Explore topic-wise InterviewSolutions in Current Affairs.

Correct option is (B) Person

Non Co-operation among members:

• The success of a co-operative society depends highly on the honesty, loyalty and co-operative approach of the members.
• When members lack these values it may result in disharmony, conflicts, division of members in various groups, selfishness, enmity and ultimately non-co-operation.
• Owing to these reasons, the co-operative society may not be able to fulfill its objectives.

According to the Indian Co-operative Societies Act, 1912,”A cooperative society is a society which has its objective the promotion of the interests of its member in accordance with cooperative principles.”

Correct option is (D) Both (A) and (C)

Demerits of Departmental Organisation: 

(i) Delay in Action : In Departmental organisation there is always centralization of authorities. Such excessive centralization of authority leads to delay in action.

(ii) Inefficiency and Corruption : There is lot of inefficiency and corruption in departmental organisation.

(iii) Less Scope for Initiative : The working of this organization suffers from lack of continuity and stability because the policies of the department are decided by the ministers.

(iv) Instability : The working of this organisation suffers from lack of continuity and stability, because the policies of the department are decided by the Ministers.

(v) Delayed : The executives at the lower level have to depend on higher authority for all the decisions. They can’t take, their own decisions.

Merits of Departmental Organization: 

1. Qualified Staff : Departmental organizations are properly managed and supervised by the qualified government staff.

2. Proper Use of Funds : The Departmental organizations provide public utilities or basic necessities. Government Department works under the control and supervision of the concern ministry. Charges for misuse of funds are less in departmental organization.

3. Social Welfare : Government undertakes socio-economic activities to promote social welfare. Providing essential comlhodities to people at reasonable price is top priority of the state. Thus, socio-economic objectives are achieved with Government control.

4. Public Accountability : The concerned minister incharge of the government organisation is answerable to the Parliament or Assembly. The elected representatives of people can raise the question about the working of this enterprises on behalf of public at large.

(A) Introduction: 

(i) Global enterprises or Multinational Corporations are the Corporations which under take business activities in more than one country. Any company having its head office in one country and place of business in other countries is called a Multinational Corporation.

(ii) Multinational Corporation played an important role in the Indian Economy since 1991. They have become a common feature of developing economies in the world. A Multinational Corporation is a corporation which operates, in addition to the country in which it is incorporated, in one or more other countries.

(B) Merits of Multinational Corporation: 

Following are the merits of Multinational Corporation.

(i) Proper use of Idle Resources : The national income of host country increases as MNCs use idle physical and human resources with latest technologies.

(ii) Inflow of Foreign Capital: Multinational corporations bring much needed foreign capital for the rapid development of developing countries. This capital is useful for growth of domestic country

(iii) Promotion of International Brotherhood and Culture: MNCs integrate economies of various nations with the world economy and promote international brotherhood and culture with peace and prosperity in the world.

(iv) End of Local Monopolies : In global market, Multinational Corporations end local monopolies of host . countries improving their products and reduces prices.

(v) Technical Development: Multinational corporations gives lot of importance to research and development activities. They are also fully equipped and have necessary infrastructure. The research and development is undertaken for finding out new product, new system, and new technology of doing business in an economical way.

(vi) Improvement of Standard of Living : Multinational Corporations supply their product at very reasonable prices in the global market. E.g. the price of wrist watches, cell phones, etc. This helps to improve the standard of living of people of host countries.

(vii) Managerial Development : Multinational corporations have highly specialized and expert team of management. These experts are hired from different countries of the world. Also their functioning is highly professional. They adopt new technology and use huge resources. 

(viii) Employment Generation : MNCs create large scale employment opportunities in host countries and . helps in reducing unemployment.

(C) Demerits of Multinational Corporation: 

(i) Danger for Domestic Industries : Multinational Corporations have vast economic power so they are danger to domestic industries which are still in process of development. Domestic industries not so powerful to face the challenges of Multinational Corporation.

(ii) Create Problem for Environment: Profit is sole objective of multinational corporation. Such companies damage environment of developing countries. To lower the price of goods they dump lower standard quality product which harms local soil, water and air.

(iii) Outsourcing of Job: Normally MNCs outsource the job work due to lower cost, due to this their liabilities towards employees are reduced. 

(iv) Misuse of Mighty Status : Multinational Corporations have powerful financial strength because of huge capital. They can afford to bear losses for a long while in the hope of earning huge profits. They have ended local competition and achieved monopoly. This may be unfair.

(v) Multinational Corporations Import Skilled Labour : Most companies in this position imports the skilled labour they require from other economic to meet their needs. That means the best jobs, especially in the developing world, are given to people who don’t even live in the local economy. Those wages do not offer the same economic benefits because spending occurs internationally instead of at the local level.

(vi) Interference : Multinational Corporations are gigantic organizations with huge finance and efficient management. They try to bring about expansion of business through mergers, acquisitions and amalgamations. As they are huge corporations they exert influence on political parties and try to spread political ideology of their home country.

