
13. Ways of Dissolution:
Different ways of dissolution of partnership firm/ business must be mentioned
in partnership agreement.
14. Rule of Transfer:
The rule of transfer of business must be written in the partnership agreement.
15. Rights and Duties:
The detail of rights and duties of all partners must be mentioned in the
partnership deed
16. Duration:
The detail of time period of business must be written in partnership agreement.
17. Dates of Start of Business:
The date of start of business must be mentioned in the partnership agreement.
18. Interest on Capital:
The detail of interest on capital must be mentioned in the partnership
agreement.
19. Name of Business:
The name of the business must be mentioned in the partnership agreement.
20. Nature of Business:
The detail of nature of business must be mentioned in the partnership
agreement.

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21. Amount of Salary:
The amount of salary of any partner must be written in partnership agreement.

CONCLUSION:
Partnership Agreement plays an important role in the conduct of business
activities. All time and conditions must be decided in the partnership deed

Q: Write down the difference between partnership and co-ownership?

Partnership
Partnership is an association of two Co-Ownership
to twenty people who carry on A property is purchase a owned
business together for the purpose of jointly, without any intention to
making profit. carry on business.
Example:
If two persons purchase a house without any intention of business, it is a
case of co-ownership. If two or more persons purchase a house for the purpose
of business, it is a case of partnership.

Difference between Partnership and Co-Ownership:

Partnership Co ownership
Agreement
Partnership is the result of written or In co-ownership, there is no need of
oral agreement. agreement by the co-ownership.
Purpose
The partnership is made to do The co-ownership is not made to do
business for purpose of earning business but to own purpose.
profit.
Share Transfer
A partner cannot transfer his share A co-owner can transfer his property
to other, without the consent of to any other person without the
partners. consent of other co-owners.
Agent
A partner is an agent of other A co-owner is not agent of other co-
partners. owner. Every co-owner is responsible
for his own nets.

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 Lien
A partner has lien on the things A co-owner has no lien on the things
owned in common for expenses. owned in common for expenses.
Derision of property
A partner cannot demand the A co-owner can demand the decision
decision of property. A partner can of property. A co-owner can receive
receive cash for his share in the his share of property.
business.
Members
In partnership business, the In co-ownership, there is no
minimum members are two and maximum limit of co-owners.
maximum limit is twenty.
Act
A partnership is controlled by the A co-ownership is not controlled by
partnership Act 1932. any special Act.

Minor
A minor cannot become the regular A minor can become the co-owner in
partner in the business. He can the property. The age does not affect
become a regular partner after the position of co-owner.
18year of age.
Formation
Partnership can be formed for the There is not need of formation of co-
purpose of earning profit. ownership is natural.
Dissolution
Partnership can be dissolution by There is no chance of dissolution of
partners. co-ownership.

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 Question:
1. Write down the difference between the dissolution of partnership and
dissolution of partnership firm?
2. Explain the ways of dissolution of partnership firm?

INTRODUCTION:
A,B,C and D are partners A is separated from partnership business but
other partners carry on the business it is called dissolution of partnership. When all
partners are separated and business is also closed it is known as Dissolution of
partnership firm.

DEFINTIONS:

Dissolution of Partnership
When one is more persons are separated from partnership business but other
partners continue the business it is called dissolution of partnership.
(According to section (39) of partnership Act 1932)

Dissolution of Partnership Firm

When all partners are separated from partnership business and partnership
business is also closed. It is called dissolution of partnership firm.
(According to section (39) of partnership Act 1932)

DISSOLUTION OF PARTNERSHIP FIRM

Dissolution by Agreement

Dissolution of Notice

Contingent Dissolution

Dissolution by Court
Insolvency of Partner
Death of Partner
Completion of Work
Compulsory Dissolution
Expiry of Period
 Other Reason
Regular Losses
Insolvency of Partners
Transfer of Share
Unlawful Business
Misconduct
Breach of Agreement

DISSOLUTION OF PARTNERSHIP FIRM

Following is the brief description of the Ways of dissolution of partnership firm

1. Dissolution by Agreement:
If all the partners are decide to close the partnership business with the consent of all
partners. It called dissolution by agreement.

2. Dissolution of notice:
If partnership is at will, any partner can serve notice for dissolution of partnership
firm or business.

3. Contingent Dissolution:
Contingent dissolution can be happened due to following reason.
Insolvency of Partner
Partnership business may be dissolution if any partner becomes insolvent.
Death of Partner
The partnership business may be dissolved if any partner died or expired.
Completion of work
Partnership business may be dissolved if project is completed.
Expiry of Period
Partnership business may be dissolved if time period of business is expired.

4. Dissolution by Court
Court can issue the order of dissolution of partnership firm by the following ways.
Breach of Agreement
Court can issue the order of dissolution of partnership business if any partner
breaches the partnership agreement.
Misconduct
Court can issue the order of dissolution of partnership business if any partner
misconducts the business activities.
Transfer of Share
Court can issue the order of dissolution of partnership firm if any partner transfers
his share without the consent of the partners.
Regular Losses
Court can issue the order of dissolution of partnership business if business is
suffering from regular losses.
Other Reason
Court can issue the order of dissolution of partnership business due to any other
reasons which is considered suitable for dissolution of partnership business.

