commerce-secretarial-practice.pdf

 The Constitution of India Chapter IV A Fundamental Duties ARTICLE 51A Fundamental Duties- It shall be the duty of every citizen of India- (a) to abide by the Constitution and respect its ideals and institutions, the National Flag and th...

 The Constitution of India Chapter IV A Fundamental Duties ARTICLE 51A Fundamental Duties- It shall be the duty of every citizen of India- (a) to abide by the Constitution and respect its ideals and institutions, the National Flag and the National Anthem; (b) to cherish and follow the noble ideals which inspired our national struggle for freedom; (c) to uphold and protect the sovereignty, unity and integrity of India; (d) to defend the country and render national service when called upon to do so; (e) to promote harmony and the spirit of common brotherhood amongst all the people of India transcending religious, linguistic and regional or sectional diversities, to renounce practices derogatory to the dignity of women; (f) to value and preserve the rich heritage of our composite culture; (g) to protect and improve the natural environment including forests, lakes, rivers and wild life and to have compassion for living creatures; (h) to develop the scientific temper, humanism and the spirit of inquiry and reform; (i) to safeguard public property and to abjure violence; (j) to strive towards excellence in all spheres of individual and collective activity so that the nation constantly rises to higher levels of endeavour and achievement; (k) who is a parent or guardian to provide opportunities for education to his child or, as the case may be, ward between the age of six and fourteen years.  The Coordination Committee formed by GR No. Abhyas - 2116/(Pra.Kra.43/16) SD - 4 Dated 25.4.2016 has given approval to prescribe this textbook in its meeting held on 20.06.2019 and it has been decided to implement it from the academic year 2019-20. Secretarial Practice STANDARD XI 2019 Maharashtra State Bureau of Textbook Production and Curriculum Research, Pune - 411 004 Download DIKSHA App on your smartphone. If you scan the Q.R.Code on this page of your textbook, you will be able to access full text. If you scan the Q.R.Code, you will be able to access audio-visual study material relevant to each lesson, provided as teaching and learning aids. First Edition : 2019 © Maharashtra State Bureau of Textbook Production and Second Reprint : 2021 Curriculum Research, Pune- 411 004. Maharashtra State Bureau of Textbook Production and Curriculum Research reserves all rights relating to the book. No part of this book should be reproduced without the written permission of the Director, Maharashtra State Bureau of Textbook Production and curriculum Research, Pune. Cover, Illustrations and Computer Drawings Commitee Members Sandip Koli, Artist, Mumbai Dr. Jyoti Gaikwad (Chairman) Typesetter Dr. Mukund Tapkir (Member) Baladeo Computers, Mumbai-28. Dr. Prashant Sathe (Member) Shri. Mohan Salvi (Member) Co-ordinator Shri. Surendra Nirgude (Member) Ujjwala Shrikant Godbole I/C Special Officer for Mathematics Shri. Mahesh Athawale (Member) Smt. Anantlaxmi Kailasan (Member) Shri. Narayan Patil (Member) Production Smt. Laxmi Pillai (Member) Sachchitanand Aphale Chief Production Officer Smt. Mrinal Phadke (Member) Sanjay Kamble Smt. Ujjwala Godbole (Member-Secretary) Production Officer Prashant Harne Asst. Production Officer Paper 70 GSM Cream wove Study Group Members Printer Smt. Zubeida Surti Smt. Laxmi Pillai Shri. Vijay Khude Shri. Nitin Gujarathi Print Order No. Shri. Ashok Gadadare Smt. Manjusha Gongale Shri. Omkar Prasade Shri. Prashant Shelke Shri. Govind Hare Smt. Nayana Padki Publisher Vivek Uttam Gosavi, Controller Maharashtra State Textbook Bureau, Prabhadevi, Mumbai- 400 025 NATIONAL ANTHEM  PREFACE We have pleasure in introducing the text book based on revised syllabus for Std-XI. from the academic year 2019-2020. A student in the commerce stream studies various subjects which covers topics like business, commercial organisations, management of business, economics, financial accounting etc. Secretarial Practice is one of the subjects in commerce which deals exclusively with one of the largest and most popular forms of business organisation viz. the Joint Stock Company. In this subject, a student is introduced not only to Joint Stock Company, its working, management etc., but also to the role and importance of Company Secretary as compliance officer and also introduced to the communication skills of company secretary. Due care has been taken to put the subject matter in a simple manner so that students can easily grasp the legal and technical aspects of the Companies Act, 2013. The contents are supported with charts and diagrams wherever necessary. The terms and difficult words are explained then and there. The book contains interesting additional information, activities etc. The exercise given at the end of the topic contains different types of questions to test conceptual clarity. Students are given opportunity to analyse, express opinion and justify their answer through application based questions. At the end of the chapter, QR code is given which will be helpful to the reader as it contains forms, documents, links, proformas etc. to get more knowledge and clarity about the contents. The Companies Act, 2013 has brought in drastic changes and has also introduced new concepts. There have been frequent amendments made to the Act. This book includes all changes and amendments made in the Act and in Rules and Regulations upto December, 2018. It does not cover each and every provision of Companies Act, 2013 considering the syllabus covered for std XI. Students are introduced to the legal provisions of Companies Act, 2013 in simple way keeping in view the practice of Company Secretary. We are greatful to the subject committee members, study group members, translators, reviewers and all those who have taken efforts in designing this textbook. We hope the textbook will be well received by academicians and students. (Dr. Sunil Magar) Pune Director Date : 20 June 2019 Maharashtra State Bureau of Textbook Indian Solar Date : 30 Jyestha 1941 Production and Curriculum Research, Pune.  Competency Statements Unit Topic Competency Statements No. The Students will be able to - l Understand the concept of Secretary l Understand importance of Secretary, 1 Secretary types of secretary l Know about qualities and qualification of Secretary The Students will be able to - l Understand Evolution of Business organisations Joint stock 2 l Understand Meaning, Features and company types of Joint Stock Companies l Compare Various Forms of Business Organisation The Students will be able to - Formation of l Understand the Procedure of company and Formation of a company 3 Documents related l Understand different documents of to Formation of the company namely MOA, AOA, company Prospectus etc. l Compare MOA and AOA. The Students will be able to - l Understand the concept of shareholder Members, and member, rights of members Directors l Explain ways and reasons of 4 and Key acquisition and termination of Managerial membership. Personnel l Understand role, importance, duties of Board of Director, M.D., CEO, CFO, C.S.  The student will be able to - l Understand the meaning, need, provisions of Company Meetings 5 Company Meeting l Understand the types of company meeting and legal provisions. l State the functions of secretary related to annual general meeting. The student will be able to - l Understand different types of Business Communication, importance, layout and essentials of Business letters. l State role of secretary in preparing letters, notices, reports, returns and minutes The student will be able to - Business l Understand circumstances under 6 Communication skills which secretary communicates of secretary with directors and drafting of letters. l Understand circumstances under which secretary communicates with banks and drafting of letters. l Circumstances under which secretary communicates with statutory authorities and drafting of letters.  