(A) Introduction: 

(i) Global enterprises or Multinational Corporations are the Corporations which under take business activities in more than one country. Any company having its head office in one country and place of business in other countries is called a Multinational Corporation.

(ii) Multinational Corporation played an important role in the Indian Economy since 1991. They have become a common feature of developing economies in the world. A Multinational Corporation is a corporation which operates, in addition to the country in which it is incorporated, in one or more other countries.

(B) Merits of Multinational Corporation: 

Following are the merits of Multinational Corporation.

(i) Proper use of Idle Resources : The national income of host country increases as MNCs use idle physical and human resources with latest technologies.

(ii) Inflow of Foreign Capital: Multinational corporations bring much needed foreign capital for the rapid development of developing countries. This capital is useful for growth of domestic country

(iii) Promotion of International Brotherhood and Culture: MNCs integrate economies of various nations with the world economy and promote international brotherhood and culture with peace and prosperity in the world.

(iv) End of Local Monopolies : In global market, Multinational Corporations end local monopolies of host . countries improving their products and reduces prices.

(v) Technical Development: Multinational corporations gives lot of importance to research and development activities. They are also fully equipped and have necessary infrastructure. The research and development is undertaken for finding out new product, new system, and new technology of doing business in an economical way.

(vi) Improvement of Standard of Living : Multinational Corporations supply their product at very reasonable prices in the global market. E.g. the price of wrist watches, cell phones, etc. This helps to improve the standard of living of people of host countries.

(vii) Managerial Development : Multinational corporations have highly specialized and expert team of management. These experts are hired from different countries of the world. Also their functioning is highly professional. They adopt new technology and use huge resources. 

(viii) Employment Generation : MNCs create large scale employment opportunities in host countries and . helps in reducing unemployment.

(C) Demerits of Multinational Corporation: 

(i) Danger for Domestic Industries : Multinational Corporations have vast economic power so they are danger to domestic industries which are still in process of development. Domestic industries not so powerful to face the challenges of Multinational Corporation.

(ii) Create Problem for Environment: Profit is sole objective of multinational corporation. Such companies damage environment of developing countries. To lower the price of goods they dump lower standard quality product which harms local soil, water and air.

(iii) Outsourcing of Job: Normally MNCs outsource the job work due to lower cost, due to this their liabilities towards employees are reduced. 

(iv) Misuse of Mighty Status : Multinational Corporations have powerful financial strength because of huge capital. They can afford to bear losses for a long while in the hope of earning huge profits. They have ended local competition and achieved monopoly. This may be unfair.

(v) Multinational Corporations Import Skilled Labour : Most companies in this position imports the skilled labour they require from other economic to meet their needs. That means the best jobs, especially in the developing world, are given to people who don’t even live in the local economy. Those wages do not offer the same economic benefits because spending occurs internationally instead of at the local level.

(vi) Interference : Multinational Corporations are gigantic organizations with huge finance and efficient management. They try to bring about expansion of business through mergers, acquisitions and amalgamations. As they are huge corporations they exert influence on political parties and try to spread political ideology of their home country.

(viii) E ncourage Political Corruption : To get favourable terms and conditions in host country multinational corporations bribe to political parties. 

(ix) Repatriation of Profiles : Multinational Corporations get huge profit. Repatriation of profit by Multinational Corporation adversely affects the foreign exchange reserves of the host country. If means that a large amount of foreign exchange goes out of host country.

(A) Merits of Government Company: 

(i) Profitability and Accountability : It works on business principles and follows commercial approach. Though not profit oriented like private sector, it does make reasonable profit which is used for public welfare, modernisation, renovation and development. Moreover, its performance can be evaluated by the Parliament as it has public accountability.

(ii) Internal Autonomy: Government Company enjoys financial and administrative autonomy. Its dependence on Government authority is minimum. It has its own capital structure, financial plan, borrowing powers and so on.

(iii) Government Ownership ; The ownership of the government company rests with Central or State Government who owns major capital of the company and as such looks after its management and control. Government always promotes public welfare.

(iv) Foreign Capital and Technical Know how : As the government provides 51% of the capital, the rest 49% can be raised through foreign investment. By seeking foreign capital, Government companies bring advanced technology and technical know how. 

(v) Acquisition of Sick Units : A government company can acquire a sick unit in the private sector without rationalisation. It can be acquired by purchasing 51% of the share capital of a private company.

(vi) Concessions and Privileges : As government owns Government Company, it enjoys various concessions, privileges, subsidies, etc. It may also get orders for the products or services from various government departments and agencies. It also has access to use financial resources of the Government.

(vii) Efficiency : Government company has to compete with the private sector companies. Hence, it tries to promote efficiency at all levels and avoids wastages wherever possible. It tries to improve its services to consumers and promotes consumer satisfaction by providing quality goods at reasonable prices. From the above points, it could be seen that the Government Company enjoys various benefits as it is owned by the Government and blends the objectives of privately owned companies with State owned control and maximise public welfare.