5. Compulsory Dissolution:
A partnership firm can be dissolved due to following reason.
Unlawful Business
Partnership business must be dissolved if business becomes on lawful.
Insolvency of Partners
Partnership business must be dissolved if all the partners become insolvent.
CONCLUSION
According to partnership Act 1932, section (39) to section (44) defines the different
circumstances of dissolution of partnership business.
Set # 4

Topics:
Q #01
Define Joint Stock Company
Characteristics of Joint Stock Company
Q # 02
Types / Kinds /Classifications of Company
Q # 03
Types of Company meetings / Public Limited Company

Q # 04
Basic Legal Documents of the Company

Q # 05
Stages/ Steps of Formation of Company/ Public Limited Company

Q: Define Joint Stock Company? Explain characteristics of a

company.
INTRODUCTION:
The third form of business organization is called Joint Stock Company. In Joint Stock
Company many people invest their capital for the purpose of earning profit. Company
is formed to remove the problems of capital and unlimited liability. Joint Stock
Company can be formed and registered under companys ordinance 1984.

DEFINITION
Company is an artificial person, created by law
With perpetual succession and common seal.
(LORD JUSTICE)

MAIN POINTS:
Company is an artificial person
Created by law
With perpetual succession
Common seal

Joint Stock Company means a company,

Which is formed and registered under this
Ordinance or an existing company
(Companies Ordinance 1984)

MAIN POINTS:
J.S.C means a company
Formed and registered
Under and registered
 Or existing company

CHARACTERISTICS OF A COMPANY
1. Creation by law:
Company is always registered under companys ordinance 1984. Company is a
creation of law in the word.
2. Capital (share capital)
Company has large capital due to large number of members. Because in public
limited company, there is no maximum limit of the members.
3. Owners:
By the term owner we mean number of members. There are two main types of
companies relating to ownership.
PUBLIC LIMITED COMPANY
PRIVATE LIMITED COMPANY
Public limited company
In public limited company, the minimum number of members is 7, and
there is no maximum limit.
Private limited company
In Private limited company, the minimum number of members is 2, and
maximum limit is 50.
4. Management:
The Management of company is in the hands of the board of directors. The
directors of the company are responsible to control all the activities of the business.

5. Profit:
The company is started for the purpose of earning profit. Profit must be
distributed all the members according to their share in the capital.
6. Use of word:
Following words are used for different companies:
PUBLIC LIMITED COMPANY
PRIVATE LIMITED COMPANY
Public limited company
Every public limited company must use the word limited or Ltd as a part
of its name.
Private limited company
Every private limited company must use the word private limited or Pvt.
Ltd as a part of its name.

7. Transfer of shares:
The transfer of share in public limited company is very easy. Members can
transfer their shares to public. Where as in private limited company members cannot
be transfer their shares to public.

8. Easy decision:
The decision of Joint Stock Company can be easy taken. Decision is bases
taken on the basis of majority agreed members.

9. Risk:
The risk of Joint Stock Company must be distributed among all the members
according to their capital.

10. Size of business:

The size of business in Joint Stock Company is very large, because capital is
large due to unlimited members. The size of business can be expanding due to large
capital and better management.

11. Legal entity:

The business of Joint Stock Company has the separate legal entity.
Owners are not responsible for any business activity
Company purchases property on its own name.

12. Limited liability:

The members of Joint Stock Company have a limited liability. Limited liability means
personal property is not liable (responsible) for any debts of the business.
13. Law:
Company can be formed and registered under companys ordinance 1984.

14. Audit of accounts:

The audit of accounts is compulsory in public limited company. Audit means,
checking of accounts by the chartered accountants to reduce the errors and fraud
rate in the company.

15. Business (object):

The main object of the company is earning the profit. Hence in order to earn
maximum profit at minimum cost the company adopts the best possible path for
achieving its objective.
16. Formation
The formation of joint stock company (J.S.C) is very difficult, it requires long and
complicated procedure for it registration and filling the other formalities.
17. Dissolution
The dissolution of Joint Stock Company is very difficult, because it also requires long
and complicated procedure like the formation.

Conclusion:

Company is started for the purpose of earning profit.

Companies are playing an important role in the
economic development of any country.

Q: DEFINE JOINT STOCK COMPANY? WHAT ARE THE TYPES / KINDS

/CLASIFICATIONS OF COMPANY?
INTRODUCTION:
The third form of business organization is called Joint Stock Company. In
Joint Stock Company many people invest their capital for the purpose of earning
profit. Company is formed to remove the problems of capital and unlimited liability.
Joint Stock Company can be formed and registered under companys ordinance 1984.
DEFINITIONS:
1. Company is an artificial person, created by law
With perpetual succession and common seal
(LORD JUSTICE)
MAIN POINTS:
Company is an artificial person
Created by law
With perpetual succession
Common seal

2. Joint Stock Company means a company,

Which is formed and registered under this
Ordinance or an existing company
(Companies Ordinance 1984)
MAIN POINTS:
J.S.C means a company
Formed and registered
Under and registered
Or existing company

TYPES OF JOINT STOCK COMPANY

CHARTERED Co STATUTORY Co
REGISTERED Co

Co. Ltd. by Shares Co. Ltd by Guarantee Unlimited Co. Association

not for Profit
Public Ltd. Co. Private Ltd. Co.

