Chapter 1

Introduction to Business
Introduction & characteristics of Business
 Introduction of Business

 Types of Business
 Objectives of Business
 Requ...
Human Activities
Economic activities
Non-economic activities
Business
 “Being busy”

 For-profit
 Sole proprietorship
 Partnership
 Limited liability
 Corporations
 Not-for-pro...
Objective of Business

Economic Objective
Earning fair profits
 Incentive to businessman
 Serves as a measure of succe...
Objective of Business

Social Objective –
Sufficient supply of Goods at

reasonable price.
Fair Deal to employee
Fair ...
Types of Business
(1) INDUSTRY
 Extractive (Mining)
 Genetic (Dairy farming)
 Manufacturing (Steel, furniture)
 Constr...
TYPE OF BUSINESS

INDUSTRY

COMMERCE

GENETIC (Animal Husbandary)

TRADE (Wholesale IMP/EXP)

EXTRACTIVE (Mining)

ANCILLA...
Non-economic activities
 Personal satisfaction (hobbies)
 Physical requirements (sports, going to gym)
 Social obligati...
Business as an Economic Activity
 Objective: Sell goods/services for profit.
 Use, payment of scarce resources
 Capital...
Objectives of Business
1.
2.
3.
4.

Economic
Social
Human
National
1. Economic objectives
 Profit earning (personal need, growth and expansion)
 Customer creation
 Innovation (new produc...
2. Social objectives
 Right quality at reasonable price
 Avoiding hoarding, overcharging, adulteration, misleading


...
3. Human objectives
 Fair remuneration
 Working condition and environment
 Job satisfaction
 Growth
 Future security
...
4. National objectives
Social justice

National priorities
Exports, foreign exchange reserves

Imports substitution
Role of Profit

Means of livelihood

Increases volume of business
Index of performance
Reward for risk bearing
Helps ...
Requisites of Business
 Well Defined Objective
 Proper Planning
 Proper Location, Layout & Size of Business
 Adequate ...
Recent Issues
Corporate Social Responsibility

Business Ethics
CSR towards…
 Investors

 Employees
 Consumers
 Suppliers
 Government
 Community and society

 Competitors
Need for CSR
 Long-term interest of business

 Public image
 Avoidance of government regulations
 Moral justification
...
Few Issues of CSR
 Environmental protection
 Equal employment opportunity
 Minimum wages
 Occupational safety and heal...
Chapter 2

Individual & Sole
Proprietorship
Syllabus
 Objective
 Introduction to Individual / Sole Proprietorship
 Merits
 Limitations

 Partnership Organisation...
Sole Proprietorship
 Business owned by one person, established, Financed,

managed with utmost freedom by an individual e...
Sole Proprietorship
 Merits

 Limitations

 Easy & Simple Formation

 Limited Financial Resources

 Smooth Management...
Partnership Org
 Partnership Orgn has grown out of necessity to arrange more

capital, provide better skill, control and ...
Partnership (Basic Features)
 Number of Persons
 Contractual Relationship
 No Legal Distinction Between Firm and Partne...
Types of Partners
 Active Partners
 Sleeping Partners
 Nominal Partners
 Partners in Profit only
 Retired or Outgoing...
Registration of Partners
 Indian Partnership Act 1932
 Optional
 Limitations to unregistered firms

 Registration Proc...
Rights & Duties of Partners
 Right to Management
 Right To inspect Books of Accounts
 Right to continue unless expelled...
Duties of Partners
 Duties to conduct business
 To act bonafide (good Faith)
 To see that partnership property is not u...
Implied Authority of a Partner as an
Agent
 A partner is an agent of the firm, his acts bind the firm
 Sell Purchase
 R...
Can’t do following due to Implied
Authority of a Partner as an Agent
 Submit a dispute relating to the business for arbit...
Dissolution of Partnership (auto)
 Implies the end of original partnership agreement, not the firm.
 Disso of partnershi...
Dissolution of Partnership
 When a partner gives notice to that effect in case of partnership at






will
When all ...
Dissolution of Firm thru Court
 Any partner can move to court for disso & court can order disso
 On Lunacy of a Partner
...
Sole Proprietorship & Partnership In India
 Most accepted formats of business in India
 Pop is poor, Little capital, sma...
Chapter 3
Introduction of Public Enterprise
Syllabus
 Intro of Public Enterprise
 Definition & Objective
 Characteristics of Public Corporations
 Govt. Companies
...
Pre Independence & 5 years on
 Railways, Ports, Communications, Broad Casting, Irrigation &

Power Sector
 No clear obje...
Definition & Objective
 Public Enterprise means state ownership & operation of

Industrial, agricultural, financial, and ...
 Planned Development

Objectives of PE

 Balance Development
 Acceleration of Rate of Economic Development
 Provision ...
Characteristics of PE
 Wholly Owned by State
 Created by special law, defining powers, duties and








immuniti...
Govt Companies
 As an alternative to PE, Govt Companies are popular in India
 Body Corporate under a general law (Comp A...
Reasons for adoption of this form
 Salvage Financial Crisis
 Emergency
 Need of sector

 National / International Inte...
Criticism of PE
 It evades constitutional responsibilities compared to

special powers granted
 Company Law becomes fict...
Public Enterprise in India
 29 Crores in 1950-51 to 21.226 Crs in March
1981
 5 to 199 PE at 1981
 146971 Crs in March ...
Problems of PE
 Poor Planning
 Bad Financial Planning

 Heavy Overheads
 Faulty Production, Planning & Utilization Cap...
Introduction of Public Utilities
 Estb for supply of essential products or services, operating in

limited market areas o...
Characteristics of PE
 Supply of Essential Products / Service
 Unduly Heavy Fixed Capital
 Inelastic Demand
 Non Trans...
Specific Problems of PU
 Plant Location (No Choice, rely on local auth or
state to acquire land.
 Size ( require Huge Ca...
Chapter 4
Competitive Priorities
Syllabus
 Introduction
 Competitive Priorities Objectives
 Competitive Priorities Factors affecting plant layout
 Comp...
Competitive Priorities Introduction
 It talks about the way products / services are manufactured
 Market (Oil)
 Process...
Objectives of Good Plant Layout
 Proper Efficient & Economic handling of materials
 Economic Utilization of Floor Space
...
Factors affecting plant layout
 Management Policies
 Policy re volume and size
 Managerial emphasis on quality
 Policy to attain flexibility & adaptability
 Policy to ach...
Plant Layout affecting factors
 Plant location
 Climate and environment

 Nature of Products and type of Industry
 Seq...
Effective Plant Layout Benefits
 Improved Production Process
 Higher Production Capacity
 Min Materials Handling
 More...
Effective Plant Layout Weaknesses
 Bad Production Process
 Low Production Capacity

 Unmanaged Materials Handling
 Und...
Assignment
 Study & Describe Functional Layouts of following
 Machine Shop –
 Assembly of a Ship
 Hospital
 Municipal...
Chapter 5

Company Law
Management in India
Syllabus
 Introduction
 Company Management in India
 Shareholders
 Board of Directors
 Chief Executive

 Managing Di...
Company management
 In case of sole proprietorship, the business is owned

by on person operated for ones own profit.
 I...
share holders

elect
board of directors

appoint
chief executive
finance production purchase sales
manager manager manager...
Share holders
 The share holders are the owners of a public company.
 Due to separation of ownership from control, the
...
Rights of shareholders
 In case of company the shareholders are owners but

the management is controlled by the board of
...
Individual rights of shareholders
 He is entitled to receive dividend as declared by the










company.
He can...
Group rights of shareholders
 They as a group determine objectives and policies in annual








general meeting.
T...
Directors of company
 In company form of organization, the ownership is

separated from management.
 The shareholder who...
 In company form of organization, the ownership is

separated from management.
 The shareholder who are the owners of th...
POWERS OF DIRECTORS
 The directors of a company by passing a resolution

shall exercise the following powers on behalf of...
 To authorize director of the company to enter

into any contract with the company for making
sale, purchase, or supply o...
Liability of directors
 The directors are personally liable for acts such as

wrongful acceptance or surrender of shares....
Chief executive
 The board of directors of a company is the top

organ of management of company.
 The board appoints one...
 As director he shares the responsibilities of the board

and as chief executive carries out the management of
company.
...
 Different from Sole Prop & Partnership Firms
 Different System of Operation & management
 Different Departments
Shareh...
Shareholders
 Furnish the required capital, assume the risks, and being the real

owners.
 Certain rights to exercise co...
Board of Directors
 Elected members by Shareholders
 Shareholders delegate the power of Management to them
 Individuall...
Appointment - Board of Directors
 Every Public Limited Company – 3 BOD

 Every Pvt Limited Company – 2 BOD
 Process – F...
Chief Executive & MD
 Board of Directors is the Ultimate Executive Authority of the

Company
 Day 2 Day Affairs, Policy ...
Manager
 An individual who, subject to superintendent,

control and direction of BOD has the
management of whole or part ...
New Pattern of Company Mgmt
 New Pattern of Mgmt – Managing Directors as an alternative

to the managing agents”
 This f...
India's 10 Fastest Growing Companies

Lot of companies are emerging up in India and slowly
growing with addition of new en...
1. Jindal Steel & Power
Jindal Steel and Power Limited (JSPL) is an
Indian steel and energy company based in
New Delhi, In...
2. Adani Ports
Adani Ports and Special Economic Zone
Limited (APSEZ) is India‟s largest private
multi-port operator. APSEZ...
3. Opto Circuits
Opto Circuits Limited is an Indian medical devices
company based in Bangalore. It designs, manufactures
a...
4. IRB Infra Developers
IRB Infrastructure Developers is India's
leading highway construction company
headquartered in Mum...
5. J Kumar Infraprojects
J Kumar is a leading contractor based in
Mumbai. The turnover of this engineering
company is arou...
6. Educomp Solutions
Educomp Solutions was set up in the year
1994 and has recently become one of the
largest Indian techn...
7. Godrej Consumer Products
Godrej Consumer Products Limited (GCPL) is an Indian
consumer goods company based in Mumbai, I...
8. Titan Industries
Titan Industries is the world's fifth largest
wrist watch manufacturer and India's
leading producer of...
9. Sun Pharma
The leading pharmaceutical giant has seen its
domestic business growing by an average of 21
percent between ...
10. Lupin Pharmaceutical
Lupin is world's largest manufacturer of
the anti-TB drugs based in Mumbai,
Maharashtra, India. T...
Company - Advantages
 Companies are designed as to make it easy to raise

capital.
 Companies have the ability to subdiv...
Company – Advantages (cont.)
 It is also said to allow managers to take greater risk in the

knowledge that the sharehold...
Company - Disadvantages
 Forming a company and complying with company

law is expensive and time consuming.
 It also app...
COMPANIES ACT 1956

98

Companies Act 1956
Legal meaning
 Sec 3(1) (i); “Company means a company formed and

registered under this Act or an existing company. An ex...
Nature and definition of a company
 „Literal meaning - Company‟ in common parlance means a

group of persons associated t...
Contd  Lindley – An association of many persons who contribute money

or money‟s worth to a common stock and employ it in...
Characteristics of the company
 An artificial person created by the law.
 A separate Legal entity
 Case: Saloman and Sa...
Separate Legal Personality (cont.)
 The most famous case in this area is Salomon v Salomon &

Co
 Mr Salomon was in busi...
Separate Legal Personality (cont.)
 Unfortunately, the company did not do well and it went into

liquidation
 A liquidat...
Separate Legal Personality (cont.)
 The liquidator claimed that the company was a fake because

Mr Salomon owned 20001 sh...
Separate Legal Personality (cont.)