INDEX No. Chapter Page No. 1 Secretary 1 2 Joint Stock Company 16 3 Formation of a company 33 4 Documents related to formation of a company 48 5 Members of a company 67 6 Directors and Key Managerial personnel of a company 77 7 Company Meetings - I 102 8 Company Meetings - II 121 9 Business Communication Skills of Secretary 134 10 Correspondence with Directors 149 11 Correspondence with Banks 158 12 Correspondence with Statutory Authorities 173 Answer Keys 186  1 SECRETARY 1.1 Origin of Secretary 1.2 Meaning and Definition 1.3 Features 1.4 Importance 1.5 Types 1.5.1 Personal Secretary 1.5.2 Institutional Secretary Secretary of Non-profit Association Secretary of Co-operative society Secretary of Joint Stock Company Secretary of Government Department 1.6 Functions of Secretary 1.7 Qualities of Secretary 1.8 Distinction INTRODUCTION: The Indian economy is fast developing and has fastest growing service sector in the world. Various forms of organizations have emerged in the present economic situation. Finance is needed to establish a business, run it, to modernize it, expand it and diversify it. The role of financial management has become important to the corporate world. Expert individuals having special capabilities and knowledge to grow business have now become important for our present Indian business scenario. The profession of Secretary is one such profession which caters to the changing demands of businessmen and organizations. The subject ‘Secretarial Practice’ deals with the origin, importance, features, types, appointment, qualities, qualifications, functions, duties of different types of secretaries, the functioning of joint stock company etc. 1.1 ORIGIN OF SECRETARY Until the late 19th century, persons involved in the daily correspondence and the activities related to finance had assumed the title ‘Secretary’. The Latin words ‘secretum’ or ‘secretus’ which means the secrets. The word Secretary is derived from the Latin word ‘Secretarius’ which means someone who works for a person of great importance. 1  In the Roman times, ‘Scribae’ was a professional letter writer or one who maintains confidential records. In ancient Indian history, Secretary was referred to as Amatya, Sachiva or Chitnis, which means a person who does secretarial work. Today, the State and Central Governments also have secretaries for various departments functioning under the control of ministries in the Sachivalaya. Origin Former names for Meaning Secretary Latin language Secretarius A confidential writer or officer with whom secrets are entrusted by employer. Roman Empire Scribae A professional letter writer or one who maintains confidential records. Indian history Amatya/Sachiva/Chitnis A person who does secretarial work. Additional information: In 1870 Sir Isaac Pitman founded a school where students could qualify as professional writers. In 1888, with the invention of typewriters, the role of secretary increased. In an effort to promote professionalism, the National Secretaries Association was created in 1942 in the USA. Later a special Secretaries Day was created which would be in the last week of April. This week is now known as Administrative Professional’s Week. 1.2 MEANING AND DEFINITION There are various definitions of Secretary some of them are as follows : 1) The Oxford Dictionary defines a Secretary as ‘A person whose work is to write for others, especially one who is employed to conduct correspondence, keep records and to transact various other businesses for another person or for a society, corporation or public body.’ 2) According to Companies Act 2013 Section 2(24) ‘‘Company Secretary or Secretary means a Company Secretary as defined in Clause (c) of Sub-section (i) of Section 2 of the Company Secretaries Act 1980 who is appointed by a company to perform the function of a Company Secretary under this Act.’’ The Company Secretaries Act, 1980 defines Company Secretary as - “a person who is a member of Institute of Company Secretaries of India.” From the above definitions it can be stated that Secretary is appointed to ensure the smooth functioning of the organization and assists in various functions related to correspondence, meetings, record keeping and any such administrative work. 2 1.3 FEATURES OF SECRETARY FEATURES OF SECRETARY Individual Qualities Representative Duties Qualification Confidential Appointment Paid officer employee 1) Individual : Only an individual alone can be appointed as a Secretary. A firm, an institution or a corporate body cannot be appointed as a Secretary. A Secretary has to be an individual as per the provisions of the Company Law and also due to the skills required to fulfill the duties and responsibilities towards the employers. 2) Duties : A Secretary has to perform routine and administrative duties such as correspondence, conducting meetings, maintaining records and providing information. Secretary also has to fulfill the day to day routine duties related towards the employer or organization such as clerical work, recording, fixing appointments, giving reminders, replying to other employees queries etc. These duties vary according to the nature of work of the organization or employer. In recent time, Secretary has to ensure legal compliances. 3) Qualification : Every Secretary must possess certain qualities and qualifications as per the organization. However, a person who is appointed as a Company Secretary in a public or private limited company needs to have certain prescribed qualifications according to Companies Act 2013. Similarly a Secretary of a Government Department needs to have the qualifications as per the Government rules and regulations. 4) Appointment : A Secretary can be appointed by individuals, professionals, society, corporation, government, public organization, Joint stock companies etc. In other words a Secretary can be a personal or institutional Secretary. 5) Paid employee : A Secretary is a paid employee of the organization. Secretary is either given a salary or paid an honorarium. Although Secretary is a paid employee, yet the Secretary holds an important position in the organization. Honorarium : A fee or a payment given to a professional person for services rendered. 6) Confidential officer : A Secretary is a custodian of secret and confidential information of the organization. Secretary is closely connected to the top management and can be involved in policy decisions. 7) Representative : A Secretary acts as a representative of the organization. Generally secretaries are of two types: (a) Personal (b) Institutional. Secretaries appointed by individuals are known as personal secretaries. These secretaries represent their employers. 3  Institutional secretaries are appointed by societies, companies, government departments and represent their organizations. 8) Qualities : A Secretary should possess certain qualities so as to conduct the secretarial duties smoothly. The qualities like concentration, intelligence, tact, loyalty, co-operation, courtesy, leadership, orderliness and knowledge seeker assist in smooth and efficient working of the organization. 1.4 IMPORTANCE OF A SECRETARY I M Expert advice and guidance P Administrator O Custodian of secret information R Correspondent T Legal compliance officer A Conducting meetings N Link between management and staff Fulfillment of Secretarial standards and secretarial audit C E In modern times a Secretary has greater status and importance in an organization. This is because of the ever changing and never ending demands of today’s business world. The need and importance of a Secretary can be highlighted with the following points : 1) Expert advice and guidance : The Secretary advices the superiors on various important issues and assists in finalizing decisions on various issues. The views, observations and opinions of the Secretary are always considered valuable while taking appropriate policy decisions. The Secretary provides able guidance to the management and helps to achieve expected growth of the business. 2) Administrator : A Secretary looks after the routine office administration of the organization. Secretary handles efficiently routine as well as executive duties of the organization. Routine duties like office management, documentation of important issues, attending visitors etc. are handled by the Secretary efficiently. Secretary also handles the executive duties like assisting policy formulation, preparation of plans, supervision on execution of plans, etc. 3) Custodian of secret information : Secretary is an important person of the organization. Secretary has access to confidential and crucial information related to the organization. Secretary is also involved in making and executing important decisions. All such important decisions regarding business activities are required to be maintained confidential. Secretary guards the secrets of the organization and does not disclose it to anyone unless required and authorized to do so. Therefore, Secretary is often referred to as ‘confidential officer’. 4) Correspondent : The Secretary is a correspondent of the organization and is therefore responsible for inward and outward correspondence. Secretary conducts correspondence with members, directors, banks, insurance companies, Registrar, Government authorities, customers, etc. 4  5) Legal compliance officer : The Secretary has to ensure proper and timely legal compliances in all activities of the organization. Secretary has to perform various statutory duties. Secretary has to maintain books, registers etc. as prescribed by Companies Act. 2013. Secretary has to file returns, documents with proper authorities within the stipulated time. 6) Conducting Meetings : Every business organization has to conduct meetings where the persons meet and finalize important decisions. The Secretary carries out formalities which are required to be undertaken before, during and after the meeting which includes preparation of agenda, sending notices, preparing minutes etc. 7) Link between management and staff : A Secretary acts as a link between management and staff of the organization and helps in effective communication. It is important that these decisions are co-ordinated effectively at all levels of the organization. 