TYPES OF COMPANIES UNDER INDIAN COMPANIES ACT 2013

KALOL INSTITUTE OF MANAGEMENT [KIM]
+91-75748 67120 & +91-99784 40833
prakashrajkumavat@gmail.com
KIRC Campus, Opp. Sindbad Hotel,
Kalol-382721
Integrated MBA SEM-I

BUSINESS STRUCTURE &
PROCESS
MODULE-III
PRAKASHRAJ P KUMAVAT, Assist. Prof. KIM, Kalol

COMPANY
ORGANISATION
[INDIAN COMPANIES ACT, 2013]

Companies Act, 2013
 The Companies Act 2013 is an Act of the
Parliament of India which regulates
incorporation of a company, responsibilities of a
company, directors, dissolution of a company.
 The 2013 Act is divided into 29 chapters
containing 470 sections and 7 schedules.
 The Act has replaced The Companies Act, 1956
(in a partial manner)
Cont…

 The Act came into force on 12 September 2013
with few changes like earlier private companies
maximum number of member was 50 and now
it will be 200. A new term of "one person
company" is included in this act that will be a
private company of the Act notified.
 Another 184 sections came into force from 1
April 2014

Company: Definition
 Company is an artificial person created by
law having separated entity with a perpetual
succession and common seal”.

Company: Features
 Artificial person: the company becomes
artificial person after registration, it means that
company hold property, enter into contracts,
borrow or lend money on its own name.
 Separate legal entity: the company has a
separate legal entity, it means it is
independent from its members.
 Perpetual existence: it means the company is
not affected by death, lunacy or insolvency of
its member.
Cont…

 Limited liability: Since the company has
separate legal entity, its shareholders only
liable for their liabilities not the liable for debts
of the company.
 Separate property: a company, being a legal
person, is capable of owing, using & disposing
of property in its own name.
 Common seal: the company have its own
common seal. The symbol of seal is the
signature of director of company, because
company is an artificial person.

Company: Formation Procedure
 Step-1: Select Name of Person:
 First of all company must select the name of person i.e. the director
of the company. At least three names for Public Company and Two
names for Private company.
 Step-2: Apply for Digital Signature Certificate:
 Digital Certificates serve as proof of identity of an individual for a
certain purpose. Likewise, a digital certificate can be presented
electronically to prove your identity, to access information or
services on the Internet or to sign certain documents digitally.
 Step-3 Apply for Director Identification Number:
 It is a unique identification number allotted to the existing director of
the company or intending to be appointment as director of a
company according to Section-152(3), Section-153 & Section-154 of
the Companies Act, 2013.
Cont…

 Step-4: Application for Name of Company:
 According to Section-4(4) of The Companies Act, 2013
person can make an application to propose the name of
the company to be registered with such forms and manner
accompanied by fees of Rs. 1,000/- to be paid, as may be
prescribed, to the Registrar for the reservation of a name set
out in the application.
 Step-5: Drafting of Memorandum of Association:
 The MoA is the Constitution of the Company which must
contain all the fundamental information of the Company.
MoA define the relationship of the Company with its
shareholder. Therefore, it is important to draft the MoA very
carefully with properly incorporating Clauses carefully.
Cont…

 Step-6 Drafting of Articles of Association:
 AoA which is an important document explains the operation
of the company, purpose for which Company is incorporated
along with the information for the process of Appointment of
Directors and also management of the financial Record of
the company.
 Step-7 Application for Incorporation of
Company:
 According to Section-7 of The Companies Act, 2013 shall be
filed with the registrar within whose jurisdiction the registered
office of a company is proposed to be situated.
 Step-8 Commencement of Business:
 After receiving the certificate of incorporation and
commencement of business company can start doing
business.
Cont…

