Q. State the merits and demerits of Statutory Corporation as a form of public sector enterprise. (4+4=8) (2015)
-> The advantages of statutory corporations are as follows:-
- They enjoy independence in their functioning and a high degree of operational flexibility. They are free from undesirable government regulation and control.
- Since the funds of these organisations do not come from the central budget, the government generally does not interfere in their financial matters, including their income and receipts.
- Since they are autonomous organisations they frame their own policies and procedures within the powers assigned to them by the Act. The Act may however, provide few issues/matters which require prior approval of a particular ministry.
- A statutory corporation is a valuable instrument for economic development. It has the power of the government, combined with the initiative of private enterprises.
The disadvantages of statutory corporation are as follow:-
- In reality, a statutory corporation does not enjoy as much operational flexibility as stated above. All actions are subject to many rules and regulations;
- Government and political interference has always been there in major decisions or where huge funds are involved;
- Where there is dealing with public, rampant corruption exists;
- The government has a practice of appointing advisors to the Corporation Board. This curbs the freedom of the corporation in entering into contracts and other decisions. If there is any disagreement, the matter is referred to the government for final decisions. This further delays action.
Q. What is global enterprise? What are its features? (2+6=8) (2015/2017)
-> Global enterprises are the companies that operate around the world. There are categories based on their huge size, a large number of products, and advancements in technology, marketing, strategy and network of operations all over the world.
A global enterprise is one which owns and manages the functions in two or more countries, for example- Unilever Ltd, Coca-Cola, Samsung etc.
Features of Global enterprise:-
- Huge capital resources- These enterprises are characterised by possessing huge financial resources and the ability to raise funds from different sources. They are able to tap funds from various sources.
- Foreign collaboration- Global enterprises usually enter into agreements with Indian companies pertaining to the sale of technology production of goods, use of brand names for the final products, etc. These MNCs may collaborate with companies in the public and private sector.
- Advanced technology- These enterprises possess technological superiorities in their methods of production. They are able to conform to international standards and quality specifications. This leads to industrial progress of the country in which such corporations operate since they are able to optimally exploit local resources and raw materials.
- Product innovation- These enterprises are characterised by having highly sophisticated research and development departments engaged in the task of developing new products and superior designs of existing products.
- Marketing strategies- The marketing strategies of global companies are far more effective than other companies. They use aggressive marketing strategies in order to increase their sales in a short period. They possess a more reliable and up-to-date market information system.
- Expansion of market territory- Their operations and activities extend beyond the physical boundaries of their own countries. Their international image also builds up and their market territory expands enabling them to become international brands. They operate through a network of subsidiaries, branches and affiliates in host countries. Due to their giant size they occupy a dominant position in the market.
- Centralised control- They have their headquarters in their home country and exercise control over all branches and subsidiaries. However, this control is limited to the broad policy framework of the parent company. There is no interference in day-to-day operations.
Q. Explain the steps involved in formation of a private limited company. (5marks) (2017/2019)
-> There are four stages in the formation of a company:
1) Promotion- Promotion is the first stage in the formation of a company. It involves conceiving a business opportunity and taking an initiative to form a company so that practical shape can be given to exploiting the available business opportunity. Following are the steps of promotion:-
a) Discovery of ideas.
b) Finding the promoters to launch the company.
c) Assembling the preposition.
d) Preparing important documents.
e) Formation or getting the company registered.
2) Incorporation- Incorporation of a company means the registration of a company as a corporate body under the provisions of Companies Act’ 2013. A Company comes into existence from the date of incorporation. After completing the aforesaid formalities, promoters make an application for the incorporation of the company. The application is to be filed with the registrar of companies of the state within which they plan to establish the registered office of the company. These may be briefly mentioned again:-
1. The memorandum of Association duly stamped, signed and witnessed. In case of a public company, at least seven members must sign it. A private statement in lieu of the prospectus is submitted, instead of an Article of Association.
2. The Articles of Association duly stamped and witnessed as in case of the Memorandum. However, as stated earlier, a public company may adopt Table A, which is a model set of Articles, given in the Companies Act. In that case a statement in lieu of the prospectus is submitted, instead of Articles of Association.