8) Fulfillment of Secretarial Standards and Secretarial Audit : Secretarial Standards and Audit aim at checking whether the company is adhering to the legal and procedural requirements. (Secretarial Standards and Secretarial Audit (SS and SA) are discussed in Chapter 6) 1.5 TYPES OF SECRETARY The growth of industrialization and modernization has lead to an increase in various types of organizations. Every organization therefore, requires one such person on whom the individuals or organizations can entrust the person with responsibilities. The concept of Secretary has expanded and is required by almost all types of organizations. Each Secretary performs the duties and responsibilities of the organization or employer. Followings are the various types of secretaries : TYPES OF SECRETARY Personal Institutional Secretary Secretary 1. Secretary of a Non - profit association 2. Secretary of a Co-operative society 3. Secretary of a Joint Stock company 4. Secretary of a Government Department 5. Other Body Corporates 5 1.5.1 Personal Secretary The personal Secretary or Personal Assistant is the oldest type of Secretary. A personal Secretary is one who is appointed by busy individuals like industrialists, businessmen or professionals to conduct the correspondence and the day to day routine duties. Appointment : Busy individuals appoint secretaries to look after other work so as to enable them to concentrate on their primary work. e.g.: Doctors, Lawyers, Engineers, CA, actors, politicians, leaders, ministers etc. Qualifications : A personal Secretary as such has no specific qualifications. Yet a graduation degree, good command over language, is required. Knowledge of computers and internet skills have now become a necessity. The qualification depends on the requirement of employer’s profession. 1.5.2 Institutional Secretary : A Secretary appointed by an institution or organization is called Institutional Secretary. Some institutional secretaries are - 1) Secretary of a Non-profit Association : A non - profit association means the organizations formed to promote social, educational, cultural, arts, sports activities, with the intention of providing services and not to earn profits. Appointment : A non-profit association is looked after by management committee which is elected by the members. The Secretary may be a full time or part time person working on salary basis or honorarium basis. e.g.: Rotary Club, Lions Club, Sports club, Cultural clubs, Chamber of Commerce, etc. Qualification : There is no prescribed qualification for this type of Secretary. The Secretary should be acquainted with the objects and basic functioning of the organization. Knowledge of filing, computers, correspondence are the basic requirements for this type of organization. 2) Secretary of a Co-operative society : A co-operative society is an association formed voluntarily by minimum 10 members or more. In Maharashtra these societies are registered under the Maharashtra State Co-operative Societies Act 1960. Its main objective is to provide services to its members. e.g.: Co-operative banks, Co-operative Housing society, Consumer co-operative stores etc. Appointment : The members elect their representatives called management committee. One of the members of the managing committee is appointed as Secretary. Generally such Secretary works on honorary basis. For large scale co-operative organization, Secretary may be appointed as a full time employee on salary basis. Qualification : The Secretary of a co-operative society as such does not have specific qualification. Secretary should have a good knowledge of the Co-operative Societies Act and should be at least graduate. 3) Secretary of a Joint Stock Company : A Joint stock company is a form of organization which is considered to be the most suitable one for organizing business activities on a large scale. 6  A company Secretary is considered to be one of the key officers of the company. Secretary is of vital importance in modern business organization. Appointment : The Company Secretary is appointed right from the time the company is formed to look after the various aspects of business. Secretary works under the control of the Board of Directors. Appointment of Company Secretary is as per the Companies Act 2013, Company Secretary is included in the definition of KMPs. The concept of Key Managerial Personnel (KMP) has been introduced in the Companies Act 2013. The Board of Directors cannot look after the day to day affairs of the company, therefore the task is given to certain managers and executives of the company. (KMP is discussed in Chapter 6) Qualification : As per Section 203 of Companies Act 2013 the Company Secretary must be a member of the Institute of Company Secretaries of India (ICSI). 4) Secretary of Government Department : Government departments are those departments working under the various ministers of the State and Central Government. Appointment : In the functioning of Government of India and State Government, a Secretary is the administrative head of a Ministry or Department. In the Union and State Governments, secretaries hold positions as heads of the departments like Finance Secretary, Defence Secretary, Home Secretary etc. Qualification : The Secretary of a Government needs to possess a graduation degree. The Secretary should pass the Civil Services Examination conducted by the Public Service Commission and be in Indian Administrative Services (IAS). Additional information: For Ministry of External Affairs, Government of India; an IFS (Indian Foreign Services) is appointed as Secretary. 1.6 FUNCTIONS OF A SECRETARY Secretary performs basic clerical functions and office responsibilities of a company, department or individual. The functions of a Secretary are vital for helping an employer or organization to function efficiently. 1) Correspondence : One of the important functions of a Secretary is correspondence. Secretary looks after the inward and outward mail, replying to inquiries from outsiders, government department and other stake holders. Secretary also looks after the various records of the organization. 2) Office management : Secretary is responsible for the efficiency of the entire office routine. Secretary supervises and controls the staff and looks after the activities of the association. Secretary has to guide, supervise and control the office staff for the smooth functioning of the company. The Secretary also has to look after training, promotion and transfer of the office staff. 7  3) Reception function : A personal Secretary attends to telephone calls and visitors, attends to inquiries, fixing appointments, etc. 4) Financial functions : Secretary handles the banking transactions and maintains proper books of accounts. Secretary has to keep a watch on receipts and payments. Secretary provides the necessary information to employer, management, banks and government. 5) Arranging meetings : The Secretary arranges meeting between the employer and any other parties. The Secretary also arranges general meetings, meetings of the board and managing committee meetings as per the provisions of the Acts. The Secretary drafts notices, agenda and also minutes of the meeting. Statutory functions : The Secretary has to comply with all the provisions of the Acts 6) applicable to his organization. Secretary also has to comply with the Income Tax Act, Stamp Act, Shop Act, Goods and Services Tax etc. Statutory: Required, permitted, enacted as per law 7) Assistance in formulating policies : The Secretary has to collect statistical data and information. This information assists the management in formulating policies. 8) Providing information : The Secretary provides accurate information related to various departments in the organization. Secretary provides relevant information to management, banks, government departments, shareholders and employees. 9) Administrative functions : The Secretary performs administrative functions like assisting in appointing employees, distribution of office work, supervision, training, promotion. Secretary maintains all statutory books under proper custody. 1.7 QUALITIES OF A SECRETARY The Secretary should possess certain qualities apart from academic qualification. A Secretary requires certain qualities to enable him to fulfill the employer’s or organization’s goals. 1) Accuracy : Accuracy means correctness. A Secretary must be accurate in his work like drafting letters, recording minutes and maintaining records. ‘Accuracy’ is one of the quality of Ideal Secretary. 2) Adaptability : Adaptability means ability to adjust oneself to the changing situation. The situation changes due to government policies, management policies etc. 3) Co-operativeness : Co-operativeness refers to the willingness on the part of the Secretary to assist others in achieving the objectives of the organization. It helps in developing team spirit and a sense of togetherness. 