1.



106

However, the House of Lords disagreed
The court held that
The fact that...
Separate Legal Personality (cont.)
2.


107

A company which is properly formed under the
Companies Act is a separate per...
Characteristics of a company
 Perpetual existence
 Continued existence
 Death, insolvency or unsoundness of mind of its...
Lifting the Veil of Incorporation
 Although the general rule is that a company has a separate

legal identity from its me...
Lifting of corporate veil
 Veil of corporate personality used as a cloak for fraud and

improper conduct. In such case, t...
Lifting the Veil of Incorporation (cont.)
 At common law, the general principle is that the courts will

not allow a comp...
Lifting the Veil of Incorporation (cont.)
 Therefore, when he left he formed his own company, and the

company approached...
Lifiting of corporate veil
 For the protection of revenue.
 Where a company is acting as the agent of the shareholders

...
Contd Where the device is used for some illegal purpose
 Where the number of members fall below the statutory

minimum
...
Registration and incorporation
 Sec 12: Any seven or more persons or where the

company to be formed will be a private co...
Contd  Before a company is registered, it is essential to ascertain

from the registrar of companies if the proposed name...
Contd Articles of association duly signed by the subscribers
 Agreement which the company proposes to enter into with an...
Contd Certificate of incorporation is issued by the registrar after

due examination of the documents. From the date of i...
Classification of Companies

Companies may be classified as :
Incorporated Companies

A company formed for the purpose of ...
Classification of Companies
Companies on the basis of Incorporation
1. Chartered Companies: If a company is incorporated b...
Classification of Companies
2.Registered companies : These are the companies which
are formed and registered under the Com...
Classification of Companies
Companies on the basis of Number of Members
1. Private Company :
1. Company which has a minimu...
Classification of Companies
Companies on the basis of Liability
Companies with limited liability
(a)Companies limited by s...
Classification of companies
 Company limited by guarantee: A company having the

liability of its members limited by the ...
Classification of Companies
 Unlimited company:
 It is a company in which the liability of the members is

not limited b...
Classification of Companies
 Classification based on control
 1. Government company: 51% of the paid up shares held

by ...
Classification of Companies
 The controlling company is called the holding company and

the company so controlled may be ...
Classification of Companies
 Non-trading company or association not for profit –

company formed for promoting the object...
Classification of Companies
 Producer Company – Cooperative societies can be made

companies under the Companies Act. a c...
Classification of Companies
 Illegal Association: According to sec 11 No

company, association or partnership consisting ...
Promoter
Who is a promoter?
A promoter is one who undertakes to form a company with
reference to a given project and to se...
PRE-INCORPORATION CONTRACT
 A contract made by promoters on behalf of the company

before its incorporation is termed as ...
Legal position of preincorporation contracts
The promoters while entering into preliminary
contracts are treated as agents...
Provisional contracts
Provisional Contracts
Provisional contracts refer to the contracts entered into
by the public compan...
The Constitution of the Company
 The company’s constitution essentially consists of two documents:





the memorandum ...
Memorandum of Association
 It is a fundamental document .

 It contains the fundamental condition on which alone the

co...
Memorandum of Association
 The

memorandum – is essentially for external
consumption as it sets out the names of the
prom...
Contents
 The name clause
 The registered office clause
 The objects clause
 Liability clause
 Capital Clause
 Assoc...
Memorandum of Association
3. Object Clause (Sec 13 (1))
The objects of the company shall be clearly set forth in the
Memor...
Memorandum of Association
Purpose of the Main objects:

To enable subscribers to the Memorandum to know the
uses to which...
Doctrine of Ultra Vires
 A company cannot go beyond its objects mentioned in

its memorandum. The company’s activities ar...
Alteration of Memorandum
To Alter the Memorandum the provisions of the
memorandum can be divided into 2 :





Conditio...
Doctrine of Ultra Vires
 Company exists only for the objects which are expressly

stated in its objects clause or which a...
Doctrine of Ultra Vires
 In case a company is about to undertake an ultra vires act the

members of a company (even a sin...
Doctrine of Ultra Vires
 Any property acquired by a company under an

ultra vires transaction may be protected by the
com...
Doctrine of Ultra Vires
 Money or property gained through an ultra vires

transaction available in specie or capable of b...
Articles of association
 Sec 2(2) – AOA of a company as originally framed or as altered

from time to time in pursuance o...
Articles of Association
Contents of Articles
1.
2.
3.
4.
5.

Different classes of shares and rights of shareholders
Proced...
Articles of Association
6.

7.
8.
9.
10.
11.
12.

The time lag between calls on shares, conversion of
shares into stock.
D...
Articles of Association
13. Alteration of share capital and buy back of shares.
14.Borrowing powers of Directors.
15. Gene...
Articles of Association
Limitations to Alteration of Articles
1.

Alterations should not be inconsistent with the provisio...
Articles of Association
Alteration of Articles


Every company has the power to alter its Articles by a
special resolutio...
Articles of Association
2. Must not sanction anything illegal

Case : Andrew vs Gas meter co. Ltd.
The Memorandum of the C...
Articles of Association
3.Must be bonafide for the benefit of the company as a whole.
Case: Shuttleworth vs Cox Bros.& Co....
Articles of Association
4.Must not deprive any person of his rights under a
contract.
5.Must not be contrary to the order ...
Articles of Association
Binding force of Memorandum and Articles
a) The company is bound to its members.
b) Each member is...
Articles of Association
Difference between Articles and Memorandum of
Association
Memorandum is the charter of the company...
Articles of Association
3. Memorandum is a supreme and primary document
where as Articles are subordinate to the Memorandu...
Articles of Association
6. Acts Ultra vires the memorandum are wholly void and
cannot be ratified where as acts ultra vire...
Articles of Association
Doctrine of Constructive Notice
Memorandum and Articles on registration with ROC
assume the charac...
Articles of Association
Doctrine of Constructive Notice
Case : The Articles of Association of the company
contained a clau...
Articles of Association
Doctrine of Constructive Notice
Decision
It was held that the Mortgage was invalid in spite of the...
Articles of Association
Lord Hatherley observed in this regard in a case of
Mahony vs East Holyford Mining Co.
Whether act...
Articles of Association
Doctrine of Indoor Management

There is one limitation to the doctrine of Constructive
Notice.
The...
Articles of Association
Case: Royal British Bank vs Turquand
The Directors of the company had issued a bond to T. They
had...
Articles of Association
Decision
T could recover the amount of the bond from the company
on the ground that he was entitle...
Articles of Association
Exceptions to the Doctrine of Indoor Management

1.Where the outsider has the knowledge of irregul...
Articles of Association
2. Negligence on the part of the outsider
Case : Anand Bihari Lal vs Dinshaw and Co.
The plaintiff...
Articles of Association
3. In case of a forgery
Case: Ruben vs Great Fingall consolidated Co.
The secretary of the company...
Articles of Association
4. Acts outside the scope of apparent authority.
Case: Kredit Bank Cassel vs Schenkers Ltd.
A bran...
Directors
 Brains of the company
 A person having control over the direction, conduct and

management or superintendence...
Directors
Director is a person who has control over the direction
, conduct and management of the affairs of the
company.
...
Management and Administration

According to Companies Act 1956, Sec 2(13)
A Director is defined as “ any person occupying ...
Management and Administration

Qualification of a Director
The Act prescribes no academic or professional
qualification fo...
Powers
 General powers of the Board

 Powers to be exercised at board meetings
 To issue debentures
 To invest the fun...
Contd  To borrow money
 To contribute to charitable trusts
 To remit or give time for repayment of any debt due to the
...
Meetings
 General meetings
 Statutory meeting
 Annual General meeting
 Extraordinary meeting

 Class meeting
 Meetin...
Requisites of a valid meeting
 Proper authority
 Notice of meeting
 Quorum of meting
 Chairman of meeting
 Minutes of...
Statutory Meetings (Sec 165)
Definition

Applicability

The 1st General Meeting of the members of the company after
the in...
Annual General Meetings (Sec
166)
AGM is the regular meeting of the members of a company held
annually for the purpose of ...
Annual General Meetings (Sec
166)
Power of the Central Government (section 167)

The Central Government on an application ...
Annual General Meetings (Sec
166)
Every AGM shall be called for :
 At a time during business hours
 On a day that is not...
Extra Ordinary General Meetings
(Sec 169)
Every general meeting other than the statutory meeting and the annual general
me...
Notice of Meetings
Contents and manner of service of notice – Section 172
 Meeting can be called by giving not less than ...
Quorum of Shareholders’ Meetings
Quorum for meeting - section 174


Unless the article provides for a larger number, the ...
Board Meetings
Frequency of Meeting (section 285)




At least once in every 3 calendar months and 4 meetings in every ...
Board Meetings
Quorum for Board Meetings







1/3 rd of the Board’s total strength or 2 directors which ever is hig...
Winding up
 Winding up or liquidation of a company represents the last

stage in its life.
 A proceeding by which a comp...
Modes of winding up
 Winding up by the court – compulsory winding up
 Voluntary winding up
 (a) members voluntary windi...
Grounds for compulsory winding up
 By special resolution
 Default in holding statutory meeting
 Failure to commence bus...
Voluntary winding up
 Winding up by the creditors or members without the

intervention of the court.
 Grounds
 If the c...
Contd If the company resolves by special resolution that it shall be

wound up voluntarily

192
Members winding up
 Members winding up is possible only when the company is

solvent and is able to pay the liabilities i...
Creditors voluntary winding up
 Based upon the assumption that the company is insolvent
 From the beginning the meeting ...
Chapter 6

Causes of Combination
Syllabus
 Introduction
 Causes
 Types
 Forms

 Advantage
 Combination in Indian Industries
Intro
 Business Combi grew in 19th Century “Free Competition”
 Laissez Fair
 Invisible Hands Adam Smith

 Survival of ...
Causes of combination
 Wasteful Competition (Consolidation due to Patent)
 Popularity of Joint Stock Orgn (TATA AIG)
 E...
Types of Combination
 Horizontal
 Vertical
 Lateral
 Diagonal
Horizontal
 Also known as Trade, Parallel or unit combination.
 Same industry companies combine together – sugar mill

...
Vertical
 Also known as Industry, Sequence or Process








combination.
Successive Stages of activity in same ind...
Lateral
 Also known as allied integration.
 When the business enterprise engaged in manufacture of

goods in different i...
Forms of combination
 In businesses various forms of combinations are found with varying

degrees of control of integrati...
Benefits of combination
 Combination of business units offer benefit of
 Spirit of cooperation

 Eliminates waste
 Str...
CHAPTER 7
Introduction to globalization
Syllabus
 Introduction
 Globalization Advantages & Disadvantages
 Kenchi Ohame‟s Theory
 International Monetary Fund
...
What is Globalization?
 Globalization is the process of increased interconnectedness

among countries, most notably in th...
Four Aspects of Globalization
1. Globalization as Westernization or Modernization – The

social structure of modernity (ca...
Positive Aspects of Globalization
1.
2.
3.
4.

