By going through these Maharashtra State Board Secretarial Practice 11th Commerce Notes Chapter 2 Joint Stock Company students can recall all the concepts quickly.
Maharashtra State Board Class 11 Secretarial Practice Notes Chapter 2 Joint Stock Company
Evolution of Business Organization –
- Sole Trading Concern
- Joint Hindu Family Business
- Partnership Firm
- Limited Liability Partnership
- Co-operative Society
- Joint Stock Company
Sole Trading Concern
Owned, managed and controlled by one person. It is also called as ‘One Man Business’. A person who conducts the business is called “Sole Trader”.
Features of Sole Trading Concern –
- Not suitable for large scale business operations
- No separate Law or Act but follow all laws of land
- Only one owner
- Do not have separate legal status
- Capital contribution is very small
- Liability is unlimited
- No division of profit or loss
- Decisions of business by Sole trader
- Maximum business secrecy
Joint Hindu Family Business-
- When a Hindu Undivided Family conducts business, inherited by it as per Hindu Law, it is called a Joint Hindu Family Business.
- Exists only in India governed by Hindu Succession Act 1956.
Features of Joint Hindu Family Business-
- Karta decision maker
- Membership is by birth only
- Karta : Manager, controller and co-ordinator
- Limited liability of ‘Co-parceners’
- Liability of Karta is unlimited
- Profit sharing ratio keeps on changing
- Head of family as “Karta”
- Other family Members are ‘Co-parceners’
- No limit on minimum and Maximum number of members
- Engaged in the business
- The business organization which is owned, managed and controlled by two or more person is called a partnership firm.
- Owners are called Partners, Organization is called a firm.
- It is governed by Indian Partnership Act, 1932.
Features of Partnership Firm-
- Partners share profit and losses in agreed ratio
- NO separation of ownership and management
- Agreement between two or more persons
- Number of members Minimum : Two, and Maximum fifty for general business
- Joint owners as well as joint managers Liability of partners unlimited, joint and several
- Capital contributed by partners
- DO not enjoy separate legal status
Limited Liability Partnership (LLP)-
- It has a combination of features of both partnership and joint stock company.
- Partners have limited liability
- Governed by the Limited Liability Partnership Act of 2008.
Features of Limited Liability Partnership-
- Separate legal entity i.e. a body corporate
- Number of partners- Minimum- two. Maximum- unlimited.
- No minimum requirements of capital contribution.
- Simple to form and easy to operate.
- Liability of each partner is limited to his share as written in the agreement.
- Low cost of formation.
- No restriction on joining and leaving the LLP except as stated in partnership agreement.
- Double taxation is avoided, no tax on profit share.
Co – operative Society-
- It is a voluntary association of persons formed to achieve certain economic objectives.
- It is service oriented.
- Governed under the Maharashtra State Co-operative Societies Act 1960.
Features of Co- operative Society-
- Compulsory Registration
- Membership open to all.
- Number of members- Minimum- ten, Maximum- no limit.
- Limited liability of a member.
- Aim is not maximization of profit but to provide services to its members.
- Independent legal status.
- Democratic in nature, equality in voting right One member one vote’.
- Control and supervision by the state government.
Joint Stock Company (JSC)-
- It is a more formal form of business organization.
- Satisfies requirement of modern industry
- Convenient to conduct large scale business industry
- Types of Joint Stock Companies
- Statutory etc.
Definition of Joint Stock Company-
- According to 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 individual for profit, having its capital divided into transferable shares, the ownership of which is the condition of membership.”
Features of Joint Stock Company-
1. Voluntary Association –
- Membership is open to all
- Can become a member or leave subject to the provisions of Articles of Association of the company.
2. Incorporated Association-
- Registration or incorporation is compulsory.
- After registration an association obtains the status of a Joint Stock Company.
3. Separate Legal Entity
- Members are the owners and are liable in limited way.
- Members are conferred with rights and duties.
4. Artificial Person
- Created by law.
- Legal process and own independent personality.
- Legal rights to enter into contracts, purchase and sell assets and property etc.
5. Perpetual Succession
- Continuous in existence.
- Not affected by death, insolvency or retirement of any of any members.
- Very long and stable life.
6. Common Seal
- It is a device that acts as a signature of the company.
- Affixed on all the important documents and contracts.
- Usually signed by two directors and the secretary as a witness after the seal is affixed.
7. Limited Liability
- Shareholders have limited liability.
- Shareholder is liable to pay only the unpaid amount of his shares.
- Shareholder is not concerned with debts and liabilities of the company.
8. Separation of Ownership and Management
- Shareholders are real owners of the company, but large and scattered.
- Unable to manage the day to day affairs of the company.
- Board of Directors look after the management and policy decisions of the company. They are elected representative of shareholders.
9. Transferability of shares
- Shares of public company are freely transferable.
- Shares of private company are not freely transferable.
10. Number of Members
- Owned by a large number of persons.
- Private limited company — minimum 2 members maximum — 200 members
- Public limited company — minimum 7 members maximum — no limit
- Raise huge capital.
