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Balbharti Maharashtra State Board Class 11 Secretarial Practice Solutions Chapter 7 Company Meetings – I Textbook Exercise Questions and Answers.

Maharashtra State Board Class 11 Secretarial Practice Solutions Chapter 7 Company Meetings – I

1A. Select the correct answer from the options given below and rewrite the statements.

Question 1.
The intimation to members stating the day, date, time, and place of meeting is known as ______________
(a) quorum
(b) agenda
(c) notice
Answer:
(c) notice

Question 2.
The notice of the general meeting must be sent to all members ______________ clear days before the meeting.
(a) 24
(b) 21
(c) 14
Answer:
(b) 21

Question 3.
The person who presides over the meeting is known as ______________
(a) Secretary
(b) Chairman
(c) Director
Answer:
(b) Chairman

Question 4.
A proxy can vote only in the case of voting by ______________
(a) division
(b) show of hand
(c) poll
Answer:
(c) poll

Question 5.
The appointment of an auditor requires ______________
(a) resolution requiring special notice
(b) an ordinary resolution
(c) a special resolution.
Answer:
(b) an ordinary resolution

Question 6.
A ______________ is the proposal put before the meeting for discussion and decision.
(a) Motion
(b) Resolution
(c) Minutes
Answer:
(a) Motion

Question 7.
The right of casting vote is given to the ______________
(a) Director
(b) Chairman
(c) Secretary
Answer:
(b) Chairman

Question 8.
Minutes must be recorded within ______________ days of the conclusion of the meeting.
(a) 60
(b) 21
(c) 15
Answer:
(c) 15

Question 9.
______________ resolutions are not passed in general meeting.
(a) Ordinary
(b) Special resolution
(c) Resolution by circulation
Answer:
(c) Resolution by circulation

Question 10.
For passing special resolution ______________ majority is required.
(a) 51%
(b) 66%
(c) 75%
Answer:
(c) 75%

Question 11.
For alterations in the Articles of Associations ______________ is required.
(a) a special resolution
(b) an ordinary resolution
(c) a resolution requiring a special notice
Answer:
(a) a special resolution

Question 12.
Provisions about resolutions are contained in ______________ of a company.
(a) Articles of Association
(b) Memorandum of Association
(c) Prospectus
Answer:
(a) Articles of Association

Question 13.
When a poll is demanded it must be taken within ______________ hours.
(a) 48
(b) 36
(c) 12
Answer:
(a) 48

1B. Match the pairs.

Question 1.

Answer:

1C. Write a word or a term or a phrase which can substitute each of the following statements.

Question 1.
The person who signs the minutes of the meeting.
Answer:
Chairman

Question 2.
A method of voting where members can vote in proportion to the number of shares held.
Answer:
Voting by-poll

Question 3.
A resolution passed by simple majority.
Answer:
Ordinary Resolution

Question 4.
A resolution passed by a 3/4 majority.
Answer:
Special Resolution

Question 5.
A company officer who is required to draft the minutes of the meeting.
Answer:
Secretary

Question 6.
A person who conducts the proceedings of the meeting.
Answer:
Chairman

1D. State whether the following statements are True or False.

Question 1.
Minutes are prepared before the meeting.
Answer:
False

Question 2.
A maximum number of members required to attend the meeting is called a Quorum.
Answer:
False

Question 3.
Meetings are held only to review the progress of the company.
Answer:
False

Question 4.
Chairman has the right to conduct the meeting.
Answer:
True

1E. Find the odd one.

Question 1.
Next Business Motion, Previous Question Motion, Special Resolution.
Answer:
Special Resolution

Question 2.
Ordinary Resolution, Resolution requiring special notice, Substantive motion.
Answer:
Substantive Motion

1F. Complete the sentences.