Listed Company Unlisted Company

1) Chartered Company

Meaning:
A company which is formed by order of king or queen is called a chartered company.

Object:
These companies are formed for some special purpose.

Example:
Standard Chartered Bank
East India company

2) Statutory Company

Meaning:
A company, which is formed, by the special parliament Act or order of Head of State is
called statutory company.

Object:
The parliament or head or state decides the objects of these companies.

Example:
State bank of Pakistan
National bank of Pakistan

3) Registered Company

Meaning:
A company, which is formed under the companies ordinance 1984, is called a
registered company
Object:
The object of these companies is decided by the companys ordinance 1984.
Example:
Habib bank limited
Pakistan steel mills limited.

TYEPS OF REGISTERED COMPANY

Following are the main four types of registered companies.

1. Company Limited. by Shares

2. Company Limited by Guarantee
3. Unlimited Company
4. Association not for Profit

1. Company Limited by Shares

Meaning:

A company in which liability of members is limited up to shares is known as company

limited by shares.
Object:
The main object of these companies is decided by the companys ordinance 1984.

Example:
National Bank of Pakistan limited
United Bank limited
Allied Bank limited.

TYPES OF COMAPANY LIMITED BY SHARES

There are two types of Company limited by shares

Public Limited company
Private Limited company

Public Limited Company

A company in which minimum number of members is 7 and there is no maximum
limit is called company.
 It can issue shares to public.
Its members can transfer their shares.
It must use the word limited as a part of its name.

Types of Public Limited Company

There are two types of Public Limited Company.

i. Listed Company
ii. Unlisted company
Listed Company
Any public company, which is registered with the stock exchange, is called a listed
company.

Unlisted Company
Any public company, which is not registered with the stock exchange, is called an
unlisted company.

Private Limited Company

A company in which minimum number of members is 2 and maximum is 50.
It cannot issue shares to public.
Its members cannot transfer their shares.
It must use the word private limited as a part of its name.

2. Co. Limited by Guarantee

Meaning:
The company in which members give guarantee for the payment of companys debts
Object:
The object of these companies is decided by the companys ordinance 1984.
Example:
Karachi stock exchange Guarantee limited.
Lahore stock exchange Guarantee limited.

3. Unlimited Company
Meaning
A company in which the liability of members is unlimited is known as unlimited
company. Unlimited liability means the personal property of members is responsible
to pay business debts.

4. Association not for Profit

Meaning
Association not for profit can be registered under Sec (42) of companys ordinance
1984.
Object
These are associations are working for the welfare of public.
Examples
Chamber of commerce
Edhi Trust.

Conclusion
Company is stared for the purpose of earning profit.
Companies are playing an important role in the
Economic development of any country.

Q: DEFINE JOINT STOCK COMPANY? EXPLAIN TYPES OF MEETINGS OF COMPANY

/ PUBLIIC LIMITED COMPANY?

 INTRODUCTION:
The third form of business organization is called Joint Stock Company. In
Joint Stock Company many people invest their capital for the purpose of earning
profit. Company is formed to remove the problems of capital and unlimited liability.
Joint Stock Company can be formed and registered under companys ordinance 1984.

DEFINITIONS:

Company is an artificial person, created by law

With perpetual succession and common seal
(LORD JUSTICE)

MAIN POINTS:
i. Company is an artificial person
ii. Created by law
iii. With perpetual succession
iv. Common seal

Joint Stock Company means a company,

Which is formed and registered under this
Ordinance or an existing company
(Companies Ordinance 1984)

MAIN POINTS:
i. J.S.C means a company
ii. Formed and registered
iii. Under and registered
iv. Or existing company
COMPANYS MEETING:
A meeting in which shareholders and the directors decide the
companys matters / affairs is called companys meeting

TYPES OF MEETING OF COMPANY

BORD OF DIRECTORS SHARE HOLDERS

MEETING MEETING

Statutory Meeting Annual General Meeting

Extra Ordinary General Meeting

BORD OF DIRECTORS MEETING:

Meaning
A meeting in which directors decide the companys matters
Is called Board of directors meeting
Occasion:
Board of directors meeting must be held once in every three months and at least four
times every year.
Notice:
A written notice of board of directors meeting must be given to every director before the
meeting.
Object:
Board of directors meeting may be held for any type companys matter.
SHARE HOLDERS MEETING:
There are the three types of shareholders meeting.
i. Statutory meeting
ii. Annual general meeting
iii. Extra ordinary general meeting
 Statutory Meeting
Meaning
First meeting of shareholders after the formation of
The company is called statutory meeting.
Occasion:
Statutory meeting must be held not less than three months and not more than six
months after the formation of the company.
Notice:
A notice of twenty one days must be given to every shareholder before the meeting.
Object:
Following are the main objects of statutory meeting.

To discuss the first three months performance of the company

To discuss the details of assets of company
To discuss the expenses incurred and payments made by the company.

Annual General Meeting (AGM)

Meaning
A meeting that is held every financial year is called
Annual general meeting
Occasion:
Annual general meeting must be held every year.
Notice:
The notice of Annual general meeting must be given to all shareholder twenty one
days before the meeting.
Object:
Following are the main objects of Annual general meeting.

