This document discusses different types of business organizations including private enterprises, public enterprises, and global enterprises. It describes private companies, forms of public sector enterprises like departmental undertakings and statutory corporations, government companies, and joint ventures. It also discusses the changing role of public sector enterprises in India.

1. CHAPTER 3
PRIVATE, PUBLIC AND GLOBAL
ENTERPRISES
 The private sector consists of
business owned by individuals or a
group of individuals. examples—sole
proprietorship, partnership, Joint Hindu
Family business.
 The public sector consists of various
organizations owned and managed by
the government. These organisations
may be either be partly or wholly owned
by the government.

2. PRIVATE COMPANY
 A Private company means a company which :-
a. restricts the right of members to transfer its
shares.
b. has a minimum of 2 and a maximum of 50
members, excluding the present and past
employees.
c. does not invite public to subscribe to its
share capital
d. must have a minimum paid up capital of Rs.
1 lakh

3.  It is necessary for a private company to use
the word private after its name.
 If a private company contravenes any of the
aforesaid provisions, it ceases to be a private
company and losses all the exemptions and
privileges to which it is entitled.
 The following are some of the privileges of a
private limited company as against a public
limited company:
1. A private company can be formed by only
two members where as seven people are
needed to form a public company.

4. 2. There is no need to issue a prospectus as public is
not invited to subscribe to the shares of a private
company.
3. Allotment of shares can be done without
receiving he minimum subscription.
4. A private company can start business as
soon as it receives the certificate of
incorporation. The public company on the
other hand, has to wait for the receipt of
certificate of commencement before it can start
a business.
5. A private company need to have only two
directors as against the minimum of three
directors in the case of a public company.

5. FORMS OF ORGANISING
PUBLIC SECTOR ENTERPRISES
The forms of organisation which a public
enterprise may take are as follows:-
 Departmental undertaking
 Statutory corporation
 government company

6. Departmental undertakings
 This is the oldest and most traditonal form
of organising public enterprises.
 These enterprises are established as
departments of the ministry and are
considered part or an extension of the
ministry itself.
 Examples of departmental undertakings
are Indian Railways, Post and Telegraph,
All India Radio, Doordarshan, etc

7. FEATURES OF DEPARTMENTAL
UNDERTAKING
1. Part of government—The ultimate authority lies
with the concerned minister who is responsible
to the parliament or state legislature.
2. Government financing-The funding of these
enterprises comes directly from the government
treasury and revenue earned by these is also
paid into the treasury.
3. Accounting and Audit– The undertaking is
subject to the normal budgeting, accounting and
audit.
4. Civil Service code– The enterprise is managed
by
civil servants whose methods of recruitment
and service conditions are the same as for other

8. Merits of departmental undertaking
1. Easy formation--- no registration or special
law is required. The undertaking is created by
the administrative decision of the government
and no legal formalities are involved.
2. Direct government control—the undertaking
is under the direct and complete control of
the state.
3. Public accountability-- There is maximum
degree of parliamentary control on the
undertaking. Such control keeps the
management alert.

9. 4. Proper use of money– The risk of public
money is minimized due to strict budget,
accounting, and audit control.
5. Aid to public revenue– Departmental
undertaking helps to increase government
revenue because their earnings are deposited
in the government treasury.
6. Public interest--- departmental undertakings
can better serve public interest. They are very
useful for public utility services.

10. Limitations
1. Lack of flexibility
2. Lack of motivation
3. Red tapism– excessive formality and routine
required before official action can be taken or
strict adherence to official formalities.
4. Inefficient management
5. Insensitive to needs of consumers

11. 2. STATUTORY
CORPORATIONS
 Statutory Corporations are public enterprises
brought into existence by a special act of
parliament.
 The act defines its powers and functions,
rules and regulation governing its employees
and its relationship with government
department.
 Examples are Airport Authority of India,
National Highways Authority of India, Central
Warehousing Corporation, LIC of India, RBI,
ICAI (Institute of Chartered Accountants of
India)

12. FEATURES OF STATUTORY
CORPORATION
1. Generally financed by the central or state
government
2. May borrow fund from the public and government
organization
3. They have separate legal entity
4. They have to frame their own policies and
procedures within the scope of state legislature
5. Providing better services to public and make
adequate profit
6. They can recruit and appoint their employee with
their service condition, since they are corporate body
7. There is less government interference in matters of
the corporation

13. MERITS
1. Autonomy (independent or freedom from
external control) of operation
2. Absence of political interference
3. Quick and prompt decision
4. Ease of raising capital
DEMERITS:-
1. No flexibility in operation
2. Misuse of powers
3. Lack of efficiency
4. Political interference could be there

14. 3. GOVERNMENT COMPANY
 A Government company is established under
the Indian Companies Act of 1956 and is
registered and governed by the provisions of
the Indian Companies Act.
 According to the Indian Companies Act 1956,
a government company means any company
in which not less than 51 percent of the paid
up capital is held by the central government, or
by any state government or partly by central
government and partly by one or more state
government.