Question 1.
The authority who can convene the general meeting of shareholders is ______________
Answer:
Board of Director

Question 2.
The advance intimation about the day, date, time, etc. of a meeting sent to the members is called as ______________
Answer:
Notice

Question 3.
The minimum number of members required to be present at a meeting is called as ______________
Answer:
Quorum

Question 4.
A person who attends a general meeting and votes on behalf of a member is called as ______________
Answer:
Proxy

Question 5.
A proposal put before a meeting for consideration and adoption is called as ______________
Answer:
Motion

Question 6.
A formal and final decision taken in a meeting is called as ______________
Answer:
Resolution

Question 7.
The written records of proceedings of a meeting is called as ______________
Answer:
Minutes

1G. Select the correct option from the bracket.

Question 1.

(Presides over the meeting, Proxy, an amended Motion, 3/4 or 75% majority)
Answer:

1H. Answer in one sentence.

Question 1.
What are Minutes?
Answer:
Minutes are the written records of the proceedings of the meeting.

Question 2.
What is Notice?
Answer:
Notice is an advance intimation given by the company informing the day, date, time, and place of the meeting.

Question 3.
What is Ordinary Resolution?
Answer:
A resolution that is passed by a simple majority i.e., 50% or more is called Ordinary Resolution.

Question 4.
What is the agenda?
Answer:
Agenda is a list of items to be discussed or things to be done at the meeting.

Question 5.
Who is Chairman?
Answer:
A chairman is a person who presides over a meeting.

Question 6.
What is the point of order?
Answer:
A point of order is an objection or question raised by any member regarding irregularity in the proceedings of the meeting.

1I. Correct the underlined word and rewrite the following sentences.

Question 1.
Minutes are prepared before the meeting.
Answer:
Minutes are prepared after the meeting.

Question 2.
Resolution is a proposal put before a meeting for discussion.
Answer:
Motion is a proposal put before a meeting for discussion.

Question 3.
Polling papers are used for voting by show of hands.
Answer:
Polling papers are used for voting by-poll.

Question 4.
A Motion is a final decision taken in the meeting.
Answer:
A Resolution is a final decision taken in the meeting.

Question 5.
The agenda is prepared after the meeting.
Answer:
The agenda is prepared before the meeting.

1J. Arrange in proper order.

Question 1.
(a) Drafting Minutes
(b) Sending notice
(c) Confirming quorum
Answer:
(a) Sending Notice
(b) Confirming Quorum
(c) Drafting Minutes

Question 2.
(a) Motion
(b) Resolution
(c) Voting
Answer:
(a) Motion
(b) Voting
(c) Resolution

2. Explain the following terms/concepts:

Question 1.
Ordinary Resolution
Answer:
Ordinary Resolution (Section 114) A resolution that is passed by a simple majority i.e. 50% or more is called ordinary resolution. More than 50% of the votes should be in favour of the motion. An ordinary resolution need not be submitted to the Registrar of Companies. The notice of the meeting need not require to explain the particulars of an ordinary resolution.
Example:

• Approval of Director’s report and Auditor report
• Alteration of share capital
• Declaration of dividend
• Approval of final accounts
• Election of director
• Appointment of Secretary, Auditor, etc.

Question 2.
Agenda
Answer:
Agenda is a list of items to be discussed or things to be done or the business to be transacted at the meeting. It is sent along with the notice. A secretary prepares the agenda in consultation with the Chairman. The business at the meeting is transacted according to the order in which it appears in the agenda, routine matter first followed by special matters. The agenda is prepared as per the nature and the scope of the meeting.

Question 3.
Quorum
Answer:
Quorum (Section 103) is the minimum number of members required to be present for transacting a valid business. Without quorum proceeding of the meeting becomes invalid. The quorum should be present throughout the meeting i.e. from beginning till the end of the meeting. Secretary must check the quorum before the commencement of the meeting.

Question 4.
Proxy
Answer:
A proxy is a person, who can attend and vote at the meeting on behalf of an absent member. Every member of a company has a statutory right to appoint a proxy. When a member is not in a position to attend the meeting, he can appoint his representative. The representative of an absent member is called a Proxy. He has no right to speak at the meeting.

Question 5.
Amendment
Answer:
An amendment is any alteration proposed by a member to the original motion when a motion is under discussion. Amendments are generally moved to alter original motion by

• Adding some new words or
• Deleting some words or
• Replacing some words or
• Changing the position or place of words.