(viii) Professional Management: The management of Government Company is in the hands of the Board of Directors appointed by the Government. Government exercises control on various matters through Board of Directors. They are highly qualified.

(ix) Easy Formation : The formation of Government Company is easy as there is no procedural delay and legal constraints. It does not require special Act or Parliament approval. It comes into existence through executive decision of the Government.

(x) Flexibility : The objects, powers and organisational set up of a Government Company can be altered easily. The company can take prompt decisions regarding management, finance and other related matters due to flexibility in their operations.

(xi) Easy to Alter : The objects, powers and organisational set up of a Government Company can be altered easily. The company can take prompt decisions regarding management, finance and other related matters due to flexibility in their operations.

(xii) Enjoys Private and Public Objective : In a Government Company, attempt is made to combine the operating flexibility of privately owned companies with the advantage of state regulation and control in public interest.

(B) Demerits of Government Company: 

Though Government Company enjoys various benefits due to Government ownership and autonomy, it has following limitations: 

(i) Inefficiency and Corruption : The Directors have no financial stake in the company and as a result they are indifferent towards working of the company. Due to limited autonomy and petty politics, the efficiency of the enterprise is affected. It results in corruption.

(ii) Lack of Professional view : There is lack of devotion, dedication and systematic approach. In fact, there is no professional approach in various operations and working of the company.

Thus, from the above points it could be seen that there is lot of government and political interference in the Government company which brings about its inefficiency and ineffectiveness.

(iii) Domination of Ministers and Politicians : The ministers of the concerned departments are in charge of the Government Company. In view of Government ownership, political interference is quite common. The Directors try to serve and achieve their political motives rather than realisation of business goals as they are nominated for political gains and not on merits.

(iv) Red Tapism and Delay : The bureaucratic management delays in taking decision and implementing. There is no time frame and the employees are not devoted. There is often delay in preparing various documents and forwarding the same for taking action. Thus, delay, red tape, corruption, avoidance of work and shirking from the responsibility is common sight in Government Company.

(v) Autonomy only in Name : Though there is administrative autonomy, these companies face a lot of interference from the government in all the matters. Appointment of Directors, employees and its working, there is no autonomy. Autonomy is only on paper and not in practice.

(vi) Weak Public Accountability : Absence of Government audit is a major draw back in case of Government company which does not assure proper utilisation of funds. There is no control on misappropriation of funds which leads to weak public accountability.

(vii) Fear of Exposure : The working of Government Company like annual report is placed before the parliament or State Legislature. It is exposed to press and public criticism. Therefore, management of the government company often gets demoralized.

(viii) Lack of Expertise: The managerial key personnel of a Government Company are deputed from government departments. Such person, generally, lack expertise and commitment leading to lower operational efficiency of the Government Company.

(ix) Ineffective Control of Parliament : There is lack of control of the Parliament in the working of the Government company. Parliament is not having direct control, due to which the officers shirk from responsibility and postpone decision making. It affects efficiency of Government company.

(x) Poor Labour Management Relations : The employer-employee relations in the Government companies are poor. This is the result of corrupt and inefficient management of selfish trade unions. Proper work culture is found absent in Government companies.

(A) Introduction :

Statutory Corporations are autonomous bodies established under special legislative Acts. A statutory corporation is formed under a Special Act of Parliament or State Legislature. The powers, duties, functions and scope of operations are laid down in the Act. LIC, IFCI, SBI, UTI, Air India are the examples of public corporation.

Statutory Corporation is a body with a separate existence, which can sue and be sued and is responsible for its own finance. It is administered by a board appointed by public authority to which it is answerable.

(B) Merits of Statutory Corporation: 

(i) Professional Management: Statutory Corporations are managed professionally. The directors and other executives are highly trained and specialize in their respective fields. This leads to efficiency in working.

(ii) Rapid Decisions : Statutory Corporations enjoy autonomy. They can take quick decisions. There is less file work and less formalities to be completed before taking decisions.

(iii) Efficient Staff : In Statutory Corporation, employees are given fair wages, better working conditions and proper training and development programs are initiated for the employees. As a result, employer-employee relations are very cordial and staff is highly motivated to perform better.

(iv) Motivated Staff: In Statutory Corporations, employees are given fair wages, better working conditions and proper training and development programmes are initiated for the employees. As a result, employer- employee relations are very cordial and staff is highly motivated to perform better.

(v) Service Motive : They are formed to provide public utility services and promote consumer satisfaction. It provides essential commodities to people at reasonable rates. 

(vi) Easy to Raise Capital : Being owned by government, these corporations can raise required funds by floating bonds at low rate of interest. 

(vii) Administrative Autonomy : Due to administrative and financial autonomy, statutory corporation take quick decisions and are flexible in its policy framing and working as per the changing business needs.

(viii) Public Accountability : These organisations enjoy public accountability, flexibility and autonomy in its working. The accounts are audited by Comptroller and Auditor General of India and final accounts are tabled before Parliament or Legislature. 

(ix) Initiative and Flexibility : Statutory Corporation have an independent identity different from the government. Though, the overall business policies are formulated by the government, they have administrative autonomy and hence operational flexibility. 