5.
6.

More Money in Developing Economies – more chances of
success and ele...
Negative Aspects of Globalization
1.
2.
3.
4.
5.

Outsourcing – opportunities moving from countries for self
interest
Cult...
Globalization and Kenchi Ohmea’s theory
Fundamental reason 4 Globalization –

1.
1.
2.
3.

Migration of Corporations,
Citi...
Balance of Payments
 Exports – XYZ
 Imports – XYZ + ABC
 IMF – 180 member countries
 Regulatory
 Consultative

 Fina...
Upcoming SlideShare
Loading in …5
×

Bba i 1 intro to business

1,341 views

Published on

Published in: Business
0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
1,341
On SlideShare
0
From Embeds
0
Number of Embeds
2
Actions
Shares
0
Downloads
39
Comments
0
Likes
1
Embeds 0
No embeds

No notes for slide

Bba i 1 intro to business

  1. 1. Chapter 1 Introduction to Business
  2. 2. Introduction & characteristics of Business  Introduction of Business  Types of Business  Objectives of Business  Requisites of a Business  Social Responsibilities of Business
  3. 3. Human Activities Economic activities Non-economic activities
  4. 4. Business  “Being busy”  For-profit  Sole proprietorship  Partnership  Limited liability  Corporations  Not-for-profit  State-owned
  5. 5. Objective of Business Economic Objective Earning fair profits  Incentive to businessman  Serves as a measure of success  Imp instrument for expansion  Essential to very existence / survival of business  Help in creating goodwill To create customers To undertake innovation
  6. 6. Objective of Business Social Objective – Sufficient supply of Goods at reasonable price. Fair Deal to employee Fair return to investors Fair Deal with suppliers Customers & Competitors To act as good citizen
  7. 7. Types of Business (1) INDUSTRY  Extractive (Mining)  Genetic (Dairy farming)  Manufacturing (Steel, furniture)  Construction (Road, buildings) COMMERCE  Trade (Wholesale, import-export)  Ancillary Services –  Transportation (Land, air, water)  Banking (money deposit and lending)  Insurance  Warehousing  Advertising
  8. 8. TYPE OF BUSINESS INDUSTRY COMMERCE GENETIC (Animal Husbandary) TRADE (Wholesale IMP/EXP) EXTRACTIVE (Mining) ANCILLARY (Communication Financial Mktg etc)
  9. 9. Non-economic activities  Personal satisfaction (hobbies)  Physical requirements (sports, going to gym)  Social obligations (cooking food for family)  Religious obligation (worshipping God)  Love and affection (dinner with friends and family)  Patriotism (Freedom-fighters)
  10. 10. Business as an Economic Activity  Objective: Sell goods/services for profit.  Use, payment of scarce resources  Capital (own, borrowed)  Men (employees)  Materials (procurement, processing)  Satisfy needs of businessmen and the general public (needs, wants).
  11. 11. Objectives of Business 1. 2. 3. 4. Economic Social Human National
  12. 12. 1. Economic objectives  Profit earning (personal need, growth and expansion)  Customer creation  Innovation (new product, process, distribution, materials)  Best possible use of resources (raw material, machine, manpower)
  13. 13. 2. Social objectives  Right quality at reasonable price  Avoiding hoarding, overcharging, adulteration, misleading     ads Employment generation Welfare of employees Avoidance of slums and pollution (air, water) General welfare of society
  14. 14. 3. Human objectives  Fair remuneration  Working condition and environment  Job satisfaction  Growth  Future security  Training and development  Help society, economically backward and handicapped persons
  15. 15. 4. National objectives Social justice National priorities Exports, foreign exchange reserves Imports substitution
  16. 16. Role of Profit Means of livelihood Increases volume of business Index of performance Reward for risk bearing Helps to gain reputation
  17. 17. Requisites of Business  Well Defined Objective  Proper Planning  Proper Location, Layout & Size of Business  Adequate Finance  Sound Organisation  Efficient Distribution System  Efficient Management  Maintenance of Better Relations with Employees  Research Facilities
  18. 18. Recent Issues Corporate Social Responsibility Business Ethics
  19. 19. CSR towards…  Investors  Employees  Consumers  Suppliers  Government  Community and society  Competitors
  20. 20. Need for CSR  Long-term interest of business  Public image  Avoidance of government regulations  Moral justification  Consumer‟s awareness (Consumer Protection Act, 1986)
  21. 21. Few Issues of CSR  Environmental protection  Equal employment opportunity  Minimum wages  Occupational safety and health  Truth in advertising
  22. 22. Chapter 2 Individual & Sole Proprietorship
  23. 23. Syllabus  Objective  Introduction to Individual / Sole Proprietorship  Merits  Limitations  Partnership Organisation       Basic Features Types of Partners Registration of Partnership Rights & Duties of Partners Dissolution of Partnership Advantages & Disadvantages of Partnership  Sole Proprietorship & Partnership In India
  24. 24. Sole Proprietorship  Business owned by one person, established, Financed, managed with utmost freedom by an individual eterprenuer  Most Natural  Oldest  Simplest  Most popular  Owner bears all risk  & receives the entire gains
  25. 25. Sole Proprietorship  Merits  Limitations  Easy & Simple Formation  Limited Financial Resources  Smooth Management  Limited Managerial Ability  Promptness in Decision  Unlimited Liability making  Personal Touch with customers  Secrecy  Lack of Continuity  Possibility of Expansion Limited
  26. 26. Partnership Org  Partnership Orgn has grown out of necessity to arrange more capital, provide better skill, control and management to take advanctage of high degree of specialization and division of labour  2 or more persons agree to carry out lawful bsuiness and share the profits on agreed basis  There should be an agreement between them (legally be able to carry out contract)  Motive to share profits  Must be carried out by one or all of them
  27. 27. Partnership (Basic Features)  Number of Persons  Contractual Relationship  No Legal Distinction Between Firm and Partners  Profit Motive  Partner as Principal as well as agent.  Test of Existence of Partnership  According to Indian Partnership Act 1932 “The intentions of the parties concerned have to be ascertained. It also has to be seen whether these I san agreement between them, whether express or implied, oral or written.
  28. 28. Types of Partners  Active Partners  Sleeping Partners  Nominal Partners  Partners in Profit only  Retired or Outgoing Partners  Incoming Partner  Minor as a Partner  Partner by Estoppel or Holding Out
  29. 29. Registration of Partners  Indian Partnership Act 1932  Optional  Limitations to unregistered firms  Registration Procedure  Name of Firm  Principal Place of Business  The name of places where it carries business  Date on which each partner joined the firm  The names in Fund and permanent addresses of partners  The duration of the firm
  30. 30. Rights & Duties of Partners  Right to Management  Right To inspect Books of Accounts  Right to continue unless expelled  Right to be indemnified for expenses on behalf of the company  Right to Profit  Right to property & its use  Heir of the Partner in case of death
  31. 31. Duties of Partners  Duties to conduct business  To act bonafide (good Faith)  To see that partnership property is not used for private  Every Partner should contribute to losses equally  Indemnify the firm if any losses occur due to him  Must maintain correct accounts  Should not assign his interest in the firm to 3rd party w/o consent of partners
  32. 32. Implied Authority of a Partner as an Agent  A partner is an agent of the firm, his acts bind the firm  Sell Purchase  Receive / Make Payments  Make appointments HR  Execute Documents  Borrow Lend
  33. 33. Can’t do following due to Implied Authority of a Partner as an Agent  Submit a dispute relating to the business for arbitration  Open bank acc on behalf of firm in his own name  Compromise or relinquish any claim or portion by the firm  Withdraw a suit or proceeding on behalf of firm  Admit any liability  Acquire any immovable property on behalf of the firm  Enter into partnership on behalf of the firm
  34. 34. Dissolution of Partnership (auto)  Implies the end of original partnership agreement, not the firm.  Disso of partnership may take place automatically  At the expiry of the period  At the completion of the venture for which it was formed  At death  At Insolvancy  Or retirement of a partner
  35. 35. Dissolution of Partnership  When a partner gives notice to that effect in case of partnership at     will When all partners give consent for disso When all partners of the firm or barring one becomes insolvent When the business of the firm becomes unlawful And if court passes an order
  36. 36. Dissolution of Firm thru Court  Any partner can move to court for disso & court can order disso  On Lunacy of a Partner  On permanent Incapability of a partner  On misconduct of a partner  On breach of Agreement  On transfer of Interest  On recurring losses  On any other reasonable ground
  37. 37. Sole Proprietorship & Partnership In India  Most accepted formats of business in India  Pop is poor, Little capital, small ventures  Conservative, Don‟t risk their savings, prefer small commercial      ventures Low infra and slow growth still makes these 2 formats most accepted Brings in regional development, reduces concentration of wealth Reduces unemployment. Tax woes not present Local market flavor still exists
  38. 38. Chapter 3 Introduction of Public Enterprise
  39. 39. Syllabus  Intro of Public Enterprise  Definition & Objective  Characteristics of Public Corporations  Govt. Companies  Public Enterprises in India  Problems of Public Enterprises  Some Specific Problems of Public Utilities
  40. 40. Pre Independence & 5 years on  Railways, Ports, Communications, Broad Casting, Irrigation & Power Sector  No clear objective of Govt  Industrial Policy Resolution 1948 demarcated certain sectors.  State to play a role on development of industries Assignment -- Find out the Public Sector Enterprises during 1940-1955?
  41. 41. Definition & Objective  Public Enterprise means state ownership & operation of Industrial, agricultural, financial, and commercial undertakings” A H Hanson.  PE are autonomous or semi autonomous corporations and companies established and owned and controlled by the state engaged in industrial and commercial enterprises” M N Mallaya  Public Ownership, Public Control and Public Interest rather than profit.
  42. 42.  Planned Development Objectives of PE  Balance Development  Acceleration of Rate of Economic Development  Provision for Infra Facilities  Balanced Regional Development  Provision of Funds for Development  Revival of sick units  Regulate concentration of wealth and Power  Prevention of monopolistic tendencies  Provision of Greater Employment Opportunities  Helping Defense in Countries  Achieving Self Sufficiency  Encouraging Import Substitution  Necessary Goods & Services
  43. 43. Characteristics of PE  Wholly Owned by State  Created by special law, defining powers, duties and       immunities. Autonomous Nature Seed Capital by State Self Financed further Exempted from many regulations Not subject to budget, accounting and audit laws Servants are recruited, remunerated under special terms and conditions
  44. 44. Govt Companies  As an alternative to PE, Govt Companies are popular in India  Body Corporate under a general law (Comp Act 1956)  The whole of Capital Stack is 51% or over by Govt of India  Directors from Govt of India  It can sue, get sued, contract, agreement, acquire property in      its own name Created by Executive decision and not legislature Articles of Association can be drawn, revised by Govt Seed Cap by Govt Exempt from Govt Audit Employee not civil servants
  45. 45. Reasons for adoption of this form  Salvage Financial Crisis  Emergency  Need of sector  National / International Interest  Misc Interest Assignment – Study how oil companies in India were formed?
  46. 46. Criticism of PE  It evades constitutional responsibilities compared to special powers granted  Company Law becomes fictional  Shareholders Dumb as Govt is the supreme authority to decide  Extent of Autonomy could have been reduced