4) Courtesy : It implies politeness and kindness. A Secretary should be courteous while dealing with the people. This approach creates a positive impression about the employer and the organization. 5) Initiative : Initiativeness means a person’s tendency to take efforts voluntarily to accomplish a task. The Secretary should take the initiative to take decisions on behalf of the employers if they are not present. 6) Leadership : A Secretary should have the ability to guide, advise, inspire, and motivate the sub-ordinates. The leadership skills of a Secretary helps to create team spirit. 8  7) Loyalty : Loyalty means faithfulness. Secretarial work is of a confidential nature. The Secretary being a confidential officer, should not disclose matters of secrecy to anyone. The Secretary should give priority only to organizational goals. 8) Orderliness : It means doing the work in a systematic manner. It helps the Secretary to complete the work in proper order and in time. 9) Pleasing personality : A Secretary should have a pleasing personality. This implies his way of talking, mannerism, good temper, confidential approach and willingness to accept challenges and situation in a calm way. 10) Knowledge seeker : A Secretary should update his knowledge as required to enable him to perform statutory functions. 11) Punctuality : It is related to the time sense and refers to doing things at the appropriate time. Lack of punctuality creates a bad impression about the organization. The Secretary should have a good time management. 12) Sound judgment : A Secretary should be able to judge the situation and accordingly take correct decisions. The Secretary should be able to judge the effectiveness and performance of his sub-ordinates. 13) Tactfulness : It means ability of a person to handle a situation in a right manner. As Secretary has to deal with different persons and situations; this quality will help Secretary in acting and reacting in a wise and sensible way. Activity 1: Find out the following- 1. Company Secretary of Mahindra & Mahindra Ltd. 2. Principal Secretary of Prime Minister of India 3. Chief Secretary, Maharashtra State 4. Secretary, School Education Department, Government of Maharashtra. Activity 2: Atmaram Bendre is a Secretary of Gokulghar Housing Society. Enlist his duties. 9 1.8 DISTINCTION: Comparative study of different types of Secretary: Sr. Points Personal Secretary of Secretary Secretary of Secretary of No. Secretary Non-profit of Co- Joint Stock Government organization operative Company Department society 1 Meaning Personal Secretary of Secretary Secretary of A Secretary of Secretary is non - profit of a a Joint stock a Government an organization co-operative company is department is individual is a person society is appointed an officer to appointed by appointed one such by business work under the professionals to look after member organization guidance of or busy the working from to ensure the ministers persons to and conduct managing legal or department. assist them specified committee compliance. in their work activities appointed of the to look after organization. the working of the society. 2 Purpose To assist the To assist in To assist in To assist To assist in busy promoting safeguarding the Board carrying out individuals in the the common of Directors administrative their day to activities of interest in taking work under day work the organiza- of the decisions the control tion members. and of ministers executive of their functions. respective departments. 3 Appoint- Appointed by Appointed Appointed Appointed Appointed ment busy persons by managing by managing by the Board by the State like doctors, committee of committee of Directors or Central lawyers, ac- association. of the of company. Government. tors, political co-operative leaders, society. businessman etc. 4 Legal The Secre- The Secre- Secretary Company The Secretary Status tary has no tary has no has legal Secretary is appointed legal status. legal status. status as per possess by the the legal status government Co-operative as per the and has a legal Societies Companies status. Act. Act. 10 Sr. Points Personal Secretary of Secretary Secretary of Secretary of No. Secretary Non-profit of Co- Joint Stock Government organization operative Company Department society 5 Qualifi- There is no There is no There is no The The Secretary cation prescribed prescribed prescribed Secretary must be qualification qualification qualification must be a in Indian for for this type member of Administrative appointment. of ICSI. Services (IAS) Secretary. 6 Position The Usually a The The The Secretary Secretary is member of Secretary is company is the a personal managing a member of Secretary is administrative assistant of committee. the society one of the head as per the the employer. and voted members department or to become a of Key ministry. Secretary. Managerial Personnel (KMP). 7 Powers Powers are Has limited Has the Has Has statutory stated by the powers for power as statutory and powers as per employer. conducting per Co- managerial the ministry or the activities operative powers department. of the Societies as per the organization. Act. Companies Act. 8 Duties The duties The rights The rights The duties Looks after are according and duties and duties are as the work of to the work are governed are laid mentioned his concerned of the by the down in in the departments / employer. managing the Co- Companies ministry. committee operative Act and of the Societies is one of Association. Act the key compliance officers. 11  Sr. Points Personal Secretary of Secretary Secretary of Secretary of No. Secretary Non-profit of Co- Joint Stock Government organization operative Company Department society 9 Compul- There is no Appointment It is Every listed Appointment sion to compulsion. is based compulsory company of Secretary appoint on the to appoint asand all other for every nature and per the Act. companies Government size of the having a department is organization. paid up compulsory. capital of ` 5 crore or more should have a full time Secretary. 10 Remu- The The The The The Secretary neration Secretary is Secretary Secretary Secretary is is a full time a salaried may get a may get a a full time employee and person. salary or salary or employee gets salary work on work on and gets a and perks honorarium. honorarium. salary as per the determined Government by the rules. Board. SUMMARY The word Secretary is derived from the Latin word ‘Secretarius’. In Roman empire Secretary was known as ‘scribae’ and in Indian ancient history as ‘Amatya’, ‘Chitnis’, ‘Sachiva’. The Secretary has to be an individual and is a paid employee. Secretary is considered as a confidential officer of the employer. The Secretary is considered as an expert advisor and a correspondent. The Secretary plays an important role in conducting meetings. Types of Secretaries: Personal Secretary is one of the oldest type of secretaries. Institutional secretaries are individuals appointed by non - profit association, co-operative societies, joint stock companies and government departments. The Secretary should have various qualities like accuracy, adaptability, co-operation, courteousness, punctuality, loyalty, initiative etc that assist in attaining organizational goals. 12  EXCERCISE Q.1 A. Select the correct answer from the options given below and rewrite the statements. 1) The word Secretary is derived from the Latin word............. which means a confidential writer. a) Amatya b) Scribae c) Secretarius 2) Only............. can be appointed as a Secretary. a) an Individual b) a Partnership firm c) a Joint stock company 3) A Secretary is a custodian of............. information. a) confidential b) individual c) investigative 4) The Secretary of a Joint stock company should be a member of.............. a) IPS b) ICSI c) IAS 5)............. is the oldest type of Secretary. a) Company Secretary b) Personal Secretary c) Secretary of Government Department 6) The main objective of a co-operative society is to............. the interest of its members. a) neglect b) takeover c) protect 7) Secretary of Government department must be a member of the.............. a) ICSI b) IAS c) ICWA 8)............. means correctness in doing a work. a) Accuracy b) Loyalty c) Courteous B. Match the pairs: Group ‘A’ Group ‘B’ a) Amatya 1) Government department b) Ministry of Finance 2) Paid employee c) Personal Secretary 3) Appointed by busy persons d) Loyalty 4) Roman empire e) Financial duties 5) Maintainence of books of accounts f) Secretary 6) Faithfulness 7) Reveals information 8) Appointed by co-operative societies 9) Ancient Indian history 10) Correspondence 11) Free service 12) Joint stock company C. Write a word or a term or a phrase which can substitute each of the following statements. 1) The term used in the Roman empire for a person who was a professional letter writer. 2) Sports club is an example of this type of organization. 13  3) A Secretary appointed by an individual. 4) The quality that a Secretary should possess to be faithful to his organization. 5) Latin word for Secretary. 