15.  The shares of the company are purchased in
the name of the President of India.
 Since the government is the major
shareholder and exercises control over the
management of these companies, they are
known as government companies.
 EXAMPLES –Bharat Heavy Electricals
Limited, Steel Authority of India Limited etc.

16. FEATURES OF GOVERNMENT
COMPANY
1. It is an organisation created by the Indian
Companies Act, 1956
2. The company can file a suit in a court of law
against any third party and be sued.
3. The company can enter in to a contract and
can acquire property in its own name
4. The Management of the company is
regulated by the provisions of the companies
Act, like any other public limited company

17. 5. The employees of the company are appointed
according to their own rules and regulations
as contained in the Memorandum and Articles
of Associations.
6. These companies are exempted from the
accounting and audit rules and procedures. An
auditor is appointed by the central Gvernment
and the Annual Report is to be presented in
the parliament

18. MERITS
1. A government company can be established by
fulfilling the requirements of the Indian
Companies Act. A Separate Act in the parliament
is not required.
2. It has a separate legal entity, apart from the
government
3. It enjoys autonomy in all management decisions
and takes actions according to business
prudence
4. Theses companies by providing goods and
services at a reasonable prices are able to
control the market and curb (control) unhealthy

19. LIMITATIONS
1. Since the Government is the only shareholders in
some of Companies, the provisions of the
Companies Act does not have much relevance.
2. It evads (avoids, escape) constitutional
responsibility, which a company financed by the
government should have. It is not answerable
directly to the parliament
3. The government being the sole shareholder, the
management and administration rests in the
hands of the government. The main purpose of a
government company, registered like other
company is defeated.

20. GLOBAL ENTERPRISES
 Global enterprises are the companies which
functions all around the world. they are
characterized by their huge size, large number
of products, advance technology, marketing
strategies and network of operations all over
the world.
 Global enterprises thus are huge industrial
organizations which extend their industrial and
marketing operations through a network of
their branches in several countries.
 example--- MNCs

21. Features of Global Enterprises
1. Huge capital resources– issue of equity
shares, debentures, bonds, financial
institutions and international banks.
2. Foreign collaboration
3. Advanced technology
4. Product innovation
5. Marketing strategies
6. expansion of market territory
7. Centralized control

22. JOINT VENTURES
 A joint venture is a project or enterprise in
which multiple companies or individuals
invest.
 A joint venture is the pooling of resources
and expertise by two or more businesses, to
achieve a particular goal.
 The risk and rewards of the business are
also shared.
 The reason behind the joint venture often
include business expansion, development of
new products or moving in to new markets,
particularly in another company.
 Example – Sony-Ericsson

23. Benefits of joint ventures
1. Increased resources and capacity
2. Access to new markets and distribution
networks
3. Access to technology
4. Innovation
5. Low cost of production
6. Established brand name

24. CANGING ROLE OF PUBLIC
SECTOR
Following points highlight the changing role of public
sector:-
1. Development of infrastructure
2. Regional balance
3. Check over concentration of economic power
4. Import substitution—Its government trade and
economic policy which advocates replacing foreign
imports with domestic production. Example-
replacement of some agricultural or industrial
imports to encourage local production for local
consumption.

25. 5. Government policy towards the public sector
since1991:_
a. Reduction in the number of industries
reserved for the public sector from 17 to 8
(and then to 3):-
---In 2001, only three industries were reserved
for the public sector. These are atomic
energy, arms, and rail transport.
---- This meant that the private sector could
enter all areas (except the three) and the
public sector would have to compete with
them.

26. b. Disinvestment of shares of a select set public
sector enterprises:-
---Disinvestment involves the sale of the equity
shares to the private sector and the public.
---- The government had taken a decision to
withdraw from the industrial sector and reduce
its equity in all undertakings.

27. c. Policy regarding sick units to be the same as that for
the private sector:-
----- All public sector units were referred to the Board of
Industrial and Financial Reconstruction to decide
whether a sick unit was to be restructured or closed
down.
d. Memorandum of understanding:-
---- Improvement of performance trough a MoU system
by which management are to be granted greater
autonomy but held accountable for specified result.
---- Under this system, public sector units were given
clear targets and operational autonomy for achieving
those targets.