  47. 47. Public Enterprise in India  29 Crores in 1950-51 to 21.226 Crs in March 1981  5 to 199 PE at 1981  146971 Crs in March 1993 Assignment -- Make a developmental chart of PE from 1950 – 2010 on an A4 Sheet.
  48. 48. Problems of PE  Poor Planning  Bad Financial Planning  Heavy Overheads  Faulty Production, Planning & Utilization Capacity  Over Staffing  Absence of Healthy Ind Selections  Lack of Autonomy in Mgmt  Problem of Incentive  Growing Sickness  Privatization and Dis-investment
  49. 49. Introduction of Public Utilities  Estb for supply of essential products or services, operating in limited market areas on monopolistic or semi monopolistic market conditions  Gas, Electricity, Water, Rail, Transport etc.  Competition in such sectors undesirable, duplication, and unsatisfactory catering of consumer needs
  50. 50. Characteristics of PE  Supply of Essential Products / Service  Unduly Heavy Fixed Capital  Inelastic Demand  Non Transferability of Demand  Limited Market Area  Natural Monopoly  Regulation of their working
  51. 51. Specific Problems of PU  Plant Location (No Choice, rely on local auth or state to acquire land.  Size ( require Huge Capital, requires large size for EOS)  Ownership and Management (Regulated by app public authority – local or National DNCR  Marketing – Employees attitude take it or leave it.  Political Scenario – Changes policy and long term objective of PU
  52. 52. Chapter 4 Competitive Priorities
  53. 53. Syllabus  Introduction  Competitive Priorities Objectives  Competitive Priorities Factors affecting plant layout  Competitive Priorities Benefits  Competitive Priorities Weaknesses  Competitive Priorities Functional Layout for Process focused systems
  54. 54. Competitive Priorities Introduction  It talks about the way products / services are manufactured  Market (Oil)  Processes (Ship Building)  Technology (BHEL)  Elements of Labor Space and Equipment Needs for Public Enterprise.
  55. 55. Objectives of Good Plant Layout  Proper Efficient & Economic handling of materials  Economic Utilization of Floor Space  Increased Turnover of WIP & reduction in amt of GIP  Speedy Disposal of work / Admin  Avoid Process Hindrances  Efficient control over various production  Efficient utilization of machinery and labor  Min Cost of Production
  56. 56. Factors affecting plant layout  Management Policies
  57. 57.  Policy re volume and size  Managerial emphasis on quality  Policy to attain flexibility & adaptability  Policy to achieve delivery to customers  Purchasing policy  Policy re more facility to employees
  58. 58. Plant Layout affecting factors  Plant location  Climate and environment  Nature of Products and type of Industry  Sequence of operation  System of production  Available Floor Space  Requirement & maintenance of equipments  Achieving Balance  Achievement of Optimum Flow & min Movement  Flexibility Approach
  59. 59. Effective Plant Layout Benefits  Improved Production Process  Higher Production Capacity  Min Materials Handling  More Efficient Utilization of Machinery & Labor  Reduction in Amount of Goods in Processes  Good Production Planning & Control  Improvement in Supervision  Increased Safety & Work Conditions
  60. 60. Effective Plant Layout Weaknesses  Bad Production Process  Low Production Capacity  Unmanaged Materials Handling  Under Utilization of Machinery & Labor  Cumbersome Processes  Good Production Planning & Control  Bad Supervision  Decreased Safety & Work Conditions  Higher Costs  Inadequate Storage
  61. 61. Assignment  Study & Describe Functional Layouts of following  Machine Shop –  Assembly of a Ship  Hospital  Municipal Office  Draw the Line Layout Pattern for Product Focus
  62. 62. Chapter 5 Company Law Management in India
  63. 63. Syllabus  Introduction  Company Management in India  Shareholders  Board of Directors  Chief Executive  Managing Director  Manager  New Pattern of Company Management Introduction
  64. 64. Company management  In case of sole proprietorship, the business is owned by on person operated for ones own profit.  In partnership all the partners or few of them take the responsibility of managing the affairs of the firm.  In case of corporation which is owned by share holders is not managed by them.  The shareholders in annual general meeting elect the board of directors who manage the company.  The board of directors is the top organ of the company.
  65. 65. share holders elect board of directors appoint chief executive finance production purchase sales manager manager manager manager
  66. 66. Share holders  The share holders are the owners of a public company.  Due to separation of ownership from control, the      shareholders do not take part in management of corporation. They are greater in number and are scattered in different part of country. Most of them possess few shares individually, they are interested in receiving the dividend and are least concerned with management. Majority of shareholders are ignorant of the operation of the company. They have no time to attend the annual general meeting. Most of them have loose association with company they sell the shares In case they receive no dividend or less dividend.
  67. 67. Rights of shareholders  In case of company the shareholders are owners but the management is controlled by the board of directors.  There are certain rights which have been given to shareholders.  These rights are grouped into two broad categories.  Individual rights and group rights.
  68. 68. Individual rights of shareholders  He is entitled to receive dividend as declared by the        company. He can sell his shares free in the stock market. He possesses the voting rights in person or by proxy. He can freely take part in policy making process of company in annual general meeting. On the death of shareholder the share will be transferred to the dependants. He can inspect company books and record as per articles of association. He can receive a copy of the minutes of the general meeting. He has the right to share in the assets of the company on dissolution.
  69. 69. Group rights of shareholders  They as a group determine objectives and policies in annual      general meeting. They have the right to discuss, approve or disapprove the work done by the board of directors. The share holders have the right to discuss directors report, profit and loss account and balance sheet of the company in the meeting. The shareholders elect the directors in the annual general meeting. The share holder have the right to declare dividend at the rate recommended by directors. They have no right to increase the rate of dividend as recommended by the directors. If situation arise to discuss some issue urgently and cannot be postponed to next annual general meeting, they ask board to call an extra-ordinary meeting.
  70. 70. Directors of company  In company form of organization, the ownership is separated from management.  The shareholder who are the owners of the company elect the board of directors in the annual general meeting.  The elected board called the board of directors is the governing body of the company.
  71. 71.  In company form of organization, the ownership is separated from management.  The shareholder who are the owners of the company elect the board of directors in the annual general meeting.  The elected board called the board of directors is the governing body of the company.
  72. 72. POWERS OF DIRECTORS  The directors of a company by passing a resolution shall exercise the following powers on behalf of company.  To issue shares.  To issue debentures.  To borrow money otherwise than on debentures.  To invest the funds of the company.  To make loans.
  73. 73.  To authorize director of the company to enter into any contract with the company for making sale, purchase, or supply of goods.  To approve yearly or half yearly or other periodical accounts as are required to be circulated to the members.  To approve bonus to employees.
  74. 74. Liability of directors  The directors are personally liable for acts such as wrongful acceptance or surrender of shares.  Payment of dividend.  Payment of capital.  Misapplication of funds of company.  To pay back the debts of company.  Receiving advance calls for personal use.  Getting secret profits.  For misstatement of fact.
  75. 75. Chief executive  The board of directors of a company is the top organ of management of company.  The board appoints one of its director as chief executive.  The whole time executive is called the chief executive or the managing director of the company.  He is a director and a chief executive.
  76. 76.  As director he shares the responsibilities of the board and as chief executive carries out the management of company.  The chief executive is appointed for a period not exceeding three years.  Chief executive of a company carries out the general policies and plans as determined by the directors.
  77. 77.  Different from Sole Prop & Partnership Firms  Different System of Operation & management  Different Departments Shareholders Board of Directors Executive Comittee Chief Executive Works Mgr Mktg Mgr Finance Mgr HR Mgr
  78. 78. Shareholders  Furnish the required capital, assume the risks, and being the real owners.  Certain rights to exercise control  Chronically the directors & MDS are holding shares so they too can exercise shareholders control  Following Rights  Attend meeting of the company  Cast Vote in person or proxy  Receive Dividends  Share assets of the company on dissolution  Inspect Statutory Books & certain records of the company  To transfer his shares
  79. 79. Board of Directors  Elected members by Shareholders  Shareholders delegate the power of Management to them  Individually they have no powers  BOD may delegate powers to either one directors or to a committee of directors  BOD is ultimate executive committee
  80. 80. Appointment - Board of Directors  Every Public Limited Company – 3 BOD  Every Pvt Limited Company – 2 BOD  Process – File Intention --- 14 days bfr Gen Meeting – Election – File Consent to act as BOD  Acquire Nominal Shares (5Rs x 1000)  BOD not more than 20 firms
  81. 81. Chief Executive & MD  Board of Directors is the Ultimate Executive Authority of the Company  Day 2 Day Affairs, Policy Matters, Functions & Supervision  One BOD member as CEO  Effective Management  Policy Matters  Day 2 Day functioning  CEO & MD one and the same thing 2 roles combined to extract performace “A director who by virtue of an agreement with the company or by Memo or Artcle of Asso is entrusted with substantial powers of mgmt whch wud not be otherwise exercised by him”
  82. 82. Manager  An individual who, subject to superintendent, control and direction of BOD has the management of whole or part as a manager”
  83. 83. New Pattern of Company Mgmt  New Pattern of Mgmt – Managing Directors as an alternative to the managing agents”  This form of management combines some advantages of managing agency system without its disadvantages”  CEO & MD are same…  New Companies (amendment act 1974) – restricts appointment of any former managing agents, / secretaries / treasurers / as consultant secretary or advisor in any other office capacity except in case of special approval thru Gen Meeting & Cent Govt.
  84. 84. India's 10 Fastest Growing Companies Lot of companies are emerging up in India and slowly growing with addition of new entrepreneurial ventures. Some make it big, some slug behind. Let‟s take a look at the fastest growing companies in India.
  85. 85. 1. Jindal Steel & Power Jindal Steel and Power Limited (JSPL) is an Indian steel and energy company based in New Delhi, India and a division of Jindal Group conglomerate. Its annual turnover of over US$4 billion, Jindal Steel & Power Limited (JSPL) is a part of about $12 billion diversified O. P. Jindal Group. The company produces steel and power through backward integration from its own captive coal and ironore mines. However, in terms of tonnage, it is the third largest steel producer in India. The company manufactures and sells sponge iron, mild steel slabs, ferro chrome, iron ore, mild steel, structural, hot rolled plates and coils and coal based sponge iron plant. The company is also involved in power generation.