3. Written consent of the prospectus directors to act as directors and an undertaking to purchase qualification shares.
4. A copy of the Registrar’s letter approving the name of the company.
3) Capital Subscription- A public company can raise the required funds from the public by means of issue of shares and debentures. The following steps are required for raising funds from the public:-
a) SEBI Approval.
b) Filing of Prospectus.
c) Appointment of Bankers, Brokers, Underwriters.
d) Minimum Subscription.
e) Application to Stock Exchange.
f) Allotment of Shares.
4) Commencement of Business- If the amount of minimum subscription is raised through new issue of shares, a public company applies to the Registrar of Companies for issue of certificate of commencement of business. The following documents are required:
i) A declaration about meeting minimum subscription requirements.
ii) A declaration regarding the application and allotment money paid by the directors as same as others.
iii) A declaration that no money is payable to the applicants because of the failure of the company.
iv) A statutory declaration that the above particulars are followed.
v) The registrar shall examine the documents if these are found satisfactory a certificate of commencement of business will be issued.
Q. State the changing role of Public-sector enterprises in India. (5marks) (2018)
-> It is becoming apparent every day that the role of the public sector is changing, and quite substantially. Private enterprise seems to be making inroads into the realm of public enterprise. Public sector investment under the five year plans has dropped to 50 percent of the total. Much of the public sector is commonly acknowledged as not pulling its weight. The public sector appears to have failed to “occupy a commanding position in the economy”. A new distribution of the role of the public sector is called for; and the trends justify this demand.
Public Sector was started to achieve the following objectives:-
a) To speed up the economic growth of the country.
b) To achieve a more equitable distribution of income.
c) To create infrastructure facilities.
d) To develop all parts of the country equally.
Performance of the Public Sector was poor due to unorganised plants, outdated technology, underutilization of capacity, over staffing, trade unionism, political interference etc., so the government, in the Industrial Policy 1991, introduced the following reforms in the public sector.
a) The number of industries reserved for the public sector was reduced from 17 to 3 industries namely atomic energy, arms and rail transport.
b) The Memorandum of Understanding signed between a public sector and its administrative ministry defines its autonomy and the targets to be achieved.
c) Equity shares of public sector units are sold to the private sector and the public which is known as disinvestment.
d) Loss making public sectors which are potentially viable will be restructured and revived through the Board of Industrial and Financial Reconstruction (BIFR). Public sector units which cannot be revived will be closed down.
e) A National Renewal Fund was created to retrain and redeploy retrenched labour and to compensate employees seeking voluntary retirement.
Q. Distinguish between Private Company and Public limited Company. State three basic advantages of company form of organization. (5+3=8) (2018)
-> Difference between Public Sector and Private Sector:
|Public Company||Private Company|
|It is owned, controlled and managed by the central or state government.||It is owned, controlled and managed by private individuals or groups.|
|It is managed by persons appointed by the government.||It is managed by owners or managers appointed by them.|
|Its main objective is to provide service to society.||Its main objective is to earn profits.|
|Managers are accountable for its financial results to the government.||Managers are accountable for its financial result to its owner.|
Three basic advantages of company form of organisation:-
1. Limited Liability- Liability of members of a company is limited up to the amount unpaid on the face value of the shares.
2. Transferability of shares- Shares of a company are freely transferable.
3. Perpetual Succession- A company has a continuous existence which is not affected by the death of its members.
Q. What is meant by Government Company? Discuss its merits and limitations. (2+6=8) (2019)
-> According to section 617 of the companies Act 1956, Government company means, “any company is which not less than 51% of the paid up share capital is held by the central Government or by any State Government and includes a company which is a subsidiary of a Government company, “it may be a public company”.
1) A government company can be established by fulfilling the requirements of the India 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.
1) Since the Government is the only shareholder in some of the companies, the provisions of the Companies Act does not have much relevance.
2) It evades 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 rest in the hands of the government. The main purpose of a government company, registered like other companies is defeated.