To discuss the one year performance of the company

To select the directors of the company
To select the auditors of the company

Extra ordinary General Meeting

Meaning
A meeting that is held for some emergency purpose is called
Extra Ordinary general meeting
Occasion:
Extra Ordinary general meeting may be held any time during the year.
Notice:
A notice is given fourteen days or 21 days before the meeting to all shareholders.
Object:
Following are the main objects of extra Ordinary general meeting.

To change the legal documents of the company

To change the capital of the company
To change the board of directors of the company
Conclusion:

Company is started for the purpose of earning profit.

Companies are playing an important role in the
economic development of any country.

Q: EXPLAIN THE BASIC LEGAL DOCUMENTS OF THE COMPANY

INTRODUCTION:
The third form of business organization is called Joint Stock Company. In
Joint Stock Company many people invest their capital for the purpose of earning
profit. Company is formed to remove the problems of capital and unlimited liability.
Joint Stock Company can be formed and registered under companys ordinance 1984.
DEFINITIONS:

Company is an artificial person, created by law

With perpetual succession and common seal
(LORD JUSTICE)

MAIN POINTS:
Company is an artificial person
Created by law
With perpetual succession
 Common seal

a. Joint stock company means a company,

Which is formed and registered under this
Ordinance or an existing company
(Companies Ordinance 1984)

MAIN POINTS:
i. J.S.C means a company
ii. Formed and registered
iii. Under and registered
iv. Or existing company

BASIC LEGAL DOCUMENTS

Memorandum of Association
Articles of Association
Prospectus

Memorandum of Association:
INTRODUCTION:
The most important legal documents of the company is called memorandum of
association. No company can be registered without memorandum of association.
DEFINITION:
Memorandum of association includes all
The objects of formation of company.
CONTENTS:
Following are the contents of memorandum of association.
Name:
Memorandum of association includes the name of the company. The name of the
company must be different from the other registered companies.
Situation:
Memorandum of association includes the name of province in which registered office
of the company is situated.
Objects:
Memorandum of association includes all the objects of the formation of the company.
Capital:
The details of capital are written in Memorandum of association. Total amount of
capital invested, number of share, and per share price must be written in the
Memorandum of association.
Liability:
The details of liability of the members must be written in the Memorandum of
association. Liability may be limited or unlimited.
Association:
Association of the contents includes the signature of promoters. In case of public
company 7 promoters must sign the documents, or in case of private company 2
promoters must sign the documents.
Change in Memorandum of Association:
Change in Memorandum of association is very difficult because, it requires long and
complicated procedure.

articles of Association:
INTRODUCTION:
Second important legal documents of the company are articles of association. In the
absence of Articles of association, table A of companys ordinance 1984 will be
considered as its article.
DEFINITION:

Articles of association includes all rules of

Internal management of company.
CONTENTS:
i. Name of the company
ii. Address of the company
iii. The rules relating the appointment of directors of the company.
iv. The rules relating the appointment of officers of the company.
v. The rules relating the appointment of auditors of the company.
vi. The rules relating the rights, duties and liabilities of directors of the
company.
vii. The details of share capital of company.
viii. The rules relating meeting of the company.
ix. The rules relating the transfer of shares of the company.
x. The rules relating the notice of meetings of the company.
xi. The rules relating the common seal form
xii. The rules relating the winding up of the company.
Change in Articles of Association:
Change in Articles of association is possible with the approval of shareholders and
Government.

PROSPECTUS:

INTRODUCTION:
Third important legal document of company is prospectus. In absence of prospectus,
the company must issue statement in lieu of prospectus.
DEFINITION:
Prospectus is an advertisement or notice to public
for the sale of companys shares or debentures.
Contents:
i. Name of the company
ii. Address of the company
iii. List of directors
iv. All the contents of Memorandum of association
v. All the contents of Articles of association
vi. Details of capital
vii. Types of shares
viii. Rules of transfer of shares
ix. Name and address of Bankers of company.
x. The brief history of company.
xi. The rules relating the appointment of auditors of the company.
xii. Shares application and procedure of application.
Conclusion:
These three above mentioned basic legal documents are necessary for the registration
of the company. A company cannot be registered without these documents.
Q: EXPLAIN STAGES/ STEPS OF FORMATION OF COMPANY/ PUBLIC LIMITED COMPANY

INTRODUCTION:

The third form of business organization is called Joint Stock Company. In

Joint Stock Company many people invest their capital for the purpose of earning
profit. Company is formed to remove the problems of capital and unlimited liability.
Joint Stock Company can be formed and registered under companys ordinance 1984.

DEFINITIONS:

Company is an artificial person, created by law

With perpetual succession and common seal
(LORD JUSTICE)

MAIN POINTS:
Company is an artificial person
Created by law
With perpetual succession
Common seal

1. Joint stock company means a company,

Which is formed and registered under this
 Ordinance or an existing company
(Companies Ordinance 1984)

MAIN POINTS:
1) J.S.C means a company
2) Formed and registered
3) Under and registered
4) Or existing company

STAGES / STEPS OF FORMATION

PROMOTION STAGE

Idea
Verification
Plan

INCORPORATION STAGE

Name
License
Preparation of document
Fee
Submission of document
Verification of document
Certificate of incorporation
SUBSCRITION STAGE

Contract with underwriters

Contract with bankers
Issue of prospectus
Issue of shares

COMMENCEMENT STAGE

Minimum issue
Payment of shares
Declaration
Certificate of commencement of
Business

Promotion Stage:
Following are the main steps of promotion stage:

Idea:
Promoters give the idea of company for the purpose of earning profit.