6) The company Secretary must be a member of this organization. 7) The Secretary of a co-operative organization in Maharashtra must have knowledge of this Act. 8) An association that aims to protect the interest of its members. D. State whether the following statements are True or False. 1) A Secretary is responsible only for typing letters. 2) The Secretary of a Government department is the oldest type of Secretary. 3) The Secretary should remain confidential about his organization. 4) A Secretary also looks after routine and administrative duties. 5) A Secretary is a paid employee. 6) Chitnis is a term used in the ancient Roman period. 7) A Secretary need not have knowledge of computers. 8) Cultural Association is an example of Government department. E) Find the odd one. 1) Secretarius, Scribae, ICSI, Chitnis 2) Leadership, IAS, Tactfulness F) Complete the sentences. 1) In Latin language a confidential writer was called as.............. 2) The oldest type of Secretary is............. secretary. 3) A company secretary must be a member of.............. G) Select the correct option from the bracket. Group ‘A’ Group ‘B’ 1) -------------------- Personal Secretary 2) Secretary of Government Department ---------------------------- 3) I C S I --------------------------- 4) -------------------- Scribae (IAS, Appointed by busy individuals, Roman Empire, Company Secretary) H) Answer in one sentence. 1) Who can appoint a personal Secretary? 2) Which company should appoint a full time company secretary? 3) A Cultural Club is an example of which type of organisaiton? 4) The knowledge of which Act is must for a secretary of co - operative Society? I) Correct the underlined word and rewrite the following sentences. 1) Personal Secretary is appointed by a Joint Stock Company. 2) Busy individuals appoint company secretary. 14  3) Secretary of a Government Department must be a member of ICSI. 4) The term chitnis was used in Roman Empire. Q.2 Explain the following terms/concepts: 1) Secretary 2) Confidential officer 3) Compliance officer 4) Tactfulness 5) Loyalty Q.3 Study the following case/situation and express your opinion. 1) Rajiv and Sanjiv have applied for the post of Company Secretary at Pharma India Pvt. Ltd. Rajiv has an experience of 10 years as a personal Secretary. He later worked as a Secretary at Venus Co-operative bank for 2 years. Sanjiv has passed his CS examination and is a member of ICSI. He has no working experience. Rajiv is only a commerce graduate. Questions: a) Who is better suited for the above post? Justify your answer. b) Can Rajiv be selected as a Personal Assistant for one of the Directors? c) Can Rajiv be appointed as Secretary to Pharma India Pvt. Ltd.? 2) Harshada has cleared her CS examination and intends to make her career as a Secretary at the Government department. a) Can she apply for the post of a Secretary at Government Department? b) Can she be appointed as the Secretary of ABC Ltd.? c) As a Company Secretary will Harshada be considered as an employee? Q.4 Distinguish between the following: 1) Personal Secretary and Company Secretary 2) Secretary of Co-operative society and Secretary of Government department 3) Company Secretary and Secretary of a Government department. 4) Secretary of Non-profit association and Secretary of Co-operative society Q.5 Answer in brief. 1) Describe any four qualities of a Secretary. 2) State any four functions of a Secretary. 3) Mention any four features of a Secretary. Q.6 Justify the following statements. 1) A secretary should be courteous and have a pleasing personality. 2) A secretary is considered as a paid employee. 3) Only individuals can be secretaries. 4) A secretary is a link between the staff and management. 5) A personal secretary is appointed by busy individuals. Q.7 Answer the following questions: 1) Define a Secretary and explain importance of secretary. 2) Explain the features of a secretary. 3) Describe the qualities of a secretary. 4) Explain briefly the various types of Institutional secretaries. vvv 15  2 JOINT STOCK COMPANY 2.1 Evolution of Business Organization A. Sole Trading Concern B. Joint Hindu Family Business C. Partnership Firm D. Limited Liability Partnership E. Co-operative Society F. Joint Stock Company 2.2 Meaning, Definition and Features of Joint Stock Company 2.3 Types of Companies 2.4 Distinction between INTRODUCTION: Industrial revolution took place in England in 1760. Before industrial revolution, production was done manually using local resources. Limited capital was needed and often production was done at home. The industrial revolution brought about radical change in the field of industry and commerce. Production was now on a large scale with the help of machines and that too, in anticipation of demand. Local markets turned into regional, national and international markets. Revolution in transport and other commercial activities were the major effects of Industrial revolution. To meet the new challenges of business, Joint Stock Company form of business organization evolved. 2.1 EVOLUTION OF BUSINESS ORGANIZATION: In view of above given developments the Sole Trading Concern, Joint Hindu Family Business and Partnership Firm proved inadequate to face the challenges posed by changing needs of commerce and industry. Thus a new form of business organization namely, the Joint Stock Company emerged. Different types of business organizations are discussed below: Forms of Business Organization Sole Joint Hindu Partnership Limited Co-operative Joint Trading Family Firm Liability Society Stock Concern Business Partnership Company 16 A) SOLE TRADING CONCERN: A Sole Trading Concern is a form of business organization. It is 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: 1) There is no separate Law or Act governing Sole Trading Concern, but it has to follow all the laws of Land. 2) Sole Trading Concern has only one owner. 3) Capital contributed by sole trader is very small. 4) There is no division of profit or loss as there is a single owner. 5) All decisions of business are taken by sole trader. 6) The proprietor (sole trader) can ensure maximum business secrecy. 7) The liability of sole trader is unlimited. 8) This business does not enjoy a separate legal status. 9) Sole Trading Concern is not suitable for large scale business operations. B) 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. It exists only in India. It is governed by Hindu Succession Act 1956. Features: 1) Membership in the Joint Hindu Family Business is by birth only. Every child born in the family becomes a member. 2) The Head of the Family is known as ‘Karta’. 3) Other members of the family are called as ‘Co-parceners’. 4) Number of members - There is no limit on minimum and maximum number of members. 5) All Family members are engaged in the business. 6) The Liability of Karta is unlimited. 7) The Liability of co-parceners is limited. 8) Karta is the manager, controller and co-ordinator of the business. 9) Karta being the sole decision maker, can take quick decisions. 10) The profit sharing ratio keeps on changing depending upon the births and deaths in the family. C) PARTNERSHIP FIRM: The business organization which is owned, managed and controlled by two or more persons is called Partnership Firm. The owners are called Partners and the organization is called a Firm. Registration of Partnership firm is compulsory in Maharashtra state. This form of organization is governed by Indian Partnership Act 1932. 17  Features: 1) This business is started by an agreement between two or more persons. 2) Number of partners- Minimum- Two Maximum- Fifty for general business. 3) The liability of partners is Unlimited and it is joint and several. 4) Capital is contributed by partners. 5) Partnership firm does not enjoy separate legal status. 6) In Partnership Firm partners, cannot transfer their shares without the permission of other partners. 7) All partners are joint owners as well joint managers of business. 8) No separation of ownership and management in Partnership firm. 9) Partners share profit and losses in the agreed ratio as mentioned in partnership deed. D) LIMITED LIABILITY PARTNERSHIP (LLP): Limited Liability Partnership has a combination of features of both partnership and Joint Stock Company. As the name suggests partners have limited liability which means that personal assets of the partners are not attached for paying off the debts of LLP. Now a days it has become very popular form of business. All limited liability partnerships are governed by the Limited Liability Partnership Act of 2008. Features: 1) The Limited liability partnership is a separate legal entity i.e. a body corporate. The LLP and the partners are distinct from each other. 2) Number of partners- Minimum- two. Maximum- unlimited. 3) No requirements of minimum capital contribution. 4) It is simple to form and easy to operate. 5) The liability of each partner is limited to his share as written in the agreement. 6) It has a low cost of formation. 7) There is no restriction on joining and leaving the LLP except as stated in the partnership agreement. 