  86. 86. 2. Adani Ports Adani Ports and Special Economic Zone Limited (APSEZ) is India‟s largest private multi-port operator. APSEZ is a part of the Adani Group, a global integrated infrastructure player. The company (earlier known as Mundra Port & Special Economic Zone Ltd) changed its name to “Adani Ports and Special Economic Zone Limited” effective January 06, 2012. It has its presence in India's largest multi-product special economic zone, at the Mundra port. It is banking on multiplying traffic on India's major ports in the coming years. Adani Port & Special Economic Zone Limited was conferred with the Gateway Awards of Excellence – Ports & Shipping 2012 in the “Private Port of the Year” category.
  87. 87. 3. Opto Circuits Opto Circuits Limited is an Indian medical devices company based in Bangalore. It designs, manufactures and markets a range of health monitoring, emergency care, and treatment and sensing devices. It was established in 1992 in Bangalore. The company has acquired many businesses that have significantly improved its profit margins. Its medical equipment business brings almost 80 percent of its revenues. It has aggressive plans to increase its presence in emerging markets, so it will maintain around 15 to 20 percent growth rate in the coming few years. It went public in 2000, with a listing on the Bombay Stock Exchange and the National Stock Exchange. It acquired German company Eurocor Gmbh in 2006. In 2008, it acquired US-based Criticare Systems. The company was listed in Asia's Best under a Billion lists by Forbes magazine in 2011.
  88. 88. 4. IRB Infra Developers IRB Infrastructure Developers is India's leading highway construction company headquartered in Mumbai. It is part of IRB Group. IRB Infrastructure, which executed the country‟s first buildoperate-transfer (BOT) road project, is one of the largest operators of such ventures. Currently it has about 3404.40 lane KM operational and about 2330.4 lane KM under development. One of most notable projects is Mumbai Pune Expressway. In 2012, IRB acquired Tamil Nadu based BOT Road builder MVR Infrastructure and Tollways for 130 crore.
  89. 89. 5. J Kumar Infraprojects J Kumar is a leading contractor based in Mumbai. The turnover of this engineering company is around 2500 crore. It has bagged the prestigious Navi Mumbai metro project. The thinning margins on road construction are putting pressure on the profitability of this construction giant. The main focus of J Kumar Infraprojects Ltd. is the development of residential and commercial buildings, airport runways, bridges, roads, sports complexes, flyovers, railway buildings and irrigation projects. J Kumar Infraprojects Ltd. has been active in the various regions of Maharashtra like Aurangabad, Mumbai, Vidharbha and Pune.
  90. 90. 6. Educomp Solutions Educomp Solutions was set up in the year 1994 and has recently become one of the largest Indian technology based advanced education companies. The company provides learning services to nearly 3.6 million learners and has centers in countries like Singapore and U.S. Educomp Solutions gives maximum weight age to the Information Technology and worldwide web based education models. The company indulges in a lot of projects of private and public partnerships. Educational programs, teacher training programs, implementations in the infrastructure of education, and development of content are only some projects that have been successfully implemented by Educomp Solutions. The company also takes part in educational programs in tie-ups with NGOs.
  91. 91. 7. Godrej Consumer Products Godrej Consumer Products Limited (GCPL) is an Indian consumer goods company based in Mumbai, India. GCPL‟s product range includes soaps, hair colourants, toiletries and liquid detergents. GCPL has five manufacturing facilities in India at Malanpur (Madhya Pradesh), Guwahati (Assam), Baddi- Thana (Himachal Pradesh), Baddi- Katha (Himachal Pradesh) and Sikkim. GCPL has an international presence through the acquisitions of Keyline Brands Limited (United Kingdom) in 2005, Rapidol in 2006, and Godrej Global Mid East FZE in 2007 and the joint venture with SCA Hygiene Products AB, Sweden in 2007. GCPL acquired 49 percent stake in Godrej Sara Lee (GSLL), an unlisted joint venture between the Godrej Group and Sara Lee Corporation USA in early 2010. Subsequently in May 2010 it entered into an agreement to acquire the remaining 51 percent stake. It has acquired Megasari, a leading FMCG player in household care sector in Indonesia and has agreed to acquire Tura, a leading personal care player in Nigeria.
  92. 92. 8. Titan Industries Titan Industries is the world's fifth largest wrist watch manufacturer and India's leading producer of watches under the Titan, Fastrack, Sonata, Nebula, RAGA, Re galia, Octane & Xylys brand names. It is a joint venture between the Tata Group, and the Tamil Nadu Industrial Development Corporation (TIDCO). Its product portfolio includes watches, accessories and jewellery, in both contemporary and traditional designs. It exports watches to about 32 countries around the world with manufacturing facilities in Hosur, Dehradun, Goa and manufactures precious jewellery under the Tanishq brand name, making it India's only national jewellery brand.
  93. 93. 9. Sun Pharma The leading pharmaceutical giant has seen its domestic business growing by an average of 21 percent between the fiscal years of 2007 and 2011. It‟s also expanding into U.S. market. Sun Pharma was listed on the stock exchange in 1994 in an issue oversubscribed 55 times. The founding family continues to hold a majority stake in the company. Today Sun Pharma is the fifth largest and the most profitable pharmaceutical company in India as well as the largest pharmaceutical company by market capitalization on the Indian exchanges. The Indian pharmaceutical industry has become the third largest producer in the world and is poised to grow into an industry of $ 20 billion in 2015 from the current turnover of $ 12 billion.
  94. 94. 10. Lupin Pharmaceutical Lupin is world's largest manufacturer of the anti-TB drugs based in Mumbai, Maharashtra, India. The company production contains the Cardiovascular (prils and statins), Diabetology, Asthma, Pediatrics, CNS, GI, Anti-Infectives and NSAIDs therapy and world largest manufacturer of Anti-TB and Cephalosporins segments. It is also India' fourth largest drug maker by revenue. India is the first Asian country where the company has launched the new prescription drug after launching first anti TB drugs in single tablet.
  95. 95. Company - Advantages  Companies are designed as to make it easy to raise capital.  Companies have the ability to subdivide their capital into small amounts, allowing them to draw in huge numbers of investors who also benefit from the sub-division by being able to sell on small parts of their investment.  Limited liability also minimises the risk for investors and is said to encourage investment. 95
  96. 96. Company – Advantages (cont.)  It is also said to allow managers to take greater risk in the knowledge that the shareholders will not lose everything.  The constitution of the company provides a clear organisational structure which is essential in a business venture where you have large numbers of participants. 96
  97. 97. Company - Disadvantages  Forming a company and complying with company law is expensive and time consuming.  It also appears to be an very complex organisational form for small businesses, where the Board of Directors and the shareholders are often the same people 97
  98. 98. COMPANIES ACT 1956 98 Companies Act 1956
  99. 99. Legal meaning  Sec 3(1) (i); “Company means a company formed and registered under this Act or an existing company. An existing company means a company formed and registered under any of the previous companies laws” 99 Companies Act 1956
  100. 100. Nature and definition of a company  „Literal meaning - Company‟ in common parlance means a group of persons associated together for the attainment of a common end, social or economic.  Represents different kinds of associations, both business and otherwise 100 Companies Act 1956
  101. 101. Contd  Lindley – An association of many persons who contribute money or money‟s worth to a common stock and employ it in some common trade or business (i.e.) for a common purpose and who share the profit or loss (as the case may be) arising therefrom. The common stock so contributed is denoted in money and is the capital of the company. The persons who contribute it, or to whom it belongs are members. The proportion of capital to which each member is entitled is his share. Shares are always transferable although the right to transfer them is often more or less restricted 101 Companies Act 1956
  102. 102. Characteristics of the company  An artificial person created by the law.  A separate Legal entity  Case: Saloman and Saloman &Co ltd o (1897) (AC) (22)  Corporate personality is distinct and different from that of its members individually and collectively 102 Companies Act 1956
  103. 103. Separate Legal Personality (cont.)  The most famous case in this area is Salomon v Salomon & Co  Mr Salomon was in business as a leather merchant  In 1892, he formed Salomon & Co Ltd  He held most of the shares with his wife and 5 of his children each holding one share as company law at that time required at least 7 shareholders in a company 103
  104. 104. Separate Legal Personality (cont.)  Unfortunately, the company did not do well and it went into liquidation  A liquidator was appointed to sell the assets of the company and pay its debts 104
  105. 105. Separate Legal Personality (cont.)  The liquidator claimed that the company was a fake because Mr Salomon owned 20001 shares and his family owned only 6 altogether  Mr Salomon was really just running the same business  Therefore, the liquidator argued that Mr Salomon was liable for all the debts of the company 105
  106. 106. Separate Legal Personality (cont.)   1.  106 However, the House of Lords disagreed The court held that The fact that some shareholders only held 1 share as a technicality was not relevant The registration procedure could be used to create a oneman company
  107. 107. Separate Legal Personality (cont.) 2.  107 A company which is properly formed under the Companies Act is a separate person As a result the debts of a company were its own and not those of its members
  108. 108. Characteristics of a company  Perpetual existence  Continued existence  Death, insolvency or unsoundness of mind of its members does not in any way affect the existence of the company.  Comes into existence by law and comes to an end by law. 108 Companies Act 1956
  109. 109. Lifting the Veil of Incorporation  Although the general rule is that a company has a separate legal identity from its members, there are exceptions to this rule when a court will not treat a company as a separate entity  This is often referred to as “lifting the veil of incorporation”  Often, this is to prevent abuse of the principle of separate identity 109
  110. 110. Lifting of corporate veil  Veil of corporate personality used as a cloak for fraud and improper conduct. In such case, the court may disregard the corporate personality. The overlooking of corporate personality or separate entity is known as the phenomenon of lifting the corporate veil 110 Companies Act 1956
  111. 111. Lifting the Veil of Incorporation (cont.)  At common law, the general principle is that the courts will not allow a company to be used for a fraudulent purpose or to avoid a legal duty  For example, in Gilford Motor Co v Horne, a term in an employee‟s contract prevented him from approaching former customers after he left Gilford Motor Co 111
  112. 112. Lifting the Veil of Incorporation (cont.)  Therefore, when he left he formed his own company, and the company approached his former customers  The court held the company was a sham being used to avoid the term in his contract 112
  113. 113. Lifiting of corporate veil  For the protection of revenue.  Where a company is acting as the agent of the shareholders  Where a company has been formed for a fraudulent purpose. 113 Companies Act 1956
  114. 114. Contd Where the device is used for some illegal purpose  Where the number of members fall below the statutory minimum  Where the prospectus includes a fraudulent misrepresentation 114 Companies Act 1956
  115. 115. Registration and incorporation  Sec 12: Any seven or more persons or where the company to be formed will be a private company, two or more persons, associated for any lawful purpose may, by subscribing their names to a memorandum of association and otherwise complying with the requirements of this act in respect of registration, form an incorporated company with or without limited liability. 115 Companies Act 1956