Company: Merits/ Advantages
 Accumulation of Large Resources:
 A company can collect large sum of money from large number of
shareholders. There is no limit on the number of shareholders in a
public company. If need for more funds arises, the number of
shareholders can be increased.
 Limited Liability:
 The liability of members in a company form of organisation is limited to
the nominal value of the shares they have acquired. If a person has
purchased a share of Rs. 100, his liability is limited to Rs. 100 only.
 Continuity of Existence:
 When a company is incorporated, it becomes a separate legal entity.
It is an entity with perpetual succession. The members of a company
may go on changing from time to time but that does not affect the
continuity of a company.
Cont…

 Efficient Management:
 In company form of organisation, ownership is separate from
management. It enables the company to appoint expert and
qualified persons for managing various business functions. Hence
efficient management is possible in company.
 Economies of Large Scale Production:
 With the availability of large resources, the company can organise
production on a big scale. These economies will enable the company
to produce goods at a lower cost, thus resulting in more profits.
 Ability to Cope with Changing Business
Environments:
 The present business enterprises operate under uncertain economic
and technological environments. The needs of consumers are varied
and changing, to cope with the changing economic environment
every business is required to invest money on research and
developmental programmes.

Company: Demerits/ Disadvantages
 Difficulty of Formation:
 Promotion of a company is not an easy task. A number of stages are
involved in company promotion.
 Separation of Ownership and Management:
 The ownership and management of public company is in different
hands. The owners i.e., shareholders play an insignificant role in the
working of the company. On the other hand, control is in the hands of
those who have no stakes in the company.
 Fraudulent Management:
 The promoters and directors may indulge in fraudulent practices. The
management is in the hands of those persons who have not invested
much in the company. The Company Law has devised methods to
check fraudulent practices but they have not proved enough to
check them completely.
Cont…

 Lack of Secrecy:
 The management of companies remains in the hands of many
persons. Everything is discussed in the meetings of Board of
Directors. The trade secrets cannot be maintained.
 Delay in Decision-making:
 In company form of organization no single individual can make a
policy decision. All important decisions are taken either by the
Board of Directors or are referred to general house. Decision-taking
process is time consuming.

Types of Company
 On the basis of incorporation:
 Chartered Company: Theses company are formed by special
chartered in force. For example, East India Company (1600)
 Statutory companies: These are the companies which are
created by a special Act of the legislature e.g. RBI, SBI, LIC,
etc. These are mostly concerned with public utilities as
railways, gas and electricity companies and enterprises of
national level importance.
 Registered companies: These are the companies which are
formed and registered under the Companies Act,2013 or
previous prevailing act in force.
Cont…

 On the basis of liability :
 Companies Limited by Shares: When the liability of the
members of a company is limited to the amount if any
unpaid on the shares, such a company is known as a
company limited by shares.
 Companies limited by guarantee: It is a registered
company in which the liability of members is limited to
such amounts as they may respectively undertake by the
memorandum to contribute to the assets of the company
in the event of its being wound up.
 Unlimited companies: A company not having a limit on the
liability of its members is termed as unlimited company. In
case of such a company every member is liable for the
debts of the company as in an ordinary partnership in
proportion to his interest in the company.
Cont…

 On the basis of number of members
 Public Company: A public company means a company
which is not a private company. There must be at least
seven persons to form a public company. It has minimum
paid-up capital of Rs 5 lakh or such higher paid-up capital,
as may be prescribed
 Private Company: A company which has a minimum of
two persons. They have to subscribe to the MOA and AOA.
It should be have a minimum paid up capital of 1 lakh or
more as prescribed by the article. The maximum number
of members to be 200.
 One Person Company (OPC): One Person Company
means a company with only one person as a member. He
will be the shareholder of the company and avails all the
benefits of a private limited company.
Cont…

 On the basis of Control
 Holding Company: A company is known as the holding
company of another company if it has the control over
that other company. A company is deemed to be the
holding company of another if, but only if, that other is its
subsidiary.
 Subsidiary company: A company is known as a
subsidiary of another company when control is
exercised by the holding company over the former
called a subsidiary company.
Cont…

 On the basis of Ownership
 Government company: A government company means
any company in which not less than 51% of the paid-up
share capital is held by (1) The central government, or (2)
any state government, or governments, or (3) Partly by
central government and partly by one or more state
government.
 Foreign company: It means any company incorporated
outside India which has an established place of business in
India. Where a minimum of 50% of the paid up share
capital of a foreign company is held by one or more
citizens of India or/and by one or more bodies corporate
incorporated in India, whether singly or jointly, such
company shall comply with such provisions as may be
prescribed as if it were an Indian company.