The amendment should be relevant to the main motion and it must not alter the original motion.

Question 6.
Motion
Answer:
A motion is a proposal put before the meeting for discussion and decision. A person who proposes a motion is called a proposer or a mover of a motion. A motion is subject to alteration before it is adopted by the meeting.

Question 7.
Special Resolution
Answer:
The resolution which is passed by a special majority is called a Special resolution. It is passed by 3/4th or 75% majority. The purpose of passing this resolution should be mentioned in the notice of the meeting. A special resolution is passed in general meetings only. Notice of special resolution has to be given to the members 21 clear days before the meeting. A copy of the special resolution must be filed with the Registrar of companies through e-filing on the MCA portal within 30 days of passing the resolution.
Examples:

• Change in the name of the company (Section 13).
• Change in the registered office of the company from one state to another (Section 12).
• Alteration in the object clause of the company.
• Reduction in the authorized share capital of the company.
• Alteration in the Articles of Association of the company (Section 14)

Question 8.
Notice
Answer:
Proper notice must be given to a proper person for a valid meeting. Notice is an advance intimation given by the company informing the day, date, time, and place of meeting and business to be transacted at the meeting. It is given in writing to all those who are entitled to receive it. In case of general meeting, 21 days clear notice before meeting and 7 days in case of the Board meeting.

Question 9.
Minutes
Answer:
Minutes are the written records of proceedings of a meeting. It is a summary of all discussions and decisions taken at the meeting. It is a concise and accurate record of business transacted at the meeting. Minutes are prepared by the secretary within 15 days after the meeting. Minutes are recorded in minutes book and written in the past tense. After preparing minutes, it should be passed in consecutive meetings. Minutes book for General meetings and Board meetings are maintained separately.

Question 10.
Point of order
Answer:
A point of order is a question or objection raised by any member when he wants to point out an irregularity in the proceedings of the meeting. It is raised to draw the attention of the chairman.
The point of order can be raised on the following points:

• Absence of quorum
• Breach of any rule related to meeting
• Misbehavior of any member
• Unparliamentary or Improper language used by any member.

3. Study the following case/situation and express your opinion.

1. XYZ Ltd Co. sent notice of its Annual General meeting to its members. In the meeting, a resolution is to be passed on altering the Articles of Association.

Question (a).
Should agenda also be sent with Notice?
Answer:
Yes, the agenda should be sent along with the notice.

Question (b).
What type of resolution is needed to alter the Articles?
Answer:
A special resolution is needed to alter the Articles of Association.

Question (c).
Should the resolution for altering articles be filed with the Registrar of Companies?
Answer:
A copy of the special resolution passed for altering Articles of Association must be filed with the Registrar of Companies within 30 days of its passing.

2. A General meeting of a public limited company is to be held. State the provision of quorum for-

Question (a).
meeting of the company which has less than 1000 members?
Answer:
The quorum for less than 1000 members is 5 members.

Question (b).
meeting of the company which has more than 5000 members?
Answer:
The quorum for more than 5000 members is 30 members.

Question (c).
meeting of the company which has 2500 members?
Answer:
The quorum for 2500 members is 15 members.

3. Mr. P is elected as chairman of the General Meeting. Please advise him on the following matters:

Question (a).
What should be done if the votes cast in favour and against the motion are equal?
Answer:
A chairman of the general meeting (Mr. P) can exercise casting votes in case of a tie in votes.

Question (b).
How many votes can a member cast under the poll method?
Answer:
Under the poll method, a member can cast his votes as per the number of shares held by him. ‘One shares One vote’ is a rule.
Eg. If Mr. A has 100 shares, he can cast 100 votes.

Question (c).
What should Mr. P do if any point of order is raised by a member?
Answer:
If the point of order is raised, Mr. P has to stop discussion on an original motion under discussion and give his ruling/decision immediately on point of order.