Verification:
In second step the promoters verify the idea of company. Promoters will verify the land,
labor, material, and machinery.
Plan:
After verify the idea, promoters prepare the plans for the registration of the company.

Incorporation Stage:
Following are the main steps of the incorporation stage:
Name:
The promoters select the suitable name of the company. Name should be different
from other companies.

License:
In incorporation stage, promoters obtain the license from the Government. License is
also called no obligation certificate (NOC)

Preparation of Document:
Promoters prepare the legal documents of company for the registration purpose.
1) MOA 2) AOA 3) other documents

Fee:
All the required fee must be deposited in registrar office.

Submission of Documents:
All the legal documents must be submitted to registrar office.

Verification of Documents:
After the submission of documents the company registrar verifies all the legal
documents.

Certification of Incorporation:
After verify the legal documents registrar issues the certificate of incorporation.
Certificate of incorporation means, company is now registered and it has separate
legal entity

Subscription Stage:
Following are the main steps of subscription stage:

Contract with Underwriters:

In subscription stage, promoters deal with the underwriters. Underwriters are
responsible to sale the share of the company.
Contract with Bankers:
In second step promoters contract with the bankers for receiving the share application

Issue of Prospectus:
In the third step, Promoters issue the prospectus as an advertisement of their
company. It includes all the details of the company.

Issue of Shares:
After receiving the shares application, company finally issues its shares.

Commencement Stage:
Following are the main steps of commencement stage:

Minimum Issue:
A document of minimum issue of shares must be submitted to the registrar office.

Payment of Shares:
A document relating the payment of shares must be submitted to registrar office.

Declaration:
A declaration relating the formation of company. According to companies ordinance
1984, must be submitted to registrar office.

Certificate of Commencement of Business:

After receiving legal documents, registrar issues the certificate of commencement of
business. Certificate of commencement of business means that the public limited
company can now start/ run its business

CONCLUSION:
A company can start its business if it fulfills the above mentioned steps.
The approval from the registrar can only be taken if the
company passes its documents from the registrar.
 MOA & AOA
Q: Define memorandums and articles of association. Also explain their difference.

INTRODUCTION:
The documents which are required for the registration of a company are called basic
legal documents of the company. These are: Memorandum of association, Articles of
association and prospectus.
MEMORANDUMS OF ASSOCIATION:
Memorandums of association are the most important legal document of the company.
It defines the relationship between company and the public.
Memorandums of association is an official documents
Setting out the details of the companys existence
ARTICELS OF ASSOCEATION:
Articles of association are the rules of the company; these rules are related to manage
the internal affairs of company and to achieve object started in memorandums.
Articles of association is a document that governs the
Running of the company its set out voting rights of
Shareholders, conduct of shareholder, and director
Meeting, powers of management etc.

Difference between Memorandum and Articles

MEMURANDUM ARTICLES
1) NATURE:
The memorandum of association in the The articles of association are by laws of
characteristics of the company it states the company.
the objects of the company.
2) SCOPE:
The memorandum of association states The Articles of association states the
the work, which the company can do. rules of conducting the business at
stated as memorandum
3) REGISTRATION
Memorandum is necessary for the Articles of association are not necessary
registration of the company. for registration. Table A of the company
ordinance 1984 can be used instead of
articles.
4) RELATIONSHIP
 The memorandum is the relationship Articles are the relationship member
between the company and outside and management of the company.
public.
5) IMPORTANCE
Memorandum is the primary and basic Articles is secondary and helping
document. documents of company.
6) LEGAL EFFECTS
A company cannot go beyond A company cannot go beyond Articles of
memorandum of association. association.
7) ALTERATION
The M O A can only be attend by special The A O A can only be attend any time
resolution and involves legal formalities. by special resolution.
8) SUBORDINATE
The MOA is under companies ordinance The AOA is under MOA and companies
1984. It can not contain any thing ordinance 1984. It can contain any
contrary to it thing contrary to both.
9) CLAUSES
The MOA has usually six clauses. The AOA has many clauses. It is not
Company can add more clauses as per limited to six clauses. Table A has 85
requirements. clauses for operating the company.

CNCLUSION
The company worth according to Articles
and memorandums of association, they are
required to run the company successfully
What is meant by Negotiable Instrument? What are main characteristics of it?
OR
What is a Negotiable Instrument? What are the essentials / features of
Negotiable Instrument?

INTRODUCTION
The law relating to negotiable instrument is contained in the negotiable instrument
Act, 1881. It deals with the promissory note, bill of exchange, and cheques.

Meaning
The word Negotiable means Transferable by Delivery and the word instrument mean
A written document, which creates a right in favour of some person. Thus, the term
negotiable instrument means a written document transferable by delivery.

DEFINITION
According to section 13 of the negotiable instrument act 1881,
A negotiable instrument means a promissory note, bills of exchange
or cheques payable either to order or the bearer.