  116. 116. Contd  Before a company is registered, it is essential to ascertain from the registrar of companies if the proposed name of the company is approved  Then the following documents duly stamped along with the necessary fees are to be filed with the registrar.  Memorandum of association duly signed by the subscribers 116 Companies Act 1956
  117. 117. Contd Articles of association duly signed by the subscribers  Agreement which the company proposes to enter into with any individual for appointment as its managing or whole time director or manager.  A list of directors who have agreed to become the first directors of the company.  A declaration stating that all the requirements of the companies act and other formalities relating to registration have been complied with 117 Companies Act 1956
  118. 118. Contd Certificate of incorporation is issued by the registrar after due examination of the documents. From the date of issue of the certificate the company becomes a separate legal entity  Certificate of commencement of business. –A conclusive evidence that the company is entitled to do business 118 Companies Act 1956
  119. 119. Classification of Companies Companies may be classified as : Incorporated Companies A company formed for the purpose of carrying on a business and is incorporated under the Company‟s Act,1956. Unincorporated Companies These companies are large partnerships, not regarded as distinct entities separate from the members constituting them. In such companies the liability of members is unlimited. 119 Companies Act 1956
  120. 120. Classification of Companies Companies on the basis of Incorporation 1. Chartered Companies: If a company is incorporated by a charter granted by a monarch, it is called a chartered company. Ex: East India Company. 2.Statutory Companies : These are companies which are created by a special Act of the Legislature, e.g. LIC,SBI,UTI. The provisions of the Company’s Act ,1956 apply to them , if they are not inconsistent with the provisions of the special Act under which they are formed. 120 Companies Act 1956
  121. 121. Classification of Companies 2.Registered companies : These are the companies which are formed and registered under the Companies Act, 1956, or were registered under any of the earlier Companies Acts. 121 Companies Act 1956
  122. 122. Classification of Companies Companies on the basis of Number of Members 1. Private Company : 1. Company which has a minimum paid up capital of Rs 1,00,000. 2. Minimum members: 2 - 50 2. Public company: 1. Minimum paid up capital: 5 lakhs 2. Minimum no of members: 7 122 Companies Act 1956
  123. 123. Classification of Companies Companies on the basis of Liability Companies with limited liability (a)Companies limited by shares: It is a registered company with the liability of members limited by the memorandum of association to the amount, if any, unpaid on the shares respectively held by them. 123 Companies Act 1956
  124. 124. Classification of companies  Company limited by guarantee: A company having the liability of its members limited by the memorandum to such an amount as the members may respectively undertake by the memorandum to contribute to the assets of the company. 124 Companies Act 1956
  125. 125. Classification of Companies  Unlimited company:  It is a company in which the liability of the members is not limited by its memorandum.  The members of such companies may be required to pay the losses from their personal property.  Because such companies have separate legal entity, its creditors cannot file a suit against the members directly. 125 Companies Act 1956
  126. 126. Classification of Companies  Classification based on control  1. Government company: 51% of the paid up shares held by the government.  2. Non-government Company:  3. Foreign Company: Company which is incorporated in a country outside India under the law of that country.  4. Domestic company: Company which cannot be termed as a foreign company  5. Holding and subsidiary company: If one company controls another company 126 Companies Act 1956
  127. 127. Classification of Companies  The controlling company is called the holding company and the company so controlled may be called the subsidiary company.  5. Public financial Institutions: LIC, UTI etc  6. One-man company: A member may hold virtually the entire share capital of a company. 127 Companies Act 1956
  128. 128. Classification of Companies  Non-trading company or association not for profit – company formed for promoting the objects of art, science , religion –a license is granted by the central government.  Investment company –A company whose principal business is the acquisition of shares, stock, debentures etc. 128 Companies Act 1956
  129. 129. Classification of Companies  Producer Company – Cooperative societies can be made companies under the Companies Act. a company formed and registered under theses provisions shall be known as producer companies.  Multinational Companies – companies operating in more than one country – ex: Coca Cola, LG 129 Companies Act 1956
  130. 130. Classification of Companies  Illegal Association: According to sec 11 No company, association or partnership consisting of more than 10 persons for the purpose of carrying on the business of banking and more than 20 persons for the purpose of carrying on another business shall be formed unless it is a registered as a company under this Act or is formed in pursuance of some other Indian Law. 130 Companies Act 1956
  131. 131. Promoter Who is a promoter? A promoter is one who undertakes to form a company with reference to a given project and to set it going, and who takes the necessary steps to accomplish that purpose. 131 Companies Act 1956
  132. 132. PRE-INCORPORATION CONTRACT  A contract made by promoters on behalf of the company before its incorporation is termed as pre-incorporation contract.It is correct to say that a company can‟t retify PIC.A company gets its legal status only after incorporation.Therefore,the only remedy open to the company after incorporation is to enter into a fresh contract. 132 Companies Act 1956
  133. 133. Legal position of preincorporation contracts The promoters while entering into preliminary contracts are treated as agents of the company that is about to be formed. The legal position is that for a valid contract two consenting parties are necessary and a company before incorporation is a non-entity. A pre-incorporation contract which is purported to be made by the company which does not exist, is a nullity . Thus when the company comes into existence it can neither sue nor be sued on that contract 133 Companies Act 1956
  134. 134. Provisional contracts Provisional Contracts Provisional contracts refer to the contracts entered into by the public company after its incorporation but before it is issued certificate to commence business. According to sec 149(4), any contract made by a company before the date at which it is entitled to commence business shall be provisional only, and shall not be binding on the company until that date, and on that date it shall become binding 134 Companies Act 1956
  135. 135. The Constitution of the Company  The company’s constitution essentially consists of two documents:   the memorandum of association the articles of association  These are essential documents as they:  set out the nature and character of the company  outline the powers of directors  define the relationship between directors and shareholders
  136. 136. Memorandum of Association  It is a fundamental document .  It contains the fundamental condition on which alone the company is allowed to be incorporated.  It lays down the area of operation of the company.  It regulates the internal affairs of the company in relation to the outsiders.  It has to be printed, divided into paragraphs, numbered consecutively and signed by at least 7 persons
  137. 137. Memorandum of Association  The memorandum – is essentially for external consumption as it sets out the names of the promoters, the share capital and the purpose (objects) of the company  This is useful information for potential customers and investors
  138. 138. Contents  The name clause  The registered office clause  The objects clause  Liability clause  Capital Clause  Association clause
  139. 139. Memorandum of Association 3. Object Clause (Sec 13 (1)) The objects of the company shall be clearly set forth in the Memorandum. It defines and confines the scope of the Company’s Powers. The object clause in the Memorandum must State a) Main Objects of the company to be pursued by the company on its incorporation and objects incidental to it. b) Other objects not included above.
  140. 140. Memorandum of Association Purpose of the Main objects:  To enable subscribers to the Memorandum to know the uses to which their money may be put.  To enable creditors and persons dealing with the company to know what its permitted range of enterprise or activities is.  The narrower the objects expressed in the Memorandum the less is the subscriber’s risk.
  141. 141. Doctrine of Ultra Vires  A company cannot go beyond its objects mentioned in its memorandum. The company’s activities are confined strictly to the objects mentioned in the memorandum and if they go beyond these objects, then such acts will be ultra vires  The object of declaring such an act as ultra vires is to protect the interests of shareholders and all others who deal with the company
  142. 142. Alteration of Memorandum To Alter the Memorandum the provisions of the memorandum can be divided into 2 :    Conditions : Are the main provisions included in the Memorandum. They can be altered as per the express provisions laid down in the company’s Act. Other Provisions : Can be altered by passing a special resolution.
  143. 143. Doctrine of Ultra Vires  Company exists only for the objects which are expressly stated in its objects clause or which are incidental to or consequential upon these specified objects  Any act done outside the express or implied objects is ultra vires  The ultra vires acts are null and void ab intio. The company is not bound by these acts and neither the company nor the other contracting party can sue upon it
  144. 144. Doctrine of Ultra Vires  In case a company is about to undertake an ultra vires act the members of a company (even a single member) can get an order of injunction from the court restraining the company  If the directors have exceeded their authority and done something then such matter can be ratified by the general body of the shareholders, provided the company has the capacity to do so by its memorandum of association.
  145. 145. Doctrine of Ultra Vires  Any property acquired by a company under an ultra vires transaction may be protected by the company against damage by third persons  Directors and other officers can be held liable to compensate the company for any loss occasioned to it by an ultra vires act.  Directors and other officers shall be personally accountable to the third parties
  146. 146. Doctrine of Ultra Vires  Money or property gained through an ultra vires transaction available in specie or capable of being identified shall be restituted (restored) to the other party.  In case an ultra vires loan taken by a company is used for the payment of its intra vires debts the lender of the ultra vires loan is substituted in place of the creditor who has been paid off and as such can recover money
  147. 147. Articles of association  Sec 2(2) – AOA of a company as originally framed or as altered from time to time in pursuance of any previous companies law or act.  They are the bye-laws of the company according to which director and other officers are required to perform their functions as regards the management of the company, its accounts and audit.  Subordinate to the memorandum  They can be easily altered by passing a special resolution. 147 Companies Act 1956
  148. 148. Articles of Association Contents of Articles 1. 2. 3. 4. 5. Different classes of shares and rights of shareholders Procedure for making an issue of share capital and allotment thereof. Procedure for issue of share certificates and share warrants. Forfeiture of shares and the procedure for their reissue. Procedure for transfer and transmission of shares.
