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short note on company

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  1. 1. COMPANY<br />Separate and distinct legal entity Stable and perpetual existence Needs to be registered there are two types of company <br />–Private company <br />–Public company <br /> Private Company<br />One to fifty shareholders. <br />Name must end "(Pvt) Ltd" <br />Has legal personality. <br />Limited liability. <br />Unlimited continuity. <br />Managed by a board of directors, comprising a minimum of one person. <br />Taxation charged on company's profits. <br />Governed by Companies Act 61 of 1973. <br />Requires the Memorandum of Association, Articles of Association and Certificate of Incorporation to commence with business. <br /> Public Company<br />Minimum of one member, Corporations Act s 114 <br />Name must end in "Ltd". <br />Has legal personality. <br />Limited liability. <br />Unlimited continuity. <br />Managed board of directors, with a minimum of one person. <br />Taxed on profits. <br />Governed by Companies Act No. 61 of 1973. <br />Requires for formation all of the Memorandum of Association, Articles of Association, Certificate of Incorporation, Prospectus and Certificate to commence business. <br />PUBLIC SECTOR BUSINESS ENTITY: <br />Public sector business entities are the form of business organisation which are adopted by the government to do the business. <br />Public Enterprise<br />Departmental Government Departmental<br />Undertaking Company undertaking<br />(Management) (Corporation)<br />Characteristic of Public Enterprise<br />Ownership: The organisation is owned by government as sole owner or major owner. The enterprises are under central government or state government or under the joint ownership of central and state. <br />Control: People control the state enterprise through parliament. The Minister in charge controls it for all practical purpose. Board of directors take care of all day to day activities. <br />Legal status: it is identical with government; through autonomous body do have a separate legal entity of its own. <br />Stability: its stability depends on the stability of the Government of India. <br />Risk: Risk if any, lies with the government. <br />Capital: Capital is supplied by government and from public borrowers by government. <br />Management: By independent board of directors nominated by government instrument. <br />Profit: surplus generated to be a portion of national exchequer. <br />Suitability of state Enterprise: <br />Infrastructure industry like roads ships, shipyards, ports, airports, railway etc. <br />Basic industries like iron and steel, automobile etc. <br />Public utilities like petroleum, water supply, hospital etc. <br />Types of state enterprises: <br />In India there are three types of enterprises. Let us discuss each of these one by one <br />Departmental undertaking: when a state enterprise is managed by a government department, it is known as department undertaking or departmental management. Example-Railway, Post & Telegraph. Army, Navy, Air force (Defense), Telecast & Broadcast etc. <br />Public corporation: it is a corporate body created by a special act of the parliament. It is a corporate entity with common seal, perpetual succession where the Act defines powers, duties, privileges and management pattern. Example: Life Insurance Corporation, State Bank of India are all Public corporation. <br /> Government Company: any state enterprise or PSU established under the provision of companies Act 1956 is known as Government Company and these are in the nature of Joint Stock Company. As per companies act, government company is a company in which not less than fifty one percent of the paid up capital is held by central government or by any state government, or partly by state and central government or by a combination of several state government. The examples are ITI Ltd, HAL Ltd., etc. <br />JOINT SECTOR: <br />When government and private sector owns and runs an undertaking together, it is known as joint sector, in general, at least 26% should be the stake of government and the responsibility of management rests upon the private counterpart. This is basically a partnership between government and private for better resource utilisation. Indian telephone, SALT LAKE ELECTRONIC COMPLEX are all under joint sector. <br />Ownership: all the partners jointly own the business. An enterprise established by two or more partners; one of them being a government mainly. <br />Control: the control of the business lies with the partners, with equity participation of the Government and private sector.<br /> Legal status: there is no separate legal entity of partnership business and it is identical with the partner. Each partner is in a fiduciary relationship. <br />Liability: There is no separate legal entity and there is no fiduciary relationship among the partners, the individual partner has both joint as well as individual unlimited liability for the firm.<br />Capital: Partners are expected to contribute equally or otherwise in the capital of the firm (government has no shortage but for private Shortage is there) <br />Management: the management is mainly vested on the partners both (govt and private).<br />Stability: it durable organization and the firms never dissolves on the death and /or insolvency of partner. <br />Risk: government can absorbs , in private that is on individual <br />Disadvantage: Voting for the top management is done by public.Conflicts over voting rights and ownership issues, even if it incurs a loss, it has to pay dividends to the share holders.<br />