(x) Enjoys Economies of Scale : As these organisations are large scale undertakings which promote social welfare, it enjoys economies of large scale business operations. 

(xi) Creates Employment Opportunities : Statutory organisations generate employment opportunities for the people at large. LIC, ONGC, Air India and others employ lakhs of people in the country. This reduces government burden of providing jobs to teeming millions and as such they help government.

(xii) Enjoy Monopoly : Most of statutory organisations are monopolistic or semimonopolistic in their areas of functioning. 

(C) Demerits of Statutory Corporation: 

Though statutory corporations are autonomous bodies and enjoy flexibility in their working, they have certain limitations which are as follows: 

(i) Clashes Amongst Interests : All or majority directors of Statutory Corporations are appointed by the Government from different fields. As there are many members it is quite possible that their interests may clash. The smooth functioning of the corporation may be hampered.

(ii) Autonomy on Paper Only : Ministers, government officials and political parties often interfere with the working and decision making policies which affects the autonomy and flexibility of it. 

(iii) Rigid Structure : Though statutory corporation have operational flexibility, they are subject to many rules and regulations. Any changes in the constitution, objects, powers, duties, etc., require amendments to be passed in the parliament which is difficult task. This reduces its flexibility.

(iv) Lack of Initiative : The statutory corporation have no profit motive. There is no competition among them. So employees do not take initiative to increase the profit. 

(v) Unfair Practices : Before 1991, these corporations enjoyed monopolistic and semi monopolistic position. They were charging high prices from the consumers to cover up their inefficiencies. After 1991, due to liberalization, most of them lost their monopolistic position but skill, in practice the lack competition as they are not aware of consumer needs.

A company which is registered in India under the Indian Companies Act or under the special act passed by the parliament is called an Indian company. An Indian Company can be private company, public company or Government Company.

(c) Departmental Undertaking

(i) True

(ii) False

 (iii) True

Departmental Organisation

The features of Joint Stock Company are as follows: 

(i) Common Seal : A company being an artificial person cannot sign on its own. The law requires every company to have a seal and have its name engraved on it. Common seal is a symbol of company’s incorporate existence. As common seal is the signature of the company, it has to be affixed on all important documents of the company. When the seal is used it has to be witnessed by two Directors of the Company. The common seal is under the custody of Company Secretary.

(ii) Artificial Person : A company is an artificial person created by law. It has an independent legal status. It has a separate name. It can enter into contracts, buy and sell property in its name. The company is distinct from its members.

(iii) Registration: The Registration of Joint Stock Company is compulsory. All companies have to be registered under Indian Companies Act, 2013.

(iv) Membership : A company is an association of persons. A private limited company must have atleast two persons and a public limited company must have atleast seven persons. The maximum limit of members for private company is 200. A public company can have unlimited members.

(v) O wnership and Management: Persons investing in the shares of the company are called as shareholders. They are the owners of the company. They receive a share in the profits of the company called “dividend”. The large number of shareholders cannot manage business. They elect representatives who are collectively called as Board of Directors. They manage business of the Company.

(vi) Limited Liability : The liability of shareholders is limited. It depends upon the unpaid amount of shares held by them. Shareholders cannot be held personally liable for the debts of the company.

Establishing a company can be broadly classified into:
(A) Promotion and
(B) Procedure for obtaining certificate of incorporation.

Let us understand both in detail.
(A) Promotion:
Promotion refers to the thought or idea that comes into mind for establishing a company and prepare for the same.
The person(s) or partnership firm or even a Joint stock company who executes the idea is called a promoter of the company.

Points to consider by promoter:
1. Idea of promoting the company:

The promoter first need to research and assess the need of the new company. He needs to be clear whether the new company will be established for developing and selling a new product or a service, etc. .

2. Primary and detailed investigation:

• Once the promoter gets clarity about the new product or service he wish to sell through the new company, he needs to conduct thorough primary as well as detailed investigation to test if the idea will work in the market.
• The idea is now to be tested on practical grounds with a strong business perspective. Various aspects such as selecting the right product and service for the business, profitability of the business, etc. are thoroughly investigated for successful implementation of the business.
• Initially a primary test and survey is done. Based on the results, detailed study and analysis is done is the market.
• Also, information regarding how much capital will be needed, how will it be raised, sourcing raw material, demand and market trend, equipment and machinery needed, land and human resources, transport facilities, power, water availability, etc. is gathered at in depth.

3. Mobilizing resources:

The promoter needs to mobilize i.e. start deploying human and physical resources. -» The promoters enter into contracts to obtain land, raw material, machinery, services, hire employees, etc.

4. Financial arrangement:

• The promoters need to decide how and from where they will raise the finance i.e. capital for the company.
• For example, whether they should raise their own funds or obtain it by issuing shares, obtain loan, borrow, etc.

(B) Procedure for obtaining certificate of incorporation:

Once the promotion phase is over the process of obtaining certificate of incorporation begins. A certificate of incorporation is to be obtained from the Registrar of Companies.