One Person Company (OPC)
 One Person Company means a company with only one
person as a member. He will be the shareholder of the
company and avails all the benefits of a private limited
company.
 The idea of One Person Company (OPC) in India was
introduced to give a boost to entrepreneurs who have
great potential to start their own venture by allowing them
to create a single person company.
 The concept of One Person Company [OPC] is a new
vehicle of business, introduced by The Companies Act,
2013.
Cont…

Features of One Person Company
 Only One Shareholder: Only a natural person, who is an
Indian citizen and resident in India, shall be eligible to
act as a member of One Person Company.
 Limited Liability: The liability of shareholder is limited to
his shareholding.
 Easy Transferability: Shares are easily transferable by a
shareholder to any other person. This can be done by
Filing and signing a share transfer form and handing
over the buyer of the shares along with share
certificate.
 Separate Legal Entity: A company has a separate legal
entity and considered as a juristic person.
Cont…

 Easy Funding: One Person Company can raise funds
through venture capital, financial institutions, angel
investors etc and thus graduating itself to a private
limited company.
 Nominee for the Shareholder: The Shareholder shall
nominate another person who shall become the
shareholders in case of death/incapacity of the original
shareholder. Only a natural person, who is an Indian
citizen and resident in India, shall be a nominee for the
sole member of a One Person Company.

Difference
Private Company
• Minimum Capital : Rs.
100000Right to transfer the
shares: Restricted
• Minimum 2 members and
maximum 200 members
• Name of the company should
be Pvt. Ltd. as last word
• Quorum of Meetings
minimum two members
personally present
Public Company
• Minimum Capital : Rs.
500000Subsidiary of a Public Co.
is deemed to be a public Co.
• Minimum 7 members and
maximum no limit.
• Name of the company should
be Public Ltd. as last word
• Five in case of Members upto
1000;Fifteen in case of Members
more than 1000, upto 5000;Thirty
in case of Members exceed
5000.

MEMORANDUM OF ASSOCIATION
[MOA]

Memorandum of Association (MOA)
 It is the charter of the company
 It contains the fundamental conditions upon which
the company can be incorporated
 It contains the objects of the company‟s formation
 The company has to act within objects specified in
the MOA
 It defines as well as confines the powers of the
company
 Any thing done beyond the objects specified in the
MOA will be ultra vires. Their transactions will be null
and void

Conditions of MOA
 It should be printed
 Divided into paragraph and numbers
consecutively
 Signed by at least seven persons or two in case
of public and private company respectively.
 The signature should be in the presence of a
witness, who will have to attest the signature
 Members have to take shares and write the
number of shares taken with full address

Clauses in MOA
 The Name Clause: it decides on the name of the
company based on the capital involved
 The Registered Office Clause: where it has registered its
head office and other branch office ( The registered
office can be changed with the permission of the
ROC)
 The Object Clause: Main object, ancillary object and
the other objects of the company are clearly specified
( Ashbury Railway Carriage Co V. Riche). The
applicable doctrine here is the “Doctrine of Ultra Vires”
beyond the powers of the company (opposed to Intra
Vires)
Cont…PRAKASHRAJ P KUMAVAT, Assist. Prof. KIM, Kalol