8) Double taxation is avoided. There is no tax on share in profit. E) CO-OPERATIVE SOCIETY: A Co-operative Society is a voluntary association of persons formed to achieve certain economic objectives. The nature of co-operative organization is service oriented. The registration of a co-operative society is compulsory in the state of Maharashtra, under the Maharashtra State Co-operative Societies Act 1960. 18  Features: 1) Registration is compulsory. 2) The membership of co-operative society is open to all. 3) Number of members- Minimum- ten Maximum- no limit. 4) The liability of a member in a co-operative society is limited. 5) It differs from other forms of organization as its aim is not maximization of profit but to provide services to its members. 6) The organization enjoys independent legal status different from its members. 7) The management of co-operative organization is democratic in nature. There is equality in voting right. They follow the principle of ‘One member one vote’. 8) There is control and supervision by the state government on the working of co- operative organization. A Sole Trading Concern, Joint Hindu Family Business and Partnership Firm could not meet the requirements of large scale business organization. All of them have limited funds, no stability, unlimited liability and lack of managerial ability, so the Joint stock Company was established. F) JOINT STOCK COMPANY: A Joint Stock Company is a more formal form of business organization. It is capable of satisfying requirement of modern industry. It is most convenient form of business organization for the conduct of large scale business activity. This form of organization started in India in the 18th century. At present, in India we come across different types of Joint Stock Companies such as public, private, government, statutory etc. 2.2. MEANING DEFINITION AND FEATURES OF JOINT STOCK COMPANY: Company means a group of individuals who are associated for a lawful common purpose or goal. The goal may include economic as well as non-economic objectives such as business, charity, research, sports, art, entertainment etc. Capital is invested by a large number of persons. In simple words:- A company is a voluntary association of persons for carrying some business and sharing the profit therefrom. Joint Stock Company can collect huge capital for the business. The capital of company is divided into small number of indivisible units of fixed amount. These units are known as ‘shares’. A person who purchases shares is called a ‘shareholder’. Shareholder is a part ‘owner’ of the company. The ownership of the company is with shareholders while its day to day administration is in the hands of directors who are the elected representatives of shareholders. The directors are collectively known as ‘Board of Directors’. The portion of profit of the company, distributed among the shareholders is known as ‘Dividend’. q Definitions of Joint Stock Company: i) According to Section 2(20) of the Companies Act 2013 “Company means a company incorporated under this Act or under any previous company law.” 19  It means every organization would get the status of a company if it is incorporated under the relevant law as a company before or after the enactment of the Companies Act 2013. ii) 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.” The above definitions reveal some of the most important features of the company. Thus to conclude we can say that- A joint stock company is an incorporated association, which is an artificial person created by law, having a separate name, a separate legal entity and perpetual succession. The liability of its member is limited. A joint stock company may have common seal. q Features of Joint Stock Company Features of Joint Stock Company 1) Voluntary Association 2) Incorporated Association 3) Separate Legal Entity 4) Artificial Person 5) Perpetual Succession 6) Common Seal 7) Limited Liability 8) Separation of Ownership and Management 9) Transferability of shares 10) Number of Members 11) Capital 12) Government Control 1) Voluntary association : A Joint Stock Company is a voluntary association of persons. Membership of the company is open to all. A person at his own wish can become or leave membership of the company subject to the provisions of Articles of Association of the company. Articles of Association: It is the document which describes the rules related to internal management of company. 2) Incorporated association : A Joint Stock Company is an association of persons formed and registered under the Companies Act. Registration or incorporation is compulsory. An association obtains the status of a Joint Stock Company only after its registration under the Companies Act. 20 3) Separate legal entity : A Joint Stock Company is a legal entity i.e. it enjoys separate legal status. Its existence is different from its members and directors. The members are the owners and are liable in limited way for the acts of their company and are conferred with rights and duties. 4) Artificial person : A Joint Stock Company is an artificial person created by law. It is created by a legal process and has its own independent personality. It enjoys certain legal rights like a person for e.g. enter into contracts, purchase and sell assets and property, appoint persons as employees etc. But it cannot act on its own like a natural person as it is an artificial person. 5) Perpetual succession : A Joint Stock Company has perpetual succession i.e. continuous existence. Its existence is not affected by death, insolvency or retirement of any of its members. A Joint Stock Company enjoys a very long and stable life unless it is wound up by following legal procedure. 6) Common seal : A Joint Stock Company is an artificial person without physical existence like a natural person. Hence, it is not in a position to sign its name. However, it has a device in the form of common seal. This common seal acts as its signature. It is affixed on all the important documents and contracts of the company. Usually two directors and the Secretary sign the documents as witness after the seal is affixed. 7) Limited liability : The liability of shareholders of a joint stock company is limited. It is limited up to the unpaid part of face value of shares held by a shareholder. Shareholder is liable to pay only the unpaid amount on his shares, if any. Shareholder is not concerned with debts and liabilities of the company. Personal property of the shareholders cannot be used for repayment of debts of a company. 8) Separation of ownership and management : In a company, ownership is separated from management. Shareholders are real owners of the company, however they are unable to manage the day to day affairs of the company because a) They are large in number. b) They are scattered and c) They keep changing because shares are transferable. So they elect the Board of Directors to look after the management of the company. All policy decisions are taken by the Board of Directors. 9) Transferability of shares : The shares of public company are freely transferable. A shareholder can sell shares as and when he desires. Membership comes to an end once the shares are sold. Shares of private company are not freely transferable. 10) Number of members : A Joint Stock Company is usually owned by a large number of persons. A private limited company must have minimum 2 members and maximum 200 members. A public limited company must have minimum 7 members and there is no limit on the maximum number of members. 11) Capital : A Joint Stock Company can raise huge capital, due to large number of members. Huge amount of capital can be collected by the company in the form of shares, debentures, bonds, public deposits etc. It can also obtain loans from banks and financial institutions. 12) Government control : A Joint Stock Company has to work under Government control and supervision. Registration is compulsory for all companies. A registered company must follow the regulations given in company law. A company has to file a copy of statement of profit 21  and loss, balance sheet and other financial statements with the registrar. It has to maintain proper books of accounts. These accounts must be audited. If a company does not fulfill these statutory obligations, it is penalized. This control is essential to protect the financial interest of small investors. 