CHARACTERISTICS OF A NEGOTIABLE INSTRUMENT

The essential characteristics of negotiable instrument are as follows:-

1. Easy transferability
They are transferable form one person to another. The right of ownership in these
instruments can be transferred from one person to another person easily. If the
instruments is payable to bearer, the property transfers to the transferee by mere
delivery. But, in case the instrument is payable to order, the property can be
transferred to the other person by endorsement and delivery.
2. Better title to transferee
Transferee is the person o whom the negotiable instrument is transferred. A transferee
if is bonafide gets the instrument free from all defects, because the transferee is not
affected by any defect in the title of transferor of the negotiable instrument
3. Transferee can sue in his own name
The transferee of negotiable instrument, in case of dishonore of the instruments, can
sue the debtor in his own name without giving a notice to the debtor of the fact that he
becomes the holder thereof.
4. Better title to a holder in due course
A holder in due course is a person who becomes the holder of the instrument.
i. For Consideration
ii. Before the due date of instrument.
iii. In good faith
A holder in due course gets the instrument free from all defects of title and is note
affected by any defect of the title of the transferor.
5. Resumption
According to section 118 and 119 of the act, certain presumptions apply to all
negotiable instruments unless contrary is proved. These presumptions are regarding
consideration, date, time of acceptance, stamp, and holder in due course etc.
6. In writing
A negotiable instrument must be in writing. An oral promise or order to pay money is
not a negotiable instrument.
7. Unconditional
Negotiable instrument must be unconditional order or promise in writing. If condition
is attached with the presentment of negotiable instrument, it becomes void.
8. Payable on demand or at fixed date
Negotiable instrument is payable on demand or at a fixed time agreed by the mutual
consent of the parties.
Example of Negotiable Instrument
The following instruments have been recognized as negotiable instrument by Custom.
1. Bills of exchange
2. Promissory note
3. Cheque
4. Government promissory notes
5. Treasury bills
6. Dividend warrants
7. Share warrants
8. Bearer debenture
9. Railway bonds payable to bearer.

Example of Non Negotiable Instrument

1. Money order
2. Postal order
3. Fixed deposit receipts
4. Share certificates
5. Letter of credit.

CONCLUSION
Negotiable instrument Are the written documents which are transferable by delivery,
and must contain the essentials mentioned above.
 Define Bills of Exchange, Cheques and promissory note. What are the differences
between of negotiable instruments?

BILL OF EXCHANGE
According to Section 5 of the negotiable instrument act 1881
A bill of exchange is an instrument in writing containing an unconditional order,
signed by the maker, directing a certain person, to pay a certain sum of money only to
or to the order of, a certain person or to the bearer of the instrument.
CHEQUES
According to Section 6 of the negotiable instrument act 1881
A cheque is a bill of exchange drawn on a specified banker and not expressed to be
payable otherwise than on demand.
PROMISSORY NOTE
According to Section 4 of the negotiable instrument act 1881
A promissory note is an instrument in writing (not being a bank note or currency
note), containing an unconditional undertaking, signed by the maker to pay on
demand or at a fixed or determinable future time a certain sum of money only to, or to
the order of certain person, or to the bearer of the instrument.
DIFFERENCES BETWEEN OF NEGOTIABLE INSTRUMENTS
Bills of Exchange Cheques Promissory Note
1. Maker
A bill of exchange is written A cheque is written by, the A promissory note is written
by, the creditor i.e. the person, who has an by, the debtor i.e. the
person who has right to account in the bank. person who is liable to pay.
demand the payment.
2. Number of parties
In a bill of exchange there are In a cheque there are also In a promissory note there
three parties i.e. the drawer , three parties i.e. the are two parties i.e. the
the drawee and payee. drawer, the drawee and maker and the payee.
payee.
3. Maker and payee
In a bill of exchange the In a cheque also the in a promissory note the
drawer and the payee may be drawer and the payee may maker and the payee are
same person. be the same person. different persons.
 4. Drawee
Drawee of a bill of exchange Drawee of a cheque is
may be anyone including bank. always a bank.
5. Primrose or order
A bill of exchange contains A cheque is also contains
an unconditional order to an unconditional order to
pay. pay.
6. Acceptance
A bill of exchange must be A cheque does not require
accepted by the drawee acceptance of the drawee
before it is presented for before its payment.
payment.
7. Nature of liability
Liability of a drawer of a bill Liability of the drawer of a
of exchange to the payee or cheque to the payee or the
the holder is secondary and holder is primary.
conditional.
8. Payable to bearer
A bill of exchange can be A cheque is always payable
drawn payable to bearer but on demand and it can also
not on demand. be made payable to bearer
and on demand.
9. Payable on demand
A bill of exchange may be A cheque is always drawn
made payable on demand or payable on demand.
at a fixed or determinable
future time.
10. Copies
A bill of exchange must be A cheque cannot be drawn
drawn in sets. in sets.
11. Grace days
Three grace days are also A cheque is always payable
allowed to the acceptor of A on demand.
bill of exchange payable
otherwise than on demand.
There is no drawee of a
promissory note.
A promissory note contains
an unconditional promise to
pay.
A promissory note needs no
acceptance as it is written
and signed by the person
who is liable to pay.
Liability of maker of
promissory note to the
payee or the holder is
primary and unconditional.
A promissory note cannot
be originally made payable
to bearer.
A promissory note may be
made payable on demand or
at a fixed or determinable
future time.
A promissory note cannot
be drawn in sets.
Three grace days are
allowed to maker while
calculating maturity date of
a promissory note payable
otherwise than on demand.