 The Liability Clause: What is the liability of its members..
limited by shares or guarantee or unlimited, there can be
alteration in the liability clause.
 The Capital Clause: The amount of the nominal capital of
the company, number of shares in which it is to be divided…
alteration of the capital clause etc
 The Association or Subscription clause: Where the
subscribers to the MOA declare that they respectively agree
to take the number of the shares in the capital. It has to
have the following:
 They have to sign in the presence of two witnesses, who
attest the signatures,
 The subscriber to take at least one share.
 After the name the subscriber has to write the number of
shares taken

ARTICLE OF ASSOCIATION
[AOA]

Article of Association (AOA)
 It is the companies by- laws or rules to govern the
management of the company for its internal
affairs and the conduct of its business.
 AOA defines the powers of its officers and also
establishes a contract between the company
and the members and between the members
inter se
 It can be originally framed and altered by the
company under previous or existing provisions of
law.
 AOA plays a subsidiary part to the MOA

 Any thing done beyond the AOA will be
considered to be irregular and may be ratified by
the shareholders.
 The content of the AOA may differ from
company to company as the Act has not
specified any specific provisions
 Flexibility is allowed to the persons who form the
company to adopt the AOA within the
requirements of the company law

Contents of the AOA
 Share capital
 Lien on shares
 Calls on shares
 Transfer and transmission of shares
 Forfeiture of the shares
 Surrender of the shares
 General meetings
 Alteration of the capital
 Directors etc..
 Dividends and reserves

 Account and audit
 Borrowing powers
 Winding up
 Adoption of the preliminary contracts etc….

Difference between MOA & AOA
MOA
 Memorandum of Association is a
document that contains all the
fundamental information which
are required for the
incorporation of the company.
 Section 2 (28)
 Powers and objects of the
company
 It is subordinate to the
Companies Act
AOA
 Articles of Association is a
document containing all the
rules and regulations that
governs the company.
 Section 2 (2)
 Rules of the company
 It is subordinate to the
memorandum
Cont…

 The memorandum of
association of the company
cannot be amended
retrospectively
 A memorandum must contain
six clauses
 Alteration can be done, after
passing Special Resolution
(SR) in Annual General
Meeting (AGM) and previous
approval of Central
Government (CG) or
Company Law Board (CLB) is
required
 The articles of association can
be amended retrospectively
 The articles can be drafted as
per the choice of the
company
 Alteration can be done in the
Articles by passing Special
Resolution (SR) at Annual
General Meeting (AGM)

PROSPECTUS

Prospectus
 It is an invitation issued to the public to purchase
or subscribe shares or debentures of the
company.
 Every prospectus must be dated. The date of
publication and the date of issue must be
specifically stated in the prospectus.
 The golden rule of the prospectus is that every
detail has to be given in strict and scrupulous
accuracy. The material facts given in the
prospectus are presumed to be true.

Which Companies are Required to
Issue Prospectus
 Every public listed company who intends to offer
shares or debentures of the company to the
public.
 Every private company who ceases to be a
private company and converts into a public
company and intends to offer shares or
debentures of the company to the public.

Types of Prospectus
 Red-herring Prospectus: Red-herring prospectus
means a prospectus which does not have
complete particulars on the price of securities
and the quantum of securities offered.
 Shelf Prospectus: Shelf prospectus means a
prospectus issued by any financial institution or
bank for one or more issues of the securities or
class of securities specified in that prospectus.

 Abridged Prospectus: It is the summary of
prospectus content. According to Section 2(1) of
the Companies Act, 1956, an abridged prospectus
means memorandum containing such salient
features of a prospectus as may be prescribed.
 Deemed Prospectus: Where a company allots or
agrees to allot any securities of the company with a
view to all or any of those securities being offered
for sale to the public, any document by which the
offer for sale to the public is made shall, for all
purposes, be deemed to be a prospectus issued by
the company
Cont…

Statement in lieu of prospectus [SILOP]
 It is a statement which is delivered by a
company, having share capital to the Registrar
for registration, at least three days before the first
allotment of shares or debentures under the
following conditions:
 Where a company does not issue prospectus; or
 Where a company has issued a prospectus but has not
proceeded to allot any of its shares offered to the public
for subscription.
 SILOP is to be signed by every person who is
named therein as a director or a proposed
director of a company.