4. Distinguish between the following.

Question 1.
Agenda and Minutes
Answer:

Question 2.
Motion and Resolution
Answer:

Question 3.
Voting by show of hands and Voting by-poll.
Answer:

5. Answer in brief.

Question 1.
State the importance of company meetings.
Answer:
The term meeting is derived from the Latin word ‘Maeta’ means ‘face to face.
A meeting may be defined as ‘Any gathering or assembly or coming together of two or more persons for transacting some lawful business of a common concern.’ – P.K.Ghosh.

Importance of Company Meetings:

• Members get the opportunity to come together and discuss the work and progress of the company.
• Minutes of the last meeting is read, which enables the absent and present member to get a clear idea about the matters discussed in the previous meeting.
• It enables the management to discuss and decide about their policies, plan, programs, etc, and its implementation.
• Problems faced by the company can be discussed at the meeting and a decision can be arrived.
• Legal formalities related to convening and conducting meetings of the company are fulfilled by conducting meetings.
• Appointment of directors and auditors, declaration of dividend, approvals of the annual report, financial statements, auditors report, etc. can be done in the meetings.
• Strict action can be taken against defaulters in the meeting.

Question 2.
State the legal provisions regarding Proxy.
Answer:
Legal Provisions regarding Proxy are as follows:

• Appointment: Any member of a company entitled to attend and vote at the meeting shall be entitled to appoint a proxy to attend and vote at the meeting on his behalf. A minor cannot be appointed as a proxy. The proxy cannot be appointed for the Board Meeting. The appointment of a proxy is valid for an adjourned meeting.
• Right: A proxy is not allowed to speak at the meeting. The proxy can vote only on resolutions passed by voting by-poll.
• Membership: A person appointed as a proxy need not be a member of the company.
• Proxy form: A member appointing a proxy must submit a duly completed proxy form in the registered office of the company at least 48 hours before the meeting.
• Inspection: A member can inspect any proxy form by giving not less than three days’ notice to the company.

Question 3.
When can the point of order be raised?
Answer:
A point of order is a question or objection raised by any member when he wants to point out an irregularity in the proceedings of the meeting. It is raised to draw the attention of the chairman.
The point of order can be raised on the following points:

• Absence of quorum
• Breach of any rule related to meeting
• Misbehaviour of any member
• Unparliamentary or improper language used by any member.

When the point of order is raised, discussion on the original motion is stopped for some time. The chairman gives his decision on point of order. The decision given by the chairman is final and binding on the meeting.

Question 4.
Explain any four methods of Voting?
Answer:
Methods of Voting:
(i) Voting by Voice:
In this method, the members are requested to say ‘Yes’ if they favour the motion or say ‘No’ if they are against the motion. The decision is taken on the basis of the volume of voice. This method is rarely used. The volume of voice may not give a clear and correct idea about the majority of votes.

(ii) Voting by Division:
In this method, present members are divided into two groups. Members in favour and those against the motion are asked to go to different rooms. Then the sense of the meeting is ascertained by counting and the chairman declares the result.

(iii) Voting by show of Hands:
This method is used in the general meetings of a company. After the discussion on the motion, the Chairman requests the members to raise their hands in favour or against the motion. The chairman declares the result by counting a number of hands in favour or against the proposal. ‘One man One vote’ is the principle.

(iv) Voting by Poll:
The poll can be demanded after the declaration of result by show of hands. Under this method, each member can vote in proportion to the number of shares held by him. ‘One share One vote’ is the principle. Polling papers are given to members and proxies for recording their votes. The result of the poll is final and not to be challenged.

Question 4.
State the importance of Minutes.
Answer:
The importance of Minutes are as follows:

• Official record: Minutes provide a ready reference to all the activities related to the meeting. It is the most important, official, and authentic record on which people can trust.
• Evidence: Minutes can be used as prima facie evidence in a court of law.
• Future reference: Minutes is a permanent record. It can be used for taking future managerial decisions.
• Legal provisions: Minutes are prepared in order to comply with the provisions of the Companies Act and Secretarial Standard.
• Information to absent members: Minutes help the absent members to know the proceedings of the meeting, as it is not always possible for everyone to attend the meeting.
• Reminder: The matters discussed at the meeting are noted down in minutes. It acts as a reminder to the concerned people.
• Information about resolution: The motion and discussion on the motion are reflected in the resolution. Interested parties can always refer to the text of a resolution when there is contradiction or confusion.
• Inspection of Minutes: As per the Companies Act, Minutes Book should be kept at the registered office of the company and every member has right to inspect the Minutes book at the general meetings.