A revenue stamp according to
the value of the bill of
exchange value is affixed.
13. Stopping the payment
The drawer of A bill of
exchange cannot stop the
payment of the bill after its
acceptance by the drawee.
A bill of exchange cannot be
crossed.
A bill of exchange can be
drawn on any paper.
12. Stamp
Generally no revenue A revenue stamp according
stamp is affixed on a to value of the promissory
cheque. note is affixed.
The drawer of a cheque The maker of a promissory
can stop the payment after note cannot stop the
its issue. payment after its issue.
14. Crossing
A cheque can be crossed. A promissory note cannot
be crossed.
15. Printed
A cheque is always drawn A promissory note can be
on the printed Performa made on any paper.
issued the bank.

What is meant by crossing of a cheque? What are the various types of crossing?

CHEQUES
Definition:
According to Section 6 of the negotiable instrument act 1881
A cheque is a bill of exchange drawn on a specified banker and not expressed to be
payable otherwise than on demand.

Types of cheques
Cheque can be divided into following types
1. Open Cheque
2. Crossed Cheque

Open Cheque
An open cheque is payable at the counter of the bank on the presentation of the
cheque. It need not be presented through a bank account.
Crossed Cheque
It is not payable at counter. Its payment is made only through the collection banker of
customer. The collection bank credits the proceeds to the account of the payee of the
cheque. The crossing provides protection to the holder of cheque.
Crossing of cheque
Meaning
A cheque is said to be crossed when two parallel transverse lines are drawn on the left
upper corner of the cheque.
Purpose
The purpose of the crossing is to direct the drawee (banker) to pay the amount of
cheque only to a banker so that the party who receives the payment of the cheque can
be traced easily.
Types of Crossing
There are the following types of crossing:
General Crossing
Special Crossing
Account payee Crossing
Not Negotiable Crossing
1. General Crossing
According to Section 123, where a cheque bears across its face the words and
company or any abbreviation thereof, between the two parallel transverse lines, or of
two parallel transverse line simply, either with or without the words not negotiable ,
such addition shall be deemed a general crossing.
According to Section 126, where a cheque is crossed generally, the bank on whom it
is drawn shall not pay it otherwise than to the bank. A general crossing can be made
as follows.

2. Special Crossing
According to Section 124, where a cheque bears across its face name of a bank,
either with or without the words not negotiable, such addition shall be deemed a
special crossing, and to be crossed to that banker. Thus, where a cheque is crossed
specially, the bank on whom it is drawn shall not pay it otherwise than to the bank to
whom it is crossed or his agent for collection.
3. Account payee Crossing
According to Section 123(A), in this type of crossing, the phrase account payee or
payees account only or A/c payee Is added to the general or special crossing. It has
the following effects:
1. It becomes non transferable.
2. It becomes the duty of the collecting bank to credit the proceeds of the cheque
only to the account of the payee named in the cheque.
4. Not Negotiable Crossing
According to Section 130, a person taking a cheque crossed generally or specially,
being in either case the words not Negotiable, shall not have and shall not be capable
of giving, a batter title to the cheque that which the person whom it took it had.

What are the difference ways may a Negotiable Instrument be dishonored. When
a bank Must or May dishonor a cheque.

INTRODUCTION
Dishonour of negotiable instruments means non acceptance or non- payment towards
the negotiable instruments.
DISHONOUR
A negotiable instrument is said to be dishonoured when the drawee refuses to accept it
or the make payment upon it.
A negotiable instrument is said to be dishonoured by:
i. Non- Acceptance or
ii. Non -payment.
Dishonour by Non Acceptance
A bill of exchange, promissory note and cheque is dishonoured due to non payment in
the following cases.
1. Time
When the drawee does not accept the bill within 48 hours from the time of
presentment for acceptance
2. Several Drawees
When one or several drawees (not being partners) fail to accept the bill.
3. Unnecessary Presentment
When presentment is unnecessary and the bill is not accepted.
4. Incapacity
Where the drawee is incompetent to contract
5. Conditional Acceptance
When the drawee gives the conditional acceptance.
6. Fictitious Person
When the drawee is a fictitious person.
7. Search of Drawee
When the drawee cannot be found after reasonable search.
Dishonur by Non payment

1. Promissory Note
When a promissory note is presented for payment and the payment is refused.
2. Bill of Exchange
When a bill of exchange after its acceptance is properly presented to the acceptor for
payment and he fails to make payment.
3. Cheque
When a cheque is presented to bank for a payment and bank refuses to make he
payment.
WHEN A BANKER MUST DISHONOUR A CHEQUE
In the following cases the banker is bound to dishonor the cheque.