Contents of SILOP
 The name of the company
 The nominal share capital of the company divided
into number of ordinary shares and par value per
share
 Description of the business to be undertaken and its
prospects
 Names, addresses, description and occupations of the
proposed or appointed directors , chief executive,
managing agent and secretary of the company
 Provisions regarding the appointment and
remuneration of the above officers of the company

 Voting rights in the meetings of the company
 Numbers and the amount of shares and debentures
agreed to be issued
 Names, occupation and addresses of vendors of
property purchased or proposed to be purchased by
the company
 Amount payable in cash, shares or debentures, to
each vendor of the property

WINDING-UP OF
COMPANY

Winding-Up
 Winding up is the process of selling all the assests of a
business, paying of creditors, distributing any
remaining assets to the partners or shareholders an
then dissolving the business.
 Simply, it means liquidation and closing down of
company.

Modes of winding-up
 Winding-up by court
 Voluntary winding-up
 Member voluntary winding up
 Creditor voluntary winding up
 Winding-up under supervision of court

Winding-up by court
 Winding up of company by court due to following
reasons:
 Special resolution
 Default in holding statutory meetings
 Failure to commence business
 Reduction in membership
 Inability to pay debts
 Failure to file balance sheet

Voluntary winding-up
 Members voluntary winding-up
 In this case, directors declares in the meeting of
shareholders that company is fit for winding-up. Through
meeting shareholders passes resolution for voluntary
winding up and appoints liquidator.
 Reasons for member voluntary winding-up:
 Expiry of period.
 By special resolution.
 Declaration of solvency of company.
 Notice of appointment of liquidator to given to registrar.
 Final meeting and dissolution.

 Creditors voluntary winding-up:
 The procedure in a creditors voluntary winding-up is
based upon assumption that the company is insolvent.

Winding-up under supervision of court
 At any time after passing resolution for voluntary
winding-up, the court may make an order that
the voluntary winding-up should continue subject
to supervision of the court.
 Application for such supervision order may be
made either by a creditor, shareholder, the
company or liquidator.

 The order passed by court due to following
reason:
 Resolution for winding-up was obtained by fraud.
 The rules relating to winding-up order are not being
observed.
 The liquidator is prejudicial or is negligent in collecting
the assests.
 So the court takes all the power as in case of
compulsory winding-up and appoints
additional liquidators.

CO-OPERATIVE
ORGANISATION

Co-operative Organisation
Meaning
“A cooperative organisation is an
association of persons, usually of
limited means, who have vol-untarily
joined together to achieve a
common economic end.”

Co-operative Organisation
Characteristics
 Voluntary Association: A cooperative so-ciety is
a voluntary association of persons and not of
capital. Any person can join a cooperative
soci-ety of his free will and can leave it at any
time. When he leaves, he can withdraw his
capital from the so-ciety. He cannot transfer his
share to another person.

 Spirit of Cooperation: The spirit of coop-eration
works under the motto, „each for all and all for
each.‟ This means that every member of a
co-operative organisation shall work in the
general interest of the organisation as a whole
and not for his self-interest.
 Capital: Capital of a cooperative society is
raised from members through share capital.
Coop-eratives are formed by relatively poorer
sections of society; share capital is usually very
limited.

 Fixed Return on Capital: In a cooperative
organisation, we do not have the dividend
hunting element. In a consumers‟ cooperative
store, return on capital is fixed and it is usually
not more than 12 p.c. per annum.
 Corporate Status: A cooperative associa-tion
has to be registered under the separate
legislation Cooperative Societies Act. Every
society must have at least 10 members.
Registration is desirable. It gives a separate
legal status to all cooperative organisations -
just like a company.

