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Questions and Answers
There should be at least __________________ members in a Private Limited Company.
two
Freely transfer of shares from one member to another is not possible in case of _____________ Limited Company.
Private
Hindustan Machine Tools is _______________ Company.
Government
Minimum amount of capital required to start a private limited company is Rs _____________.
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How many directors must a private company have?
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Which of the following is not a characteristic of cooperative societies?
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Public companies can commence business immediately after receiving the certificate of incorporation.
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The shares of a public limited company can be freely transferred.
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What is the minimum paid-up capital required for a public company?
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Match the following types of companies with their characteristics:
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What is a co-operative society?
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A co-operative society is a ________ association of individuals who come together to achieve common ________ objectives.
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What is the meaning of cooperative society?
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What are the activities undertaken by a Consumer’s Co-operative Society?
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Give two examples each of consumer’s cooperative societies and producers cooperative societies.
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What is meant by Thrift and Credit Society?
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What are the causes of conflict and lack of motivation among members of a cooperative society?
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Give the difference between ‘Producers co-operative society’ and ‘Marketing cooperative society’.
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What is meant by Joint Stock Company?
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State the advantages of Joint Stock Company.
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State the meaning of Multinational Company.
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Describe any four characteristics of Joint Stock Company.
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What are the features of Private Limited Company? How does it differ from Public Limited Company?
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Distinguish Between Private Limited and Public Limited Company.
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Enumerate the advantages of Joint Stock Company.
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State the limitations of Joint Stock Company.
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Give five examples of Multinational Companies.
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What is a co-operative society?
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Which of the following is a characteristic of a co-operative society?
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Which of the following types of co-operative societies helps consumers?
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The liability of members in a co-operative society is unlimited.
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A co-operative society works on the principle of self-help as well as _____ (fill in the blank).
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What is the primary aim of a co-operative society?
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Match the following types of co-operative societies with their descriptions:
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What type of company is characterized by being an artificial person created by law?
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In a Joint Stock Company, shares are freely transferable.
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Which of the following statements is true regarding a Joint Stock Company?
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What is the importance of the Common Seal in a Joint Stock Company?
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Study Notes
Cooperative Societies
- A cooperative society is a voluntary association of individuals with a common economic objective.
- The aim of a cooperative society is to provide a service to its members, not to maximize profit.
- Cooperative societies are based on principles of self-help and mutual help.
- Examples of cooperative societies include:
- Consumer Cooperative Societies: These societies purchase goods directly from producers to provide products at a reasonable price for consumers.
- Producer Cooperative Societies: These societies support small producers by providing them with resources like raw materials, tools, and equipment.
- Marketing Cooperative Societies: These societies help small producers sell their products by collecting and marketing them in the market.
- Thrift and Credit Cooperative Societies: These societies provide financial support to members by accepting deposits and granting loans.
- Cooperative Group Housing Societies: These societies provide residential housing to members by purchasing land and constructing houses or flats.
Joint Stock Companies
- A joint stock company is an artificial person created by law, with a separate legal entity, perpetual succession, and a common seal.
- The company's capital is divided into shares.
- Members who hold shares are called shareholders.
- Examples of Joint Stock Companies: Tata Steel, Reliance Industries, Coal India, Reliance Power, DLF, Ranbaxy.
Types of Joint Stock Companies
- Private Limited Company:
- Minimum paid-up capital required is ₹1 lakh.
- Restricts the transfer of shares.
- Limits the number of members to 50.
- Does not allow public subscription of shares or debentures.
- Prohibits accepting deposits from non-members, directors, or their relatives.
- Public Limited Company:
- Minimum paid-up capital required is ₹5 lakh.
- Shares are freely transferable.
- Minimum number of shareholders is 7.
- Members have limited liability.
Advantages of Cooperative Societies
- Voluntary organization: Membership is not mandatory.
- Democratic control: Management is based on one-member, one-vote principles.
- Open membership: Any competent person can join the society at any time.
- Elimination of middlemen’s profit: Members control their own supply chain.
- Limited liability: The liability of members is limited to the capital they contribute.
- Stable life: The existence of the society is not affected by the death, insolvency, or resignation of members.
Limitations of Cooperative Societies
- Lack of motive: Members may lack motivation due to the absence of a profit motive.
- Limited capital: The amount of capital raised from members is limited.
- Management problems: Management competency may be limited due to low compensation offered.