6. Justify the following statements.

Question 1.
The meeting must be duly convened and properly constituted.
Answer:

• A meeting is defined as Any gathering assembly or coming together of two or more persons for the transaction of some lawful business of the common concern.
• A meeting becomes valid when it is duly convened and properly constituted.
• A meeting should be convened by proper authority.
• It must be convened as per the provisions of the Companies Act, 2013.
• Notice and Agenda of the meeting must be given 21 clear days before the meeting to all those who are entitled to receive it.
• Thus, meetings must be duly convened and properly constituted.

Question 2.
Chairman is responsible for the proper conduct of meetings.
Answer:

• A Chairman is a person who presides over a meeting.
• There should be a proper person in the chair i.e. chairman to conduct the proceedings of the meeting smoothly, fairly, and properly.
• A chairman should maintain overall discipline in the meeting.
• A chairman has to maintain order at the debate and decide the priority of speakers so that members can get a chance to express their views.
• A chairman should give his ruling on point of order at the earliest.
• A chairman can initiate an order for voting and declare the result of voting.
• A chairman must prevent improper behaviour, if any, by the member and prevent the use of unparliamentary language.
• Thus, Chairman is responsible for the proper conduct of meetings.

Question 3.
Motion can be amended.
Answer:

• A motion is a proposal put before the meeting for discussion and decision.
• The amendment is an alteration proposed by a member to the original motion under discussion.
• Amendment can be done by adding some new words or deleting some words in the original motion.
• Amendment can be done by replacing some words or by changing the position of words to the original motion.
• The amendment should be relevant to the original motion.
• The amendment is done to make the original motion more effective and meaningful.
• Amendment can be accepted or rejected. If accepted, it is considered for discussion. If approved by the meeting, it is incorporated in the original motion.
• Thus, the motion can be amended.

Question 4.
The proxy can not speak in the meeting.
Answer:

• A proxy is a representative of a member.
• A proxy can attend and vote on behalf of an absent member.
• If a member is not in a position to attend the meeting, he can appoint a proxy on his behalf.
• A proxy need not be a member of the company.
• A minor cannot be appointed as a proxy.
• A proxy has no right to speak at the meeting.
• A proxy can vote only under the poll method.
• A member appointing a proxy must submit the proxy form in the registered office of the company at least 48 hours before the meeting.
• Thus, Proxy can not speak in the meeting.

Question 5.
Notice is issued to members for a meeting along with the agenda.
Answer:

• Notice is an advance intimation given by the company informing the day, date, time, and place of the meeting.
• Agenda is given along with notice so that members can come well prepared for the meeting.
• Members come to know about the matters to be discussed at the meeting.
• If a member is not in a position to attend the meeting, he can appoint a proxy.
• Member can advise his proxy to vote on certain matters.
• Thus, a Notice is issued to members for a meeting along with the agenda.

7. Answer the following questions.

Question 1.
Explain the powers and duties of the chairman.
Answer:
A chairman is a person who presides over a meeting. There should be a proper person in the chair i.e. chairman to conduct the proceedings of the meeting smoothly, fairly, and properly.

Powers of Chairman:

• To maintain order and conduct the meeting properly.
• To maintain order at the debate.
• To decide the priority of speakers.
• To prevent improper behaviour and unparliamentary language.
• To adjourn the meeting.
• To exercise a casting vote.
• To declare the result of the voting.
• To give a ruling on point of order.

Duties of Chairman:

• To see that the meeting is duly convened and properly constituted.
• To see that the meeting is held according to the rules.
• To see that the items are discussed as per the order of the agenda.
• To maintain overall discipline in the meeting.
• To give a fair chance to members to express their views.
• To declare the result of voting.
• To check and sign minutes book.
• To act in the best interest of the company.