Co-operative Organisation Formation
 A co-operative organization must be formed
under the Co-operative Societies Act, 1912 or
under the relevant state co-operative society‟s
law. A co-operative society can be formed by
alteast 10 adult members. The members willing
to form a society must have common bond
among them.
 The basic idea is that all the persons intending to
form a society should have some common
objectives to achieve.

Formation Process
 The application for forming a cooperative
organisation must have the following
information:
 Name and address of the society.
 Aims and objectives of the society.
 Names and addresses of members of the society.
 Share capital and its division.
 Mode of admitting new members.
 A copy of the bye laws of the society.

Formation Process
 The required documents are filed with the
Registrar of Societies.
 The Registrar scrutinizes the documents, if these
are as per requirements then the society‟s name
is entered in the register.
 A certificate of registration is also issued to the
society.
 The society will become a corporate body from
the date mentioned in the certificate.

Co-operative Organisation- Merits
 Easy Formation: Compared to the formation of a
company, formation of a cooperative society is
easy. Any ten adult persons can voluntarily form
themselves into an association and get it
registered with the Registrar of Co-operatives.
 Limited Liability: Like company form of
ownership, the liability of members is limited to
the extent of their capital in the cooperative
societies.

 Perpetual Existence: A cooperative society
has a separate legal entity. Hence, the
death, insolvency, retirement, lunacy, etc., of
the members do not affect the perpetual
existence of a cooperative society.
 Social Service: The basic philosophy of
cooperatives is self-help and mutual help.
Thus, cooperatives foster fellow feeling
among their members and inculcate moral
values in them for a better living.

 Open Membership: The membership of
cooperative societies is open to all
irrespective of caste, colour, creed and
economic status. There is no limit on
maximum members.
 Tax Advantage: Unlike other three forms of
business ownership, a co-operative society is
exempted from income-tax and surcharge
on its earnings up to a certain limit.

Co-operative Organisation- Demerits
 Lack of Secrecy: A cooperative society has to
submit its annual reports and accounts with the
Registrar of Cooperative Societies. Hence, it
becomes quite difficult for it to maintain secrecy
of its business affairs.
 Lack of Business Acumen: The member of
cooperative societies generally lack business
acumen. When such members become the
members of the Board of Directors, the affairs of
the society are expectedly not conducted
efficiently. Cont…PRAKASHRAJ P KUMAVAT, Assist. Prof. KIM, Kalol

 Lack of Interest: The paid office-bearers of
cooperative societies do not take interest in the
functioning of societies due to the absence of
profit motive. Business success requires sustained
efforts over a period of time which, however,
does not exist in many cooperatives.
 Corruption: In a way, lack of profit motive breeds
fraud and corruption in management. This is
reflected in misappropriations of funds by the
officials for their personal gains.

Federal Co-operative Society
 Federal cooperative society means a co-
operative society whose membership is
available only to co-operative societies and in
the case of a federal cooperative society
formed with the main objective to propagate
and promote activities in the field of art, culture,
education, information technology, training,
industry, etc., shall also include experts in the
respective fields in individual capacity not
exceeding one-fifths of the total strength of such
society or twenty, whichever is less

PUBLIC ENTERPRISE

Public Enterprise: Meaning
“A public corporation is that form of public
enterprise which is created as an autonomous
unit, by a special Act of the Parliament or the
State Legislature.”

Public Enterprise: Characteristics
 Special Statute: A public corporation is created
by a special Act of the Parliament or the State
Legislature. The Act defines its powers,
objectives, functions and relations with the
ministry and the Parliament (or State Legislature).
 Separate Legal Entity: A public corporation is a
separate legal entity with perpetual succession
and common seal. It has an existence,
independent of the Government. It can own
properly; can make contracts and file suits, in its
own name. Cont…PRAKASHRAJ P KUMAVAT, Assist. Prof. KIM, Kalol

 Capital Provided by the Government: The
capital of a public corporation is provided by
the Government or by agencies controlled by
the government. However, many public
corporations have also begun to raise money
from the capital market.
 Financial Autonomy: A public corporation
enjoys financial autonomy. It prepares its own
budget; and has authority to retain and utilize its
earnings for its business.