- Lack of commitment: Member loyalty is not guaranteed or enforceable.
- Lack of cooperation: Friction between members due to personality differences or selfish attitudes can hinder the success of the society.
Advantages of Joint Stock Companies
- Easy to raise capital: Can issue shares to raise capital from a large number of people.
- Limited liability: Liability of shareholders is limited to the amount invested.
- Separate legal entity: The company can exist independently of its members.
- Perpetual succession: The company continues to exist even if members change.
- Professional management: Can hire experts to manage the company.
Limitations of Joint Stock Companies
- Complex legal formalities: Formation of a company involves complex procedures and regulations.
- Costly formation: Setting up a joint stock company is expensive.
- Management problems: Separation of ownership and management can lead to conflicts of interest.
- Lack of flexibility: Decision-making takes time due to complex organizational structures.
- Disclosure requirements: Companies are required to disclose financial information to the public.
Multinational Company
- A multinational company is an organization operating in multiple countries.
- Benefits:
- Access to new markets and resources.
- Reduced costs and efficiency gains.
- Diversification of risks.
- Challenges:
- Cultural differences.
- Political and economic risks.
- Regulatory complexities.
Private vs. Public Limited Companies
- Private companies must have a minimum paid-up capital of Rs. 1 lakh, while public companies require Rs. 5 lakh.
- Private company membership is capped at 50, while public companies have no limit.
- Transferring shares in private companies is restricted, unlike in public companies where it's free.
- Private companies cannot issue prospectuses, but public companies can invite public investment.
- Private companies require at least two directors, while public companies need at least three.
- Private companies can start business immediately after incorporation, but public companies need a certificate of commencement.
- Private companies don't have statutory meetings, while public companies are mandated to hold them and file reports.
- A quorum for a private company meeting consists of two members, while a public company requires at least five members.
Advantages of Joint Stock Companies
- Limited Liability: Shareholders are only responsible for the face value of their shares.
- Financial Resources: Companies can raise large amounts of capital through share issuance to investors.
- Continuity: The company remains operational even in case of shareholder death or departure.
- Share Transferability: Public companies allow for the free transfer of shares.
- Risk Diffusion: Risks are distributed among many shareholders, reducing the burden on any individual.
- Social Benefits: Companies contribute to the economy by mobilizing savings and investing in industry.
Limitations of Joint Stock Companies
- Formation Difficulty: Incorporation can be expensive and complex, requiring extensive documentation.
- Government Regulation: Companies are subject to strict rules regarding operations, reporting, auditing, and transparency.
- Oligarchic Management: While management should be democratic, companies are often controlled by a small group of powerful individuals.
- Decision Delays: Multiple management levels can lead to slow decision-making due to extensive meetings and approvals.
- Lack of Secrecy: Companies are required to disclose information to the public, potentially revealing sensitive business details.
Government Companies
- Government companies are defined as entities with at least 51% of their paid-up capital held by the government (Union or State).
- The Comptroller and Auditor General of India (CAGI) audits government companies, and the reports are presented to Parliament.
- Examples include Hindustan Machine Tools (HMT), Coal India, SAIL, NTPC, MTNL, and ONGC.
- Government companies have separate legal existence.
- The government appoints all or most directors.
- Employees are not government employees, but work for the company.
Multinational Companies (MNCs)
- MNCs operate in multiple countries, producing and selling goods and services globally.
- Examples include Philips, LG, Hyundai, General Motors, Coca-Cola, Nestle, Sony, McDonald's, Citibank, Pepsi Foods, and Cadbury.
Advantages of MNCs
- Investment in Foreign Capital: Direct investment by MNCs can accelerate economic development.
- Job Creation: Expansion of MNC operations creates employment opportunities.
- Advanced Technology: MNCs invest in Research & Development, improving production methods and increasing product quality.
- Growth of Ancillary Units: Suppliers and industries supporting MNCs often flourish in host countries.
- Increased Exports and Foreign Exchange: MNCs may export goods produced in host countries, boosting foreign exchange reserves.
- Healthy Competition: MNC efficiency pushes domestic companies to improve their performance to remain competitive.
Limitations of MNCs
- Host Country Priorities: MNCs may focus on profitable industries rather than addressing host country development needs.
- Effect on Domestic Enterprises: MNC dominance can hurt local businesses, leading to closures.
- Cultural Change: Consumption patterns may be impacted by products and marketing strategies that may not align with local cultural norms.
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