Banking · Principles of Lending

Statement 1: A Partnership Firm formed under the Indian Partnership Act 1932 is not a separate legal entity from its partners, meaning that the individual partners are jointly and severally liable for all the debts and obligations of the firm incurred while they are partners. Statement 2: When a bank lends to a partnership firm, it must ensure that the Partnership Deed contains a specific clause authorizing the partners to borrow money and to mortgage the firm's property, and the bank must also verify if the firm is registered with the Registrar of Firms. Statement 3: In the event of the death of a partner, the partnership is legally dissolved unless there is a contract to the contrary in the deed, and the bank must immediately stop all operations in the firm's account to determine the liability of the deceased partner's estate. Statement 4: A Private Limited Company is a separate legal entity with restricted transferability of shares and a limit on the number of members to 200, where the liability of the members is limited to the extent of the nominal value of the shares held by them. Evaluate the statements regarding the legal status and operational risks associated with Partnership Firms and Private Limited Companies.