2.3 TYPES OF COMPANIES: Types of Companies On the On the On the On the Other basis of basis of number basis of basis of types Incorporation of members liability of control Members 1. Statutory 1. Private 1. Company 1. Holding 1. Government Company Company limited by Company Company 2. Registered 2. Public shares 2. Subsidiary 2. Foreign Company Company 2. Company Company Company 3. One Person limited by 3. Dormant Company Guarantee Company 3. Unlimited 4. Listed liability Company Company 5. Small Company 6. Associate Company 7. Company not for profit The following are the important types of companies A) ON THE BASIS OF INCORPORATION: 1) Statutory Company : These companies are incorporated by a special Act passed by the central or state legislative. e.g. Reserve Bank of India, State Bank of India, Unit Trust of India, Life Insurance Corporation etc. 2) Registered Company : These companies are incorporated under the Companies Act 2013 or any previous company law. B)ON THE BASIS OF NUMBER OF MEMBERS: 1) Private Company : (Section 2(68)) Private company means a company having a minimum paid up capital as may be prescribed and which by its Articles - 22  i) Restrict the right of members to transfer its shares if any. ii) Restrict the number of its members up to 200. iii) Prohibits any invitation to the public to subscribe for any securities or deposits of the company. Securities: are financial instruments like shares, bonds, debentures etc. issued by the company. All the above said conditions, should be fulfilled for a company to be called as private company. If any one of the condition is not fulfilled by the company, it shall be considered as a public company. The minimum number of members for private company is 2. It must add the words ‘Private Limited’ at the end of its name. A private company may be a company limited by shares or a company limited by guarantee or an unlimited company. 2) Public Company : According to Section 2(71) public company means a company which is not a private company. A public company - 1) Has no restriction on the transfer of its shares. 2) Minimum number of members should be seven. 3) Has to have a minimum paid up share capital as may be prescribed by its Articles. 4) Does not prohibit any invitation or acceptance of deposits from the public. 3) One Person Company : According to Section 2(62) a one person company is a company which has only one person as member. It is private limited company and it has to fulfill and comply with all the formalities of private company unless otherwise specified in the Act or rules. The concept of One Person Company was introduced through the Companies Act 2013.It is operated by a single promoter who has Limited Liability. It is a better form of business organization than the sole proprietorship because the liabilities of the member is limited to the extent of his capital in the company. One Person Company can have one or more directors. There is no need to hold Annual General Meeting. C)ON THE BASIS OF LIABILITIES OF MEMBERS: 1) Company limited by shares: Section 2(22) : These types of companies have a share capital and the liability of each member is limited to the unpaid part of face value of shares purchased by member. During the existence of the company or in the event of winding up, a member can be called upon to pay the unpaid remaining amount on the shares purchased by him / her. A company limited by shares may be a public company or a private company. These are the most popular types of companies. 2) Company limited by Guarantee: Section 2(21) : These types of companies may or may not have a share capital. Each member promises to pay a fixed sum of money specified in the Memorandum in the event of liquidation of the company for the payment of the debts and liabilities of the company. 23  Generally, such companies are not profit making companies because they are formed for the purpose of promotion of art, science, culture, charity, sports, or some other similar purpose. 3) Unlimited liability company: Section 2(92) : A company not having any limit on the liability of its members is termed as an unlimited company. The members are fully liable to cover the debts of the company. The unlimited company can be either a private or a public company or a one person private company. D)ON THE BASIS OF CONTROL: 1) Holding company: Section 2(46) A Holding company is a company which holds more than one half of the total share capital of another company or has powers to appoint or remove all or a majority of directors of another company. 2) Subsidiary company: Section 2(87) A Subsidiary company is just the opposite of a holding company. It is a company which is controlled by a Holding company. Such control is possible because the Holding company purchases more than one half of the share capital of Subsidiary company or has powers to appoint or remove all or a majority of its directors. E)OTHER TYPES: 1) Government company: Section 2(45) : Government company means any company in which not less than 51% of the paid up share capital is held by 1) the central government or 2) State government or governments or 3) Partly by Central Government and partly by one or more State Governments or 4) Subsidiary company of a government company. Government Company may be a private company or a public company. In fact it is a company registered and incorporated under the Companies Act 2013. e.g. Hindustan Machine Tools Limited, Steel Authority of India Limited., Bharat Heavy Electrical Limited, Coal India Limited, Oil Natural Gas Corporation Limited etc. 2) Foreign company: Section 2(42) : Foreign company means a company incorporated outside India, but having a place of business in India. e.g. Nestle India Limited, Bata India Limited, Whirlpool corporation, etc. 3) Dormant Company : If company is 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 can be called as Dormant Company. 4) Listed company: Section 2(52) Listed company means a company which has any of its securities listed on any recognized stock exchange. A public limited company may be a listed company or unlisted company. The listed companies will also have to follow SEBI’s guidelines and the provisions of the Companies Act. 24  SEBI: Securities and Exchange Board of India is established to protect the interest of the investors in securities and regulate the securities market. 5) Small company : As per Section 2(85) of the Act, small company means a company other than a public company - 1) Paid up share capital of which does not exceeds ` 50 lakh or such higher amount as may be prescribed or 2) Turnover of which as per its last profit and loss account does not exceed ` 2 crores or such higher amount as may be prescribed. Private company, One Person Company and company other than public company can be a small company. 6) Associate company: Section 2(6) An Associate Company is one over which another company exercise a significant degree of control which is less than the degree of control exercised over a subsidiary company. Associate company in relation to another company, means a company in which that other company has a significant influence, but which is not a subsidiary company. For the purpose of this clause ‘significant influence’ means control of at least 20% of total capital or of business decisions under an agreement. 7) Company not for profit: Under section 8 such companies are registered. Activity: Identify the type of following companies: 1) Bajaj Auto Limited 2) Coal India Limited 3) Microsoft India 4) Kirloskar Foundation 2.5 DISTINCTION 1. Private Company and Public Company Sr. Points Private Company Public Company No. 1) Definition A private company is a A public company means company which by its articles a company which is not a restricts the right to transfer private company. its shares, if any; limits the number of its members to 200. 2) Number of Minimum- 2 Minimum- 7 Members Maximum- 200 Maximum- No limit 3) Number of In a private company a In a public company a Directors minimum number of 2 minimum number of 3 directors are essential. directors is essential. 25  Sr. Points Private Company Public Company No. 4) Right to transfer the Shares in private company are Shares are freely shares not freely transferable. transferable. 5) Issue of prospectus Cannot issue a prospectus. Can issue a prospectus. 6) Ending word/s It is compulsory to add the It is compulsory to add the word ‘Private limited’ after the word ‘Limited’ after the name of private company. name of public company. 2. Comparative Study of forms of organization Sr. Points Sole Trading Joint Hindu Partnership Joint Stock Co- No. Concern Family Firm (PF) Company operative (STC) Business Society (JHFB) 1) Meaning A business A business A business An It is organization organization organization incorporated voluntary owned and owned and owned and association association controlled by run by family run by two or which is of one person. members of more persons an artificial individuals a joint Hindu collectively or person which is Family. jointly. created by formed for law, having providing perpetual services to succession. members. 2) Registration Registration Registration is Registration is Registration Registration is not not necessary. not necessary, is is necessary. but compulsory compulsory. compulsory. in Maharashtra state. 3) Number of Minimum- 1 There is Minimum- 2 Private Minimum- members Maximum- 1 no limit on Maximum- 50 Company 10 minimum and for general Minimum- 2 Maximum- maximum business. Maximum- No limit. number of 200. Public members. company Minimum- 7 Maximum- No limit 4) Liability Unlimited Karta- Liability of Limited Limited liability of Unlimited partners is Liability of Liability of Sole Trader. Liability unlimited, Joint members. members. Co-parceners- and several. Limited Liability. 