  149. 149. Articles of Association 6. 7. 8. 9. 10. 11. 12. The time lag between calls on shares, conversion of shares into stock. Directors, their appointment, remuneration , qualification etc. Accounts and Audit. Lien on shares. Payment on commission of shares and debentures to underwriters. Rules for adoption of preliminary contracts, if any. Re-organisation and consolidation of share capital.
  150. 150. Articles of Association 13. Alteration of share capital and buy back of shares. 14.Borrowing powers of Directors. 15. General Meetings, proxies and polls. 16.Voting rights of members. 17. Dividends and reserves. 18.Winding up.
  151. 151. Articles of Association Limitations to Alteration of Articles 1. Alterations should not be inconsistent with the provisions of the Act or any other statute, and conditions contained in the Memorandum. Case: M.R.Kamath vs Canara Banking Corporation Ltd. A Company passed a resolution expelling a member and authorising the directors to register the transfer of his shares without the transfer deed. Held the resolution was in violation of provision relating to the transfer under the act
  152. 152. Articles of Association Alteration of Articles  Every company has the power to alter its Articles by a special resolution. (sec 31) Procedure for Alteration of Articles    By passing a special resolution. Copy of Special Resolution to be sent to ROC within 30 days. Copy of altered Articles to be submitted to ROC within 3 months of passing resolution.
  153. 153. Articles of Association 2. Must not sanction anything illegal Case : Andrew vs Gas meter co. Ltd. The Memorandum of the Company provided that the Nominal Capital of the company was 60,000 pounds divided into 600 shares of 100 pounds each. The Memorandum and Articles did not contain any express provisions as to issue of preference shares. The company by a special resolution, altered its Articles so as to give itself power to issue preference shares, and then issued them. Held the issue was valid.
  154. 154. Articles of Association 3.Must be bonafide for the benefit of the company as a whole. Case: Shuttleworth vs Cox Bros.& Co. The Articles of a company provided that S and 4 others should be permanent directors of the company. They could however be disqualified by any of the 6 specific event. S failed to account for company’s money on 22 occasions within 12 months. The Articles were accordingly altered and a 7th event disqualifying a director was added. The event added was that if a Director was so requested in writing by all other Directors he should resign. S was so requested to resign. Held the alteration was bonafide for the benefit of the company as whole, and was valid.
  155. 155. Articles of Association 4.Must not deprive any person of his rights under a contract. 5.Must not be contrary to the order of the National Company Law Tribunal. 6. Alteration in Articles which has an effect of converting a public company into a private company can be made only if it is approved by the central government.
  156. 156. Articles of Association Binding force of Memorandum and Articles a) The company is bound to its members. b) Each member is bound to the company c) Each member is bound to the other member in so far as rights and duties arising out of the articles are concerned. d) Neither the members nor the company is bound to the outsiders.
  157. 157. Articles of Association Difference between Articles and Memorandum of Association Memorandum is the charter of the company while Articles are the regulations for the internal management of the company. 2. Memorandum defines the scope of activity of the company whereas Articles contain the rules for carrying out the objectives of the company. 1.
  158. 158. Articles of Association 3. Memorandum is a supreme and primary document where as Articles are subordinate to the Memorandum. 4. Memorandum is a must for every company where as for Articles , it is not a must for companies limited by shares which may simply adopt Table A of the schedule. 5. Memorandum is subject to strict restrictions and some alterations must be subject to the Central Government approval where as articles can be Altered by just passing a special resolution.
  159. 159. Articles of Association 6. Acts Ultra vires the memorandum are wholly void and cannot be ratified where as acts ultra vires the Articles but intra vires the memorandum can be ratified
  160. 160. Articles of Association Doctrine of Constructive Notice Memorandum and Articles on registration with ROC assume the character of Public documents. Every outsider dealing with the company is deemed to have notice of the contents of the same. This is known as Doctrine of Constructive Notice
  161. 161. Articles of Association Doctrine of Constructive Notice Case : The Articles of Association of the company contained a clause that all deeds and documents shall be signed by the Managing Director, the secretary and the working Director on behalf of the company. A deed of mortgage was signed by the secretary and the working director only.
  162. 162. Articles of Association Doctrine of Constructive Notice Decision It was held that the Mortgage was invalid in spite of the fact that the plaintiff acted in good faith and the money was utilised for the company. The mortgagee should have consulted the Articles of Association before executing the mortgage deed.
  163. 163. Articles of Association Lord Hatherley observed in this regard in a case of Mahony vs East Holyford Mining Co. Whether actually the outsider reads the Articles or the Memorandum or not, it will be presumed that he has read them. Every Joint stock company has its Memorandum and Articles of Association open to all and every person who deals with the company must be affected with the notice of all that is contained in these two documents
  164. 164. Articles of Association Doctrine of Indoor Management There is one limitation to the doctrine of Constructive Notice. The outsiders dealing with the company are entitled to assume that so far as the internal proceedings of the company are concerned, everything has been regularly done. They need not inquire about the regularity of the internal proceedings as required by the Memorandum and Articles. They can presume that all is being done regularly.
  165. 165. Articles of Association Case: Royal British Bank vs Turquand The Directors of the company had issued a bond to T. They had the power under the Articles to issue such a bond provided they were authorised by a resolution passed by the shareholders at the General Meetings of the Company. No such resolution was passed by the company.
  166. 166. Articles of Association Decision T could recover the amount of the bond from the company on the ground that he was entitled to assume that the resolution had been passed.
  167. 167. Articles of Association Exceptions to the Doctrine of Indoor Management 1.Where the outsider has the knowledge of irregularity. Case:T.R.Pratt Company A lent money to company B on a mortgage of its assets. The procedure laid down in the Articles for such transactions were not complied with. The Directors of the companies were the same. Held the lender had notice of irregularity and hence the mortgage was not binding.
  168. 168. Articles of Association 2. Negligence on the part of the outsider Case : Anand Bihari Lal vs Dinshaw and Co. The plaintiff in this case accepted a transfer of company’s property from its accountant. Held the transfer was void as such a transaction was beyond the scope of Accountant’s authority. The plaintiff should have seen the Power of Attorney executed in favour of the accountant by the company.
  169. 169. Articles of Association 3. In case of a forgery Case: Ruben vs Great Fingall consolidated Co. The secretary of the company issued a share certificate under the company’s seal with his own signature and the signature of a Director forged by him. Held the share certificate was not binding on the company. The person who advanced money on the strength of this certificate was not entitled to be registered as holder of shares.
  170. 170. Articles of Association 4. Acts outside the scope of apparent authority. Case: Kredit Bank Cassel vs Schenkers Ltd. A branch manager of a company drew and endorsed bills of exchange on behalf of the company in favour of a payee to whom he was personally indebted. He had no authority from the company to do so . Held the company was not bound.
  171. 171. Directors  Brains of the company  A person having control over the direction, conduct and management or superintendence over the affairs of the company  Only individuals can be directors.  Public company – three directors  Private company – two directors 171 Companies Act 1956
  172. 172. Directors Director is a person who has control over the direction , conduct and management of the affairs of the company. According to Lord Cairns A company cannot act on its own . It can only act through directors, and the relation between the company and directors is that of Principal and agent. 172 Companies Act 1956
  173. 173. Management and Administration According to Companies Act 1956, Sec 2(13) A Director is defined as “ any person occupying the position of the director, by whatsoever name called.  Only Individuals can be Directors  No Body corporate or Association or firm can be appointed as director of the company, 173 Companies Act 1956
  174. 174. Management and Administration Qualification of a Director The Act prescribes no academic or professional qualification for a director. The Articles may provide what qualifications the company’s directors must possess. Disqualification of Directors Following persons are not eligible to be directors  Persons of unsound mind  An Undischarged insolvent 174 Companies Act 1956
  175. 175. Powers  General powers of the Board  Powers to be exercised at board meetings  To issue debentures  To invest the funds of the company  To make calls on shareholders in respect of money unpaid on their shares  Powers to be exercised with the approval of company in general meeting 175 Companies Act 1956
  176. 176. Contd  To borrow money  To contribute to charitable trusts  To remit or give time for repayment of any debt due to the company by a director  Duties     176 Fiduciary duties Duties of skill, care and diligence Attend board meetings Not to delegate his functions Companies Act 1956
  177. 177. Meetings  General meetings  Statutory meeting  Annual General meeting  Extraordinary meeting  Class meeting  Meeting of creditors and debenture holders  Meeting of directors 177 Companies Act 1956
  178. 178. Requisites of a valid meeting  Proper authority  Notice of meeting  Quorum of meting  Chairman of meeting  Minutes of meeting 178 Companies Act 1956
  179. 179. Statutory Meetings (Sec 165) Definition Applicability The 1st General Meeting of the members of the company after the incorporation of the company to acquaint members with matters arising out of the promotion and formation of the company  Company limited by shares  Company limited by guarantee and having a share capital  Not applicable to Private Limited Company Periodicity Should be held between 1 months ≥ 6 months from the date at which the company is entitled to commence business Statutory Report Report has to be forwarded to every member at-least 21 days before the date of meeting 179 Companies Act 1956
  180. 180. Annual General Meetings (Sec 166) AGM is the regular meeting of the members of a company held annually for the purpose of transacting Company’s ordinary business. Definition Frequency of Meeting    Companies Act 1956  Ordinary Business 180  Once every year  The gap between 2 AGM should not be more than 15 months  Company may hold its 1st AGM within a period of not more than 18months from the date of incorporation  The registrar may for special reason extend the period of AGM by a period not more than 3 months (except in case of 1st AGM). To Consider and adopt Audited Balance Sheet To declare dividend on shares To appoint Directors in place of those retiring by rotation To appoint Auditors and to fix their remuneration.