Question 2.
Explain the different methods of voting.
Answer:
Different methods of voting are as follows:
(i) Voting by voice:
In this method, the members are requested to say “Yes’ if they favour the motion or say ‘No’ if they are against the motion. The decision is taken on the basis of the volume of voice. This method is rarely used. The volume of voice may not give a clear and correct idea about the majority of votes.

(ii) Voting by division:
In this method, present members are divided into two groups. Members in favour and those against the motion are asked to go to different rooms. Then the sense of the meeting is ascertained by counting and the chairman declares the result.

(iii) Voting by ballot:
Under this method, every member entitled to vote is asked to record the vote on a ballot paper and deposit it in the ballot box. The votes are counted and the result is declared. This method ensures secrecy in voting.

(iv) Voting by show of hands:
This method is used in the general meetings of a company. After the discussion on the motion, the Chairman requests the members to raise their hands in favour or against the motion. The chairman declares the result by counting a number of hands in favour or against the proposal. ‘One man One vote’ is the principle.

(v) Voting electronically:
The Central Government may prescribe certain companies for having compulsory electronic voting in general meeting. Members may exercise his right to vote by electronic means.

(vi) Voting by postal ballot:
The Central Government may prescribe certain companies for having voting by postal ballot. Ballot papers are sent by post to members.

(vii) Voting by Poll:
Poll can be demanded after the declaration of result by show of hands. Under this method each member can vote in proportion to the number of shares held by him. ‘One share One vote’ is the principle. Polling papers are given to members and proxies for recording their votes. The result of poll is final and not to be challenged.

Question 3.
Explain the types of resolution.
Answer:
Types of Resolution:
(i) Ordinary Resolution:
A resolution which is passed by simple majority is called ordinary resolution. More than 50% of the votes should be in favour of motion. An ordinary resolution need not be submitted to the Registrar of Companies. The notice of the meeting need not require to explain the particulars of an ordinary resolution.

Examples:

• Approval of Directors report and Auditor report.
• Alteration of share capital
• Declaration of dividend, etc.

(ii) Special Resolution:
The resolution which is passed by special majority is called as Special resolution. It is passed by 3/4th or 75% majority. The purpose of passing this resolution should be mentioned in the notice of the meeting. A special resolution is passed in general meeting only. Notice of special resolution has to be given to the members 21 clear days before the meeting. A copy of special resolution must be filed with the Registrar of Companies through e-filing on MCA portal within 30 days of passing resolution.

Examples:

• Change in the name of the company.
• Change in the registered office of the company from one state to another.
• Alteration in the object clause of company, etc.

(iii) Resolution requiring special notice:
Some resolutions require special notice as per the companies Act or Articles of Association of the company, hence such resolutions are called resolution requiring special notice. Special Notice resolution may be ordinary or special resolution. A proposer of a motion has to give a special notice of 14 days to the company. The company should then give a notice of that resolution to all members atleast 7 days before the meeting.

Examples:

• Resolution to appoint a person as an auditor other than a retiring auditors.
• A resolution providing that a retiring auditor shall not be reappointed.
• Resolution to appoint director other than retiring director, etc.

(iv) Resolution requiring registration:
Resolution which are required to be registered with the Registrar of Companies are called as resolution requiring registration. Resolution should be filed with Registrar within 30 days of its passing.

Examples:

• All special resolutions.
• Resolution made by Board of Directors regarding appointment or re-appointment of Managing director.
• Resolution by members regarding dissolution of the company, etc.

(v) Resolution by Circulation:
When directors have to take important and urgent decisions and do not have a sufficient time to call a meeting, then a draft resolution is prepared and forwarded to all directors to pass resolution. It is called as resolution by circulation.

Activity: (Textbook Page No. 113)

Prepare an agenda for a meeting to discuss holding of Annual Day.
Answer:

Balbharti Maharashtra State Board Organisation of Commerce and Management 11th Textbook Solutions Chapter 8 Introduction to Management Textbook Exercise Questions and Answers.