 Management by Board of Directors: Its
management is vested in a Board of Directors,
appointed or nominated by the Government.
But there is no Governmental interference in the
day-to-day working of the corporation.
 Service Motive: The main objective of a public
corporation is service-motive; though it is
expected to the self-supporting and earn
reasonable profits.

Public Enterprise: Merits
 Legislative Control: Affairs of a public corporation
are subject to scrutiny by Committees of
Parliament or State Legislature. The Press also
keeps a watchful eye on the working of a public
corporation. This keeps a check on the unhealthy
practices on the part of the management of the
public corporation.
 Qualified and Contented Staff: Public corporation
offers attractive service conditions to its staff. As
such it is able to attract qualified staff. Because of
qualified and contented staff, industrial relations
problems are not much severe. Cont…PRAKASHRAJ P KUMAVAT, Assist. Prof. KIM, Kalol

 Not Affected by Political Changes: Being a distinct
legal entity, a public corporation is not much
affected by political changes. It can maintain
continuity of policy and operations.
 Reasonable Pricing Policy: A public corporation
follows a reasonable pricing policy, based on cost-
benefit analysis. Hence, public are generally
satisfied with the provision of goods and services,
by the public corporation.

Public Enterprise: Demerits
 Misuse of Monopolistic Power: Public corporations
often enjoy monopoly in their field of operation. As
such, on the one hand they are indifferent to
consumer needs and problems; and on the other
hand, often do not hesitate to exploit consumers.
 Rigid Constitution: The constitution of a public
corporation is very rigid. It cannot be changed,
without amending the Statute of its formation.
Hence, a public corporation could not be flexible
in its operations.

 Low Managerial Efficiency: Quite often civil
servants, who do not possess management
knowledge and skills, are appointed by the
government on the Board of Directors, of a public
corporation.
 Clash of Divergent Interests: In the Board of
Directors of public corporation, conflicts may arise
among representatives of different groups. Such
clashes tell upon the efficient functioning of the
corporation and may hamper its growth.

ROLE OF PUBLIC
ENTERPRISES IN
INFRASTRUCTURE AND
SOCIAL DEVELOPMENT

Role of Public Enterprises
 Maximizing the rate of economic growth: The
public enterprises have firmly established the
foundation for the construction of a self-
generating, industrial economy. During the
planned era, the public sector has-diversified its
activities to cover a wide spectrum of industries.
 Development of capital-intensive sector: Industrial
development of a country necessitates the
foundation of an infrastructure! base. This
foundation is provided by the development of
capital-intensive industries and the basic
infrastructure. Cont…PRAKASHRAJ P KUMAVAT, Assist. Prof. KIM, Kalol

 Development of agriculture: The public sector has
an important role in the field of agriculture as well.
The public sector assists in the manufacture of
fertilizers, pesticides, insecticides and mechanical
implements used in agriculture.
 Balanced regional development: In the pre-
independence period a major problem was
regional economic disparities. Through the
extension of public sector enterprises the
Government desired to remove such regional
imba-lances.

 Development of ancillary industries: Establishment
of a few big public enterprises is not enough to
unleash forces of industrial develop-ment in an
area. There are states like Bihar where in spite of
lavish public sector investment, industrial
development has not been satisfactory.
 Increasing employment opportunities: The growth
of the public sector has led to the expression of
gainful employment opportunities. In addition to
the primary effect of the public sector in creating
employment opportunities, public sector
investments also have a multiplier effect on other
sectors of the economy. Cont…PRAKASHRAJ P KUMAVAT, Assist. Prof. KIM, Kalol

 Export promotion: The public sector enterprises are
substantially contributing to the country‟s export
earnings. The public sector has-built up a
reputation abroad in selling plants, heavy
equipment‟s, machine-tools and other industrial
products.
 Research and development: Today no country can
industrially prosper without research and
development. Such research is highly essential for
the introduction of new goods and new
technologies of production, lowering the cost of
production and improving the quality of the
product.