  181. 181. Annual General Meetings (Sec 166) Power of the Central Government (section 167) The Central Government on an application from any member of the company may call or give direction to call a AGM if the same has not been held as per the provision of section 166 Penalty for default in complying with section 166 & 167 (section 168) The company and every officer of the company who is in default shall be punishable with a fine which may extend upto Rs 50,000 In case of continuing default a further fine of Rs 2,500 for each day of default 181 Companies Act 1956
  182. 182. Annual General Meetings (Sec 166) Every AGM shall be called for :  At a time during business hours  On a day that is not a public holiday  Shall be held either at the registered office of the company or some other place within the city, town or village in which the registered office of the company is situated Exceptions  The central government may exempt any class of company from the requirements mentioned above subject to conditions as it may impose  A public company or a private company which is a subsidiary of a public company may by its article fix the time for its AGM and may also in one AGM fix the time for the subsequent AGM  A private company which is not a subsidiary of a public company may in a like manner and also by a resolution agreed to by all the members thereof, fix the time and place for its AGM 182 Companies Act 1956
  183. 183. Extra Ordinary General Meetings (Sec 169) Every general meeting other than the statutory meeting and the annual general meeting or any adjournment thereof, is an extraordinary general meeting  Such meeting is usually called by the Board of Directors for some urgent business which cannot wait to be decided till the next AGM.  Every business transacted at such a meeting is special business. BOD can call EGM if it has received a requisition from such number of members of the company as mentioned below: 183  Company having share capital – members holding ≥ 1/10th of the paid up capital of the company ( voting rights) at the date of the deposit of the requisition  Company not having share capital – members having ≥ 1/10th of the total voting power of all members as at the date of the deposit of the requisition Companies Act 1956
  184. 184. Notice of Meetings Contents and manner of service of notice – Section 172  Meeting can be called by giving not less than 21 days notice  Meeting can be called with shorter notice, if consent is accorded there to * AGM By all members entitled to vote thereto Company having share capital Members holding ≥ 95% of the paid up share capital * Other meeting Company not having share capital Members having ≥ 95% of the total voting rights  An explanatory statement of the special business must also accompany the notice calling the meeting.  Notice should also give the nature and extent of the interest of the directors or manager in the 184 special business, as also the extent of shareholding interest in the company of every such person
  185. 185. Quorum of Shareholders’ Meetings Quorum for meeting - section 174  Unless the article provides for a larger number, the Quorum for the meeting : * Public ltd. Company 5 members personally present * Private Ltd. Company 2 members personally present  If Quorum not present within 30 minutes of the time fixed for the meeting : * Meeting called on requisition meeting stands dissolved from members * Other meetings * In case of adjourned meeting 185 shall stand adjourned to the same day in the next week, at the same time & place or such other day at such other time & place as Board may decide members present shall form the quorum
  186. 186. Board Meetings Frequency of Meeting (section 285)    At least once in every 3 calendar months and 4 meetings in every year If 4 BMs are held in a calendar year, one in each quarter, the interval between 2 meetings may be more than 3 months Section 25 company (An association not for profit) needs to hold only one meeting in 6 months Notice of the Meeting (section 286)  Notice must be given in writing to every director for the time being in India and at the usual address in India to every other director Agenda of the Meeting   186 Unless otherwise required by the article, no agenda required In some matters prior intimation of the business to be transacted is required i.e. appointment of managing director (Sec 316), inter - company loans & investment (sec 372A) appointment of a person as a manager who is already a MD in some other company (sec 386)
  187. 187. Board Meetings Quorum for Board Meetings      1/3 rd of the Board’s total strength or 2 directors which ever is higher Total strength for the purpose means total strength of the Board as reduced by the number of positions vacant at that time Article of association can always fix a higher quorum but not lower number The quorum shall consist of fully qualified and disinterested directors only. Number of the interested directors ≥ to 2/3rd of the total strength, quorum shall be the remaining directors present at the meeting being not less than 2. Chairman of the Board Meeting  The Board shall elect one of the directors as its chairman Voting at Board Meeting 187   Question decided by majority of votes Chairman will have the right exercise casting vote
  188. 188. Winding up  Winding up or liquidation of a company represents the last stage in its life.  A proceeding by which a company is dissolved.  Assets of the company are disposed of, debts are paid out 188
  189. 189. Modes of winding up  Winding up by the court – compulsory winding up  Voluntary winding up  (a) members voluntary winding up  (b) creditors voluntary winding up  Winding up subject to the supervision of the court 189
  190. 190. Grounds for compulsory winding up  By special resolution  Default in holding statutory meeting  Failure to commence business  Reduction in membership  Inability to pay debts  Just and equitable 190 Companies Act 1956
  191. 191. Voluntary winding up  Winding up by the creditors or members without the intervention of the court.  Grounds  If the company in the general meeting passes an ordinary resolution for voluntary winding up where the period fixed by the Articles of Association for the duration of the company has expired or the event has occurred on which under the articles the company is to be dissolved. 191
  192. 192. Contd If the company resolves by special resolution that it shall be wound up voluntarily 192
  193. 193. Members winding up  Members winding up is possible only when the company is solvent and is able to pay the liabilities in full. 193
  194. 194. Creditors voluntary winding up  Based upon the assumption that the company is insolvent  From the beginning the meeting of creditors is held along with the members.  The chief power to appoint the liquidator is in the hands of the creditors and there is a provision for appointing a committee for inspection 194
  195. 195. Chapter 6 Causes of Combination
  196. 196. Syllabus  Introduction  Causes  Types  Forms  Advantage  Combination in Indian Industries
  197. 197. Intro  Business Combi grew in 19th Century “Free Competition”  Laissez Fair  Invisible Hands Adam Smith  Survival of the fittest  To combine it to simply to become one of the parts of a whole,     and a combination is merely a union of persons to make whole or group for the some common purpose” When two or more business units combine together with some common purpose, it is termed as combination. Economies of Scale Eliminate wasteful competition Enhance prestige
  198. 198. Causes of combination  Wasteful Competition (Consolidation due to Patent)  Popularity of Joint Stock Orgn (TATA AIG)  Economics of Large Scale Org (Reduce Cost of Prod)  List for power (TATA Empire)  Influence of Tariffs (Import Tariff)  Vagaries of Trade Cycles ( Depression & Boom)  Rationalization (Co-operatives)  Organizing Ability (Indian Hotels managing Taj Group)  Respect for bigness
  199. 199. Types of Combination  Horizontal  Vertical  Lateral  Diagonal
  200. 200. Horizontal  Also known as Trade, Parallel or unit combination.  Same industry companies combine together – sugar mill      acquiring sugar mill. Eliminates competition Economies of scale Helps control the market conditions Leads to monopoly Concentration of Industrial power
  201. 201. Vertical  Also known as Industry, Sequence or Process      combination. Successive Stages of activity in same industry combine together – sugar cane farm acquiring sugar cane crushing plant – sugar mill to confectionery. Same or interconnected industry Quality of product Cheaper product and better the market conditions Where one process is complimentary to another
  202. 202. Lateral  Also known as allied integration.  When the business enterprise engaged in manufacture of goods in different industries through allied to each other in some sense, combine them that is known as lateral or allied combination. It may be subdivided into two  Convergent lateral combination and  Divergent Lateral Combination  Combination – Printing Press – paper ink cardboards etc  Auto Manufacturer – into Glass Unit  Divergent Lateral Combination - Leather – Shoes, Suitcases, Bags, Saddles, Harnesses, Fancy Goods  Reduction in cost of production  Loss of one market may make gain of another market
  203. 203. Forms of combination  In businesses various forms of combinations are found with varying degrees of control of integration. Simple combination is of two or more individual combining for business.  Compound Combination –  Association – Trade Association, Loose informal agreements, chambers of commerce and industry  Federations – Partial Consolidations – Trusts- Holding Companies – Community of Interests  Complete Consolidation –  Mergers  Amalgamations
  204. 204. Benefits of combination  Combination of business units offer benefit of  Spirit of cooperation  Eliminates waste  Streamlines – economies of scale and purchasing raw material  Lowers cost of production  Increases profit
  205. 205. CHAPTER 7 Introduction to globalization
  206. 206. Syllabus  Introduction  Globalization Advantages & Disadvantages  Kenchi Ohame‟s Theory  International Monetary Fund  Balance of Payments and role of IMF  GATT  WTO  Globalization Good or Bad
  207. 207. What is Globalization?  Globalization is the process of increased interconnectedness among countries, most notably in the areas of  Economics  Politics  Culture  It is the global distribution of products goods and services through reduction of trade barriers of international trade such as  Tariffs  Export Fees and  Import Quotas
  208. 208. Four Aspects of Globalization 1. Globalization as Westernization or Modernization – The social structure of modernity (capitalism rationalism etc) are spread the world over, are normally destroying pre existent cultures and self determination. 2. Globalization as liberalization – Remove govt imposed restriction in order to create an open borderless world economy. 3. Globalization as Universalization – Spreading various objects and experiences to people at all corners of the world 4. Globalization as detoriatationalization – reconfiguration of geography so that social space is no longer wholly mapped in terms of territorial space- distance, boundaries, and borders
  209. 209. Positive Aspects of Globalization 1. 2. 3. 4. 5. 6. More Money in Developing Economies – more chances of success and elevated living standard of people Global Competition – Prices are in check Global Competition – Encourages creativity and innovation Global Technology Access – Less effort Less R&D Govt Able to work towards common goals with awareness on global issues – environment, economic, and social. World of Choices – Global infusion of culture, food, movies, music, and choices
  210. 210. Negative Aspects of Globalization 1. 2. 3. 4. 5. Outsourcing – opportunities moving from countries for self interest Culture Erosion -- Fusion of culture leads to ultimate erosion Global Health Issues – Encourages transnational diseases Global Environmental Loss – Less or no regulation creating destruction of environment and eco systems Western Focus Applied on non western country by IMF, World Bank and thus create multidimensional problems.
  211. 211. Globalization and Kenchi Ohmea’s theory Fundamental reason 4 Globalization – 1. 1. 2. 3. Migration of Corporations, Citizens Capital Across 3C Theory – 2. 1. 2. 3. The Corporation The Customer The Competitor
  212. 212. Balance of Payments  Exports – XYZ  Imports – XYZ + ABC  IMF – 180 member countries  Regulatory  Consultative  Financial

×