Following documents need to be prepared and submitted to the Registrar of Companies to obtain the certificate:
1. Memorandum of Association (MOA):

• A Memorandum of Association (MOA) is a legal document prepared during the formation and registration process of the company. MOA defines company’s relationship with shareholders.
• General public can access company’s MOA. It contains company’s name, physical address of registered office, name of share-holders, etc.
• The MOA and Articles of Association together serve as a constitution of the company. Just like a constitution describes the country, a company’s MOA and Articles of Association describe the company.

An MOA must compulsorily include the following clauses:
(A) Name clause:

• As per the name clause, a public company with liability by share needs to insert the word ‘Limited’ at the end of company name whereas a private company needs to insert the words ‘Private Limited’ at the end of its name.
• A company cannot not select a name which resembles name of other registered company in India or which can harm the national interest.

(B) Address of Registered office clause:
The company needs to mention the physical address of its registered office so that the Registrar of Companies and public can communicate with the company. Moreover, based on the address the court can decide the jurisdiction of the company.

(C) Object clause:

• Object clause is the most important clause of memorandum.
• Under this clause, the company needs to clearly mention the objective and the type of business it would conduct. It cannot conduct activities other than mentioned in this clause.

(D) Liability clause:

• Under this clause the company mentions if the liability of members is limited, unlimited or limited by guarantee.
• In case of One Person Company, the company needs to mention name of the person who will replace the original person in case of death, inability to enter into contracts, etc. of the original person.

(E) Capital clause:
Under the capital clause the company mentions the amount of share capital with which the company proposes to register and the division of capital into shares of fixed amount.

(F) Association clause:
In this clause minimum 7 members in case of a public company and minimum 2 members in case of a private company need to give a slatement along with their signatures showing their desire to establish the company.

2. Articles of Association:

• The Articles of Association is a document that contains the purpose of the company as well as the duties and responsibilities of its members.
• It also contains the rules and regulations under which the company will conduct its administration.
• Rights of members, share installment, share forfeiture, powers of Board of Directors, etc.
• Both the documents i.e. Memorandum of Association and Articles of Association become public documents after they get registered.

3. List of directors:

• The company needs to provide and register the list of persons who wish to work as directors to the Registrar of Companies.
• The list contains name of persons, address, age, sex, occupation, nationality, etc.
• The company must compulsorily include one female director in its Board of Directors.

4. Written consent of directors:
People whose name is mentioned as directors in the company need to give a written consent that they wish to work with the company on their own will.

5. Declaration of interest in other companies:
If the directors of company, managers, secretary or subscribers have interest in any other company, firms, etc, then they need to disclose it by filing a statement.

6. Statement of fulfillment of provisions of law:

• Once the company fulfills all the legal provisions discussed so far it needs to prepare a statement in the prescribed format and register it before the Registrar of Companies stating that the company has fulfilled all the legal provisions needed for incorporating a company.
• On completing all the procedures and documents the Registrar of Companies after verification and thorough investigation issues certificate of incorporation and Corporate Identification Number (CIN) to the company. The date of issue of this certificate becomes the date of establishment of company.

• A Joint Stock Company is a voluntary association of individuals for profit, having its capital divided into transferable shares, the ownership of which is the condition of membership.
• The members of a joint-stock company are many and they are scattered all over.
• It becomes very difficult for them to manage the business of the company.
• Lots of time may be wasted as all the shareholders are not able to come together at one place at the same time and as a result, there is a delay in decision making.
• To avoid these problems, the shareholders elect their representatives known as “Board of Directors”.
• The Board of Directors handles the business of the company on behalf of the shareholders.
• But, all important decisions pertaining to the company are not taken without the consent of all the shareholders.
• The owners of the company are the shareholders.
• The managers of the company are the Board of Directors.
• So, there is a separation of ownership and management in Joint Stock Company.
• Thus, the ownership and management are separated in Joint Stock Company.

The statement should contain the following details:

1. Name of the firm. 

2. Location of the firm. 

3. Names of other places where the firm carries on business. 

4. Date on which each partner joined the firm. 

5. Names and addresses of all the partners. 

6. Duration of the firm.

The unregistered firm suffers from certain disabilities. They are:

1. A partner of an unregistered firm cannot file a suit in court of law against the third parties or against the firm or against his co-partners for the recovery of the claims. 

2. An unregistered firm cannot file as suit in a court of law against the third parties for the recovery of its debts exceeding Rs. 100 

3. An unregistered firm cannot file a suit against any of its partners for the recovery of its debts.

A promoter of the company who wish to establish or say promote a company needs to pass through several lengthy and legal processes.

• He needs to first understand the need of the product/service he wishes to sell through the new company. For this he conducts thorough investigation, research, seeks advice from industry experts and prepares its feasibility Then he does a thorough study of managing resources such as raising capital, raw material, availability of land, power, water and electricity etc.
• He enters into contracts for purchasing land, raw material, machinery, hiring employees, etc.
• Once these things are done he prepares MOA and Articles of Association, prepare a list of directors and take their written consent.
• Finally, the promoter completes all the procedures and submits all these documents along with fees to the Registrar of Companies to obtain the certificate.
• Owing to so many procedures, tasks and preparing and furnishing documents ‘ the incorporation of a company become quite lengthy, complex and costly.