NON-PROFIT
ORGANISATION [NGOs]

NGO: Meaning
 Non-governmental oraganisations are groups and
institutions that have primarily humanitarian or
cooperative rather than commercial objectives.
 NGOs include charitable and religious associations
to mobilize private funds for development,
distribute food and family planning services and
promote community organizations.

NGO: Characteristics
 Voluntary associations: NGOs are voluntary
associations which are created by people having
a common interest.
 Autonomous: NGOs are autonomous bodies free
from the interference of government. They are
regulated by their own policies and procedures.
 Service Motive: NGOs are not profit making
business organisations. Rather they show a lot of
concern in social welfare aspects such as
education of children, protection of animals,
wildlife, environment, improving the status of
women etc. Cont…PRAKASHRAJ P KUMAVAT, Assist. Prof. KIM, Kalol

 Own funds: NGOs create and maintain their own
funds. They often collect contribution from the
public. Some NGOs are also financed by private
business organisations. Some NGOs are also
financed by international authorities.

NGO: Merits
 Easy Formation: Compared to the formation of a
company, formation of a NGO is easy.
 Govt. Subsidies: NGOs are formed for serving the
society hence government providing more
subsidies to these organisations.
 Easy Fund Raising: compare to other forms of
business organisation, raising fund in NGOs is easy
and free from any interest.
 Liberal Govt. Rules: As NGOs are working for
society and welfare they are liberalized with govt.
regulations.

NGO: Demerits
 Lack of financial resources: Most of the NGOs
suffer from serious shortage of funds. They have to
depend on Public contributions or sponsorship by
corporates which makes it difficult to mobilise
financial resources.
 Lack of trained staff: The volunteers of NGOs are
not specifically trained in handling problems
concerning people. Lack of accountability on the
part of the staff hinders the growth of NGOs.

 Mismanagement of funds: NGOs have lost
confidence of the general public, quite often, it is
noticed that the NGOs misappropriate the funds.
 Limited territory: Most NGOs do not take up
nationwide programmes. They operate only in a
limited territory.
 Unhealthy Competition: The increasing number of
NGOs has created an unhealthy competition
among themselves which has defeated the real
objectives.

Role of NGOs in development of
society
 Education of Children: Some NGOs have played
an important role in the education of children, eg.
: Infosys foundation is providing free text books and
computers to rural schools. Voice a NGO at
Mumbai teaches under- privileged children at
Mumbai.
 Protection of animals: NGOs are taking sufficient
care in preventing cruelty and protecting animals.
Eg.: Prani Daya Sangha.

 Betterment of disabled: Spastic Society of India,
Alert working for the leprosy patients.
 Development and operation of infrastructure:
NGOs can acquire and develop land, construct
housing. They provide basic amenities like wells,
public toilets, and waste collection services. E.g:
Infosys has constructed Public toilets called
“Nirmal” at many places in Bangalore city.
 Technical assistance and training: NGOs provide
technical assistance and training in various fields.
E.g.: “Awake” is a NGO providing development
programmes for women entrepreneurs.

 Emancipation of women: Some NGOs have
engaged in activities pertaining to upliftment of
women. E.g.: Chaitanya, Yuvatiyara Sangha is
helping the women in distress.
 Protection of environment: Some NGOs are playing
a key role in protecting the environment. They
have taken up activities like afforestation,
prevention of water and air pollution etc. E.g.:
Nasa Foundation, Ahmadabad, India.

THANK YOUSend your suggestion/ feedback to
prakashrajkumavat@gmail.com

TYPES OF COMPANIES UNDER INDIAN COMPANIES ACT 2013

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