26  5) Stability Lack of Lack of Lack of Stable Stable Stability. stability. stability. business. business. Business may Business may Business may be affected be affected be affected due to death, due to death, due to death, insolvency insolvency of insolvency of of trader. members. partners. 6) Capital Compara- Comparatively Comparatively Huge capital. Compara- tively limited limited Capital. more than STC tively more Capital. and JHFB but than STC, less than Joint JHFB, Stock Compa- partnership ny and co-op- but less than erative society. joint stock company. 7) Secrecy Ensures More business Secrets are Less business Less maximum secrecy. shared by the secrecy. business business partners. secrecy. secrecy. 8) Management A sole trader Karta alone All partners Board of Managing alone is is responsible are equally directors committee responsible for the liable for constitute the is the for the management of management of management managing management business. their business. of company. body of of business. co-operative society. 9) Government There is There is less There is limited There is more There Control minimum government government government is more government control over control over control over government control over the working. the working. the working. control over the working. the working. SUMMARY q There are different forms of business organization such as: 1) Sole Trading Concern 2) Joint Hindu Family Business 3) Partnership Firm. 4) Limited Liability Partnership 5) Joint Stock Company 6) Co-operative Society q Joint Stock Company: A Joint Stock Company is registered association which is an artificial legal person, having an independent legal entity with a perpetual succession, a common capital comprised of transferable shares and carrying limited liability. Having a common seal is optional for a company. Joint Stock Company is a formal form of business organization, developed after industrial revolution i.e. 1760. 27 q There are different types of companies as stated below: A) On the basis of Incorporation: 1) Statutory Company. 2) Registered Company. B) On the basis of Number of members: 1) Private Company. 2) Public Company. 3) One person Company. C) On the basis of liability of members: 1) Company limited by shares. 2) Company limited by guarantee. 3) Unlimited company. D) On the basis of control: 1) Holding Company. 2) Subsidiary Company. E) Other Kinds: 1) Government Company. 2) Foreign Company. 3) Dormant Company. 4) Listed Company. 5) Small Company. 6) Associate Company. 7) Company not for profit EXERCISE Q.1 A. Select the correct answer from the options given below and rewrite the statements. 1) A sole proprietorship has......................... owner/owners. a) one b) two c) five 2) The head of Joint Hindu Family Business is called as........................... a) Proprietor b) Director c) Karta 3) Indian Partnership Act was passed in the year........................... a) 1923 b) 1932 c) 1956 4) The members of Hindu Undivided Family Business are called........................... a) Karta b) partners c) co-parceners 28  5) The liability of shareholders in the public limited joint stock company is........................ a) Limited b) Unlimited c) Collective 6) The minimum number of members required for a co-operative society is......................... a) 10 b) 20 c) 50 7) The................. is / are elected representative of shareholders who manage affairs of company. a) Secretary b) Directors c) Auditors 8) State Bank of India is the example of......................... Company. a) Chartered b) Statutory c) Foreign B. 1. Match the pairs: Group ‘A’ Group ‘B’ a) Sole Trading concern 1) 1932 b) Joint Hindu Family Business 2) Partner c) Partnership Act 3) Artificial person d) Joint Stock Company 4) 1923 e) Co-operative Society 5) Karta 6) Natural person 7) Single Ownership 8) Equal voting rights 9) Multiple ownership 10) Minimum 9 members B. 2. Match the pairs: Group ‘A’ Group ‘B’ a) Private company 1) 51% share capital held by Government b) Public company 2) Bank of England c) Government company 3) Maximum 200 members d) Statutory Company 4) Minimum 7 members e) Limited Liability Partnership 5) Maximum 100 members 6) Minimum 5 partners 7) 40% share capital 8) Minimum 5 members 9) Life Insurance Corporation 10) Minimum 2 partners 29 C. Write a word or a term or a phrase which can substitute each of the following statements. 1) The owner who is the sole manager and decision maker of his business. 2) The senior most family member of Joint Hindu Family Business. 3) The members of Joint Hindu Family Business. 4) An artificial person created by law. 5) The persons who have entered into an agreement of partnership. 6) A person who purchases shares of Joint Stock Company. 7) The official signature of Joint Stock Company. 8) Name a company that is created by a special legislation of parliament or state assembly. D. State whether the following statements are True or False. 1) A joint stock company is voluntary association of persons. 2) A joint stock company is a formal form of business organization. 3) Registration of Joint Stock Company is compulsory. 4) A Joint Stock Company is a natural person. 5) A Joint Stock Company does not enjoy independent legal status. 6) The liability of shareholder of public limited company is limited. 7) A joint stock company has long and stable life. 8) There is no seperation of ownership and management in Joint Stock Company. 9) Board of Directors manage the Company. E) Complete the sentences. 1) A company is a creation of law, hence it is called as.............. 2) A company which is incorporated under a special Act is called as.............. 3) A Company which has only one member is called as.............. 4) A listed company must follow the provisions of Companies Act and............. F) Select the correct option from the bracket. Group ‘A’ Group ‘B’ 1) Private company ---------------------------- 2) Public company ---------------------------- 3) ------------------- Member have unlimited liability 4) Incorporated Outside India ---------------------------- (Foreign Company, Minimum 7 members, Maximum 200 members, Unlimited Liability Company) G) Answer in one sentences. 1) How many member/s can be there in a one person company? 2) What is a Holding company? 3) What is meant by foreign company? 30 H) Correct the underlined word and rewrite the following sentences. 1) Statutory companies are registered under the Companies Act. 2) A Subsidiary Company holds more than half of the total share capital of another company. 3) A private Company must have minimum 7 Members. 4) A public Company can have maximum 200 Membesrs. Q.2 Explain the following terms/concepts. 1) Dormant company 2) Holding company 3) Foreign company 4) Company limited by guarantee 5) Associate company 6) Limited Liability 7) Perpetual Succession 8) Listed company 9) One person company 10) Government company Q.3 Study the following case/situation and express your opinion. 1) Two promoters got ‘Super Drinks Pvt. Ltd.’ incorporated on 18th Jan, 2018. The company has 100 members as on 31st Mar, 2019. a) What is the maximum number of members this company can have? b) Can this company invite general public to subscribe for its shares? c) Can the shareholders of the company sell their shares to outsiders? 2) Kali VFX Ltd. was incorporated on 1st Jan, 2019 as a public limited company. a) How many minimum number of members must be there in this company? b) Can the members of this company sell its shares to outsiders? c) How many maximum number of members can this company have? 3) Sunset Printers Pvt. Ltd. was incorporated on 5th Dec, 2015 as per the provisions of Companies Act 2013. Mr. Manoj was the only subscriber to the Memorandum and Articles of Association and he was also the only member of the company. a) Is this company a One Person company? b) Will the liability of Mr. Manoj be limited or unlimited? c) Will the company close down on the death, insanity or insolvency of Mr. Manoj? 4) On 1st Jan, 2018 Mr. John bought 100 shares of TIPS Paints Ltd. The face value of each share was ` 10. Mr. John paid the full amount of Rs. 1000. In Dec, 2018 the company suffered a loss of ` 10 crores. a) Can the company ask Mr. John to pay any further money to the company? b) Which feature of Joint stock company is referred to in this example? c) Explain the feature briefly. Q.4 Distinguish between the following: 1) Sole Trading concern and Joint Hindu Family Business. 2) Sole Trading concern and Partnership Firm. 3) Partnership Firm and Joint Stock Company. 31  4) Joint Stock Company and Co-operative society. 5) Private company and Public company. Q.5 Answer in brief. 1) How is LLP different from a partnership firm ?. 2) Explain the different types of companies on the basis of liabilities of members. 3) What are holding and subsidiary company? Q.6 Justify the following statements. 1) Registration of Joint Stock Company is compulsory. 2) A Joint Stock Company is an artificial person. 3) The liability of shareholder of company is limited. 4) The ownership and ma