• As the name suggests a co-operative society is established and functions on the basis of co-operation.
• The members having common interest voluntarily associate with each other to fulfill definite common goals.
• The primary object is to serve and then to earn profit. These objectives require dedicated selfless efforts, honesty and loyalty.
• In such a business set-up if members do not possess these characteristics the co-operative society will not progress.
• Members mainly work for economic upliftment rather than profit maximization. Every member needs to stay focused with the objectives of the co-operative society to progress and attain the goal of coOoperative society. Hence, it is said ‘no progress without co-operation’.

Procedure for obtaining certificate of incorporation:

Once the promotion phase is over the process of obtaining certificate of incorporation begins. A certificate of incorporation is to be obtained from the Registrar of Companies.

Following documents need to be prepared and submitted to the Registrar of Companies to obtain the certificate:
1. Memorandum of Association (MOA):

• A Memorandum of Association (MOA) is a legal document prepared during the formation and registration process of the company. MOA defines company’s relationship with shareholders.
  General public can access company’s MOA. It contains company’s name, physical address of registered office, name of share-holders, etc.
• The MOA and Articles of Association together serve as a constitution of the company. Just like a constitution describes the country, a company’s MOA and Articles of Association describe the company.

An MOA must compulsorily include the following clauses:
(A) Name clause:
As per the name clause, a public company with liability by share needs to insert the word ‘Limited’ at the end of company name whereas a private company needs to insert the words ‘Private Limited’ at the end of its name.
A company cannot not select a name which resembles name of other registered company in India or which can harm the national interest.

(B) Address of Registered office clause:
The company needs to mention the physical address of its registered office so that the Registrar of Companies and public can communicate with the company. Moreover, based on the address the court can decide the jurisdiction of the company.

(C) Object clause:

• Object clause is the most important clause of memorandum.
• Under this clause, the company needs to clearly mention the objective and the type of business it would conduct. It cannot conduct activities other than mentioned in this clause.

(D) Liability clause:

• Under this clause the company mentions if the liability of members is limited, unlimited or limited by guarantee.
• In case of One Person Company, the company needs to mention name of the person who will replace the original person in case of death, inability to enter into contracts, etc. of the original person.

(E) Capital clause:
Under the capital clause the company mentions the amount of share capital with which the company proposes to register and the division of capital into shares of fixed amount.

(F) Association clause:
In this clause minimum 7 members in case of a public company and minimum 2 members in case of a private company need to give a slatement along with their signatures showing their desire to establish the company.

2. Articles of Association:

• The Articles of Association is a document that contains the purpose of the company as well as the duties and responsibilities of its members.
• It also contains the rules and regulations under which the company will conduct its administration.
• Rights of members, share installment, share forfeiture, powers of Board of Directors, etc.
• Both the documents i.e. Memorandum of Association and Articles of Association become public documents after they get registered.

3. List of directors:

• The company needs to provide and register the list of persons who wish to work as directors to the Registrar of Companies.
• The list contains name of persons, address, age, sex, occupation, nationality, etc.
• The company must compulsorily include one female director in its Board of Directors.

4. Written consent of directors:

People whose name is mentioned as directors in the company need to give a written consent that they wish to work with the company on their own will.

5. Declaration of interest in other companies:

If the directors of company, managers, secretary or subscribers have interest in any other company, firms, etc, then they need to disclose it by filing a statement.

6. Statement of fulfillment of provisions of law:

• Once the company fulfills all the legal provisions discussed so far it needs to prepare a statement in the prescribed format and register it before the Registrar of Companies stating that the company has fulfilled all the legal provisions needed for incorporating a company.
• On completing all the procedures and documents the Registrar of Companies after verification and thorough investigation issues certificate of incorporation and Corporate Identification Number (CIN) to the company. The date of issue of this certificate becomes the date of establishment of company.

Autocratic management:

• Although the share-holders or say members are entrusted several powers as per the law but they enjoy only a few of them.
• Due to the existence of voting right per share, people having a very large quantity of shares of a company might get associated and dominate the company management. They may use company’s money, assets and secrets for fulfilling their personal desires and goals.

Correct option is (D) Equality

Limited capital:

It is difficult to raise capital in a co-operative society. The main reason for this is that the price of shares to be sold to members is quite low and members generally belong to poor class. Moreover, unlike companies any member can have only one vote irrespective of the number of shares he holds. So, members are not much interested in buying shares which further adds to capital shortage.

The main motives of a co-operative society are: 

1. Open membership . 

2. Equity of Distribution of Profits.

Correct option is (B) Has the motive of service to member

Correct option is (D) Democracy

(A) Meaning: 

Departmental organizations are run by the Government departments headed by a minister who guides and controls the activities of the undertaking.