1. Death, insolvency, insanity of the customer

Upon the notice received by the banker as to the death, insolvency or insanity of the
customer, the banker is bound not make payment from such account.
2. Upon notice of assignment
In that case where a customer assign the money in his account to another person and
gives notice to the banker, the baker must not make payment from such account.
3. Defective title of the party
When there is surety to the banker that the person presenting the cheque has a
defective title then banker must refuse to honor the cheques.
4. Lost cheque
When a cheque is lost by the customer then the customer must inform the banker
about such loss, and the banker upon the receipt of such notice bound to stop the
payment if such a cheque is presented by anyone.
5. Irregular cheque
When the cheque is irregular or the customer operated the account after a very long
time, the banker is bound not to pay the cheque.
6. Notice for closing account
Upon the receipt of notice from the customer regarding the closing of his account, the
banker must not honor the cheque from such account.

WHEN A BANKER MAY DISHONOUR A CHEQUE

In the following cases the banker may dishonor a cheque.
1. Post Date Cheque
When a cheque is presented well before the date written on the cheque is a called a
post dated cheque.
2. In Sufficient Credit in Customer Account
If the balance to the credit of the customers account is insufficient to meet the cheque
and also there is no facility of over draft.
3. Set aside Fund
In case the funds in the customers count are set aside for some special purpose and
the funds are not available for payment, the banker may refuse to honor the cheque.
4. Cheque Not Presented During Banking Hours
Where a customer is in the habit of presenting the cheque improperly, i.e. presenting a
cheque after banking hours.
5. Cheque not Presented Within Reasonable Time
It is the duty of the cheque holder to present the cheque within a reasonable time i.e.
within six months from the date of issue. If the customer has presented the after that
date then banker may refuse to honor the cheque.
6. Difference in Words and Figures
When the amount of the cheque differs if words and figures the banker may refuse to
honor such a cheque.
7. Banker General lien
When there is a general lien on the customers account by the banker, and there is no
excess amount after the exercise of such lien the banker may refuse to honor the
cheque.
8. Mutilated Cheques
If cheque presented is mutilated one the banker may refuse to honor such a cheque.
9. Difference in Signature
Where the customers signature does not match with his specimen signature the
banker may refuse to honor such a cheque.

What are the difference types of Negotiable instruments?

INTRODUCTION
The law relating to negotiable instrument is contained in the negotiable instrument
Act, 1881. It deals with the promissory note, bill of exchange, and cheques.
Meaning
The word negotiable means transferable by delivery, and the word instrument means
A written document, which creates a right in favour of some person. Thus, the term
negotiable instrument means a written document transferable by delivery.

DEFINITION
According to section 13 of the negotiable instrument act 1881,
A negotiable instrument means a promissory note, bills of exchange or cheques
payable either to order or the bearer.
TYPES OF NEGOTIABLE INSTRUMENTS
Inland Instrument
A promissory note, bill of exchange or a cheque drawn or made in Pakistan payable in
Pakistan, or drawn upon any person resident in Pakistan shall be deemed to be an
inland instrument.
Foreign Instrument
Foreign instrument is that: which is made or drawn in Pakistan but is payable by a
person resident outside Pakistan or which is made or drawn outside Pakistan but is
payable in Pakistan.
Bearer Instrument
In case of bearer instrument the holder in possession of it has a right to receive the
payment due on it. It is not compulsory that the name of the person is mentioned on
it.
Order Instrument
An instrument payable to order which is expressed to be as a payable or which is
expressed to be payable to a particular person is called order instrument.
Ambiguous Instrument
Ambiguous means doubtful or not clear. It is that type of instrument which cannot be
clearly identified as promissory note or a bill of exchange is called ambiguous
instrument.
Instrument Payable on Demand
An instrument payable on demand may be presented for payment at any time. Such
instrument is payable on demand are:
Where it is expressed to be so or to be payable a sign sight or on presentment or
Where no time for payment is specified in it or
Where the note or the bill accepted or endorsed after it is overdue.
Inchoate Instrument
It is also called an incomplete instrument. If a person signs and delivers to another, a
blank or incomplete stamped instrument and authorizes the other person to convert it
into negotiable instrument by filling the blank. The signatory is responsible for that up
to the amount of the instrument.
Time Instrument
Where time for the payment of the instrument is mentioned, it is called a time
instrument. The time may be
After a specified period
On a specific day
 After sight
On the happening of a certain even.
Fictitious Bill
Where the names of both the drawer and drawee are fictitious on the instrument then
it is called a fictitious bill.
Accommodation Bill
A bill which is drawn for a financial help of the drawer and the drawee it is called an
accommodation bill.
Undated Bill
Where the date of its acceptance is not mention on the bill it is called undated bill it is
not an invalid bill.
Bank Draft
It is order issued by one bank to another bank or its branch to pay a specified sum of
money to a specified person or his order.
Documentary Bill
Where a bill is accompanied by different document it is called documentary bill.
Examples:
Bill of lading
Railway receipt
Marine insurance policy etc.
Clean Bill
Where no documents of title relating to goods and other document are attached to the
bill it is called a clean bill.
Trade Bill
Basically there are two types of bills one is trade bill and other is accommodation bill
when a bill is drawn, accepted or endorsed for the consideration it is called a trade bill.
Escrow Instrument
When a negotiable instrument is endorsed and delivered conditionally or for a special
purpose only. The purpose may be as a collateral security or for safe custody and not
for the purpose of transferring absolutely property therein, it is called an Escrow.
Bills in Sets
When bill of exchange is drawn in parts it is called bill in sets. Bill in sets is usually
drawn in case of foreign bills of exchange.