Maharashtra State Board 11th Organisation of Commerce and Management Solutions Chapter 8 Introduction to Management

1. (A) Select the correct option and rewrite the sentences

Question 1.
Management is ………………….
(a) dynamic
(b) static
(c) selective
Answer:
(a) dynamic

Question 2.
Management uses …………………. method of observation.
(a) unscientific
(b) artificial
(c) scientific
Answer:
(c) scientific

Question 3.
To help top level management in co-ordinating the activities is the function of …………………. level management.
(a) middle
(b) lower
(c) top
Answer:
(a) middle

Question 4.
To look after maintenance of machinery is the function of …………………. level of management.
(a) top
(b) middle
(c) lower
Answer:
(c) lower

Question 5.
Management is …………………. oriented action.
(a) policy
(b) profit
(c) goal
Answer:
(c) goal

1. (B) Match the pairs

Question 1.

Answer:

1. (C) Give one word / phrase / term

Question 1.
The art of getting things done through others.
Answer:
Management

Question 2.
The second level of management.
Answer:
Middle level

Question 3.
Systematic body of knowledge.
Answer:
Management as a Science

Question 4.
The level of management related to Managing Director.
Answer:
Top level management

Question 5.
Level of management that link top level and lower level management.
Answer:
Middle level management

1. (D) State True or False

Question 1.
Management is an ancient activity.
Answer:
True

Question 2.
Management is not objective oriented.
Answer:
False

Question 3.
In small organization also management is required.
Answer:
True

Question 4.
Middle level management forms policy of an organization.
Answer:
False

Question 5.
Various principles and techniques are used in management.
Answer:
True

1. (E) Find the odd one

Question 1.
Management is an – art, a science, a commerce, a profession.
Answer:
a commerce

Question 2.
Management as an Art – Singer, Actor, Dancer, Doctor.
Answer:
Doctor

Question 3.
Management as Profession – Doctor, Chartered Accountant, Lawyer, Singer.
Answer:
Singer

Question 4.
Level of Management – Lower Level, Middle Level, Top Level, High Level.
Answer:
High level

Question 5.
Top Level Management – Board of Directors, Presidents, Purchase Manager, Chief Executive Officer (CEO).
Answer:
Purchase manager

Question 6.
Middle Level Management – Departmental Head, Finance Manager, Production Manager, Supervisor.
Answer:
Supervisor

Question 7.
Lower Level Management – Supervisor, Foreman, Finance Manager, Office Superintendent.
Answer:
Finance Manager

1. (F) Complete the sentences

Question 1.
The English verb ‘manage’ came from Italian word ……………….
Answer:
Maneggiare

Question 2.
To manage is to forecast, to plan, to organize, to command, to co-ordinate and to ……………….
Answer:
control

Question 3.
Organization is a group of person who work together to achieve a ……………….
Answer:
common goal

Question 4.
Link between the top level and lower level of management is called as ……………….
Answer:
middle level management

Question 5.
Lower level management works under ……………….
Answer:
middle level management

Question 6.
Art is the bringing about a desired result through the application of ……………….
Answer:
skills

Question 7.
Any knowledge which is scientifically developed and consists of universally accepted principles is known as a ……………….
Answer:
science

Question 8.
Science is based on systematic experiments, on certain rules and on ……………….
Answer:
principles

Question 9.
Teacher, Doctor, C.A., Lawyer comes under the term ……………….
Answer:
profession

1. (G) Select the correct option

(Finance Manager, Art, CEO, Profession, Supervisors)

Answer:

1. (H) Answer in one sentence

Question 1.
What is called as management?
Answer:
Getting work done through others is called as management.

Question 2.
Name, the levels of management?
Answer:
Top level, middle level and lower level are the three levels of management.

Question 3.
What is top level management?
Answer:
The level of management that decides the long term objectives of organization and frame the plans and policies and take decisions is called as top level-management.

Question 4.
What do you mean by middle level management?
Answer:
The level of management which is concerned with implementation of plans and policies in the organization with the help of lower level management is known as middle level management.

Question 5.
What is lower level management?
Answer:
The level of management which is considered to do actual execution of plan is called as lower level management.

Question 6.
What do you mean by an art?
Answer:
An art means skill of individual, creativity, regular practice, personal abilities and innovativeness.

Question 7.
What is science?