(B) Merits of Departmental Organization: 

1. Qualified Staff : Departmental organizations are properly managed and supervised by the qualified government staff.

2. Proper Use of Funds : The Departmental organizations provide public utilities or basic necessities. Government Department works under the control and supervision of the concern ministry. Charges for misuse of funds are less in departmental organization.

3. Social Welfare : Government undertakes socio-economic activities to promote social welfare. Providing essential comlhodities to people at reasonable price is top priority of the state. Thus, socio-economic objectives are achieved with Government control.

4. Public Accountability : The concerned minister incharge of the government organisation is answerable to the Parliament or Assembly. The elected representatives of people can raise the question about the working of this enterprises on behalf of public at large.

5. Maintain Secrecy: In matters of strategic, national importance, secrecy is essential and confidentiality can be maintained in certain business activities such as defence deals, atomic plants, drugs and pharmaceuticals etc.

6. Easy Formation : These organisations are very easy to form. They do not require any special statute or registration.

7. Direct Control: These organizations are properly managed and supervised by the qualified Government Staff Minister at the top is responsible to the Parliament for its operations.

8. Direct Revenue to Government : The revenue of departmental organizations directly goes to the jr Government treasury. 

9. Less Overheads : The administrative expenses are less as government only operate it. 

10. Easy Finance : These organisation get the required finance by the government through direct allocation of funds from the concerned ministry. 

11. Development of Public Utilities : The departmental organisation provides public utilities or basic r necessities. People require essential services and products such as Railways, Transport and Communications, Telephone services, etc. Thus, essential services are made available by the Government department at a very reasonable rate.

(C) Demerits of Departmental Organisation: 

(i) Delay in Action : In Departmental organisation there is always centralization of authorities. Such excessive centralization of authority leads to delay in action. 

(ii) Inefficiency and Corruption : There is lot of inefficiency and corruption in departmental organisation. 

(iii) Less Scope for Initiative : The working of this organization suffers from lack of continuity and stability because the policies of the department are decided by the ministers.

(iv) Instability : The working of this organisation suffers from lack of continuity and stability, because the policies of the department are decided by the Ministers. 

(v) Delayed : The executives at the lower level have to depend on higher authority for all the decisions. They can’t take, their own decisions. 

(vi) Lack of Flexibility : The Departmental organization lacks flexibility in decision making. This is because there is centralization of authority. 

(vii) Incurring Losses/Huge Losses : Most of the government undertakings incur heavy losses due to lack of business skills and approach as they are not professional. 

(viii) Absence of Professionalism : There is lack of professionalism in the management of departmental organization. Often the decisions are taken unsystematically, moreover the data collected is often out dated and there is no proper analysis of such data. Hence, the decisions are taken hastily. 

(ix) Political Interference : The Ministers, bureaucrats, Government officials interfere in the day to day working of the undertaking. 

(x) Red Tapism and Bureaucracy : The Departmental organisations are controlled by government. Departmental organisations are facing delays, red tapism, corruption, lack of initiative, bureaucracy, etc. 

(xi) Insensitive to Consumer Needs : The officials of this organisation are insensitive to the needs of consumers. The officials are not bothered about consumer needs and consumer satisfaction as they are more worried about their security of service in view of monopolistic position.

(xii) Lack of Autonomy : Departmental organisation lack autonomy and freedom in working and decision making.

A company which is registered outside India and whose registered office is also outside India, but whose place of business is in India is called a foreign company. For example, Vodafone.

Definition of Joint Stock Company:

• As per Section 2(20) of the Companies Act, 2013: “Company means a company incorporated under this Act or under any previous company law”.
• According to Prof. H.L.Haney: “A Joint Stock Company is a voluntary association of individuals for profit, having its capital divided into transferable shares, the ownership of which is the condition of membership”.

Features of Joint Stock Company:

(i) Voluntary association: It is a voluntary association of individuals. Membership is open to all. Any person can join and leave the company subject to rules of the Articles of Association of the company.

(ii) Incorporated Association: Company is an association of persons formed and incorporated/registered under the Companies Act, 2013. Registration is compulsory. After incorporation, an association obtains the status of a Joint Stock Company.

(iii) Separate legal entity: The company enjoy a separate legal status different from its members and directors. Though the members are the owners, yet they are not liable for the actions of the company.

(iv) Artificial person: A company is a creation of law. A company does not have a physical existence, but it can conduct various activities like a human being.

E.g. enter into a contract, open a bank account, purchase or sell assets, appoint employees, etc. The company has corporate existence.

(v) Perpetual succession: A company has a perpetual succession means continuous existence. The company can enjoy a long and stable life. It is not affected by the death, insolvency, or retirement of any member.

(vi) Common seal: A company has a common seal of its own and all its activities are conducted under this seal. A company is an artificial person, its seal is the substitute for its signature. This seal is a name or any other recognition of a company.

(vii) Limited liability: The liability of members/shareholders of the company is limited. It is limited up to the unpaid part of the face value of shares held by shareholders. The personal property of a shareholder cannot be used for repayment of debts of the company.