- In form of shares, debentures, bonds, public deposits
- Obtain loans from banks and financial institutions.
12. Government Control
- Company is controlled and supervised by the Government.
- Registered company follow rules and regulations of company law.
- Accounts are audited.
- Copy of profit and loss, balance sheet, financial statement are submitted to the registrar.
- To protect the financial interest of small investors.
Types of Companies-
- On the basis of Incorporation
- On the basis of number of members
- On the basis of liability of members
- On the basis of control
- Other types
On the basis of Incorporation:
- Statutory Company
- Registered Company
On the basis of number of members
- Private Company
- Public Company
- One Person Company (OPC)
On the basis of liability of members-
- Company limited by shares
- Company limited by Guarantee
- Unlimited liability Company
On the basis of control-
- Holding Company
- Subsidiary Company
Others types –
- Government Company
- Foreign Company
- Dormant Company
- Listed Company
- Small Company
- Associate Company
- Company not for profit
On the basis of Incorporation-
- Statutory Company
- Registered Company
Companies incorporated by Special Act passed by Central or State legislative, e.g. Reserve Bank of India, State Bank of India, Unit Trust of India, Life Insurance Corporation, etc.
Companies incorporated under the Companies Act, 2013 or any previous company law.
On the basis of Number of Members
Private Company (SECTION 2(68)):
- Restrict the right of members to transfer its shares.
- Maximum number of members upto 200.
- Prohibits any invitation to the public for any securities or deposits of company.
- Company limited by shares or company limited by guarantee or an unlimited company.
- Must add the words “Private Limited” at the end of its
Public Company (Section 2 (71)):
- Has no restriction on the transfer of its shares.
- Minimum number of members should be seven.
- Has minimum paid up share capital.
- Does not prohibit any invitation or acceptance.
- Must add the word “Limited” after the name of the company.
One Person Company (Section 2 (62)):
- Single Promoter who has limited liability.
- Can have one or more directors.
- No need to hold Annual General Meeting.
- Better form of sole proprietorship.
On the basis of Liabilities of Members:
Company Limited By Shares Section 2(22):
- Have share capital and liability limited to the unpaid part of face value of shares purchased by member.
- May be a public company or a private company.
- Most popular type of companies.
Company Limited By Guarantee: Section 2(21)
- May or may not have a share capital.
- Member promises to pay a fixed sum of money specified in the Memorandum of the company.
- Non-profit making companies.
- Purpose of promotion of art, science, culture etc.
Unlimited Liability Company Section 2(92)
- Not having any limit on the liability of its members.
- Members are fully liable to cover the debts of the company.
- Can be either a private or . a public company or a one person private company.
On the basis of Control –
- Holding Company Section 2(46)
- Subsidiary company section2(87 )
Holding Company Section 2(46):
- Company holds more than one half of thetotal share capital of another company
- Has power to appoint or remove Directors of another Company.
Subsidiary company section2(87):
Company which is controlled by holding company.
1. Government Company:
Company in which not less than 51% of the paid up share capital is held by
- Central Government or
- State Government or Governments or
- Partly by Central Government and partly by one or more State Governments
- Subsidiary company of a government company. e.g. H.M.T, BHEL, ONGC etc.
2. Foreign Company:
Company incorporated outside India, but having a place of business in India.
e.g. Bata India Ltd, Nestle India Ltd.
3. Dormant Company:
Registered for a future project or has not made any significant accounting transactions in last two years or has not filed financial statements or annual returns in last two years, after making application u/s 455.
4. Listed Company: Section 2(52)
Company which has any of its securities listed on any recognized stock exchange following SEBI’s guidelines and the provisions of the Companies Act.
5. Small Company:
Section 2 (85):
- Paid up share capital of which does not exceed 50 lakh or such higher amount as may be prescribed
- whose turnover as per last profit and loss account does not exceed 2 crores or such higher amount as may be prescribed.
6. Associate Company: Section 2(6)
Company which controls at least 20% of total capital or of business decisions over a subsidiary company.
7. Company not for profit:
Registered u/s 8 of Companies Act.
revolution – complete change; radical – entire; anticipation – expectation; evolved – to come in existence; inadequate – insufficient/ not enough; emerged – came into existence; proprietor – single owner of business; operations – working; inherited – getting from ancestors; contribution – collection; formation – coming into being; achieve – to get; differs – unlike; democratic – representatives are elected; stability – fixed; Managerial ability – ability to manage various works at a given time; Statutory – owned by Government company; enactment – passed by; reveal – tells; conclude – end; Perpetual succession – Continuation; obtains – to get; conferred – grant; scattered – spread all over; desires – want; registrar – a person who looks after registration of company; obligations – responsibilities; penalized – fine; prohibit – restricted/stop from doing something; promoter – person who starts with an idea of starting an organization: memorandum – written document specifying the policies of a company; liquidation – converting assets into cash; significant – important; insolvency – financial loss to an individual or company.