(viii) Separation of ownership and management: As per the Companies Act, shareholders are the owners of the company, but they are unable to manage the day-to-day business activities as they are large in number, scattered and they keep on transferring shares. So, they appoint directors for management purposes. Thus, ownership and management are separate in the case of a Joint Stock Company.

(ix) Transferability of shares: The shares of a public company are transferable. They can be transferred freely whenever shareholder desires to sell. Shares of private companies are not freely transferable.

(x) Number of members: A company is owned by a large number of members. For private companies, minimum of 2 members and a maximum of 200 members are required and for the public company a minimum of 7 members and a maximum no limit.

(xi) Capital: Due to a large number of members, a huge amount of capital can be collected by the company in the form of shares, debentures, bonds, public deposits, etc. It can also borrow loans from banks and financial institutions.

(xii) Government control: There is strict control and supervision by the Government on the working of the company. The company has to follow the regulations and file Profit and Loss Account, Balance Sheet, and other financial statements with the Registrar. It should maintain all required books of accounts.

This statement is False. 

The concept of entity is different from the perpetual succession. Entity means separate existence of business from the owner whereas perpetual succession means long life and continuation.

1. It is owned, managed, controlled and financed by government. 

2. It includes – Departmental Organisation, Statutory Corporation and Government Companies. 

3. Its main objective is to provide services to society. 

4. It is managed by government officials or Board of Director. 

5. It is large in size and operates on large scale.

1. According to the Companies Act, the right to transfer shares is restricted by its articles. 

2. Only a public limited company has right to transfer shares freely. 

3. Thus, shares of Private Limited company are not freely transferable.

• The objective of a co-operative society is ‘service’. However if the society makes surplus income it distributes some part of profit among the society members in the form of dividend as per the provision of law.
• The remaining profit is utilized for the welfare of the members and the society.
• Owing to these reasons one can say that in a co-operative society there is fair distribution of profit.

Lengthy and expensive incorporation procedure:

• Unlike other forms of businesses the formation of a company is lengthy, complicated and expensive.
• A company needs to hire services of experts who help the company to prepare the documents like Memorandum, Articles, etc. and submit them to the Registrar of Companies for obtaining certificate of incorporation.
• Over and above the registration fees the companies also pay fees to the experts for their services.

Lack of efficient management:

• The directors of co-operative societies work on an honorary basis i.e. without taking any fees or salary. Hence, at times they may not take personal and deep interest in the management and administration.
• Since the directors work honorary the society may hot get an efficient person / having specialized knowledge, business experience and time.

First the surplus profit is distributed as dividend to the members. The remaining profit is utilized for welfare of the members and society.

Correct option is (A) Quite economical

Correct option is (B) Honorary service

Co-operative society:

• A co-operative society is a voluntary form of business where in individuals intending to set-up a business get associated for economic interests but on the basis of equality i.e. to provide equal right and opportunity to all the members.
• Thus, people with common interests voluntarily get associated to fulfill economic interest of members through co-operation among members but, by treating all members equally. In other words to uplift economically weaker sections of society. The co-operative societies are set-up by weaker sections of society to protect its members from the clutches of profit hungry businessman.
• Amul is one of the best examples of a co-operative society.

Difference between co-operative society and other forms of business:

• Sole proprietorship, partnership and company are three major forms of business. But, the prime motive of all these three forms is profit.
• In order to earn profit these forms can even adopt unfair means like over-pricing, exploiting employees, tampering quality, black-marketing, etc.
• On the other hand, though co-operative society is also a form of business but it differs from those three due to its special characteristics.
• These societies work on the principle ‘No progress without co-operation’.
• The philosophy behind these societies is ‘Each for all and all for each’.

Motive of service:

• The primary objective of the co-operative society is to serve its members. Profit is a secondary objective.
• The society aims to raise the economic conditions and living standards of the members and to make them self-reliant.
• For example, the objective of Amul is providing milk at desired quality and fair price. It does this by collecting milk from villagers, pay them reasonably well and sell it to market. This helps to improve economic condition of villagers who supply milk and hence make them self-reliant.

Correct option is (A) Rules of internal administration

Correct Answer is: (c) Company 

(iii) Company 

Correct option is (A) Unity of ownership and management

Limited Liability Partnership

i. Sam did not have the authority to accept the cheque because usually, individual directors do not have the authority to act on the company’s behaviour unless expressly authorized.

ii. Mr. Sam’s action cannot be called ultra-vires because any act done by him beyond the powers of the memorandum is called UltraVires.

Democratic management:

A company is managed democratically by the elected representatives called the directors.

The decisions regarding the company’s operations, policy, etc. are taken by the majority in the general meetings of the directors.

i. Minimum 2 promoters/persons are needed to incorporate a private company.

ii. After getting Incorporating Certificate, TRIM Private limited company be said to have come into existence.

iii. There are various documents, which are needed for the Incorporation of a company like Memorandum of Association, Articles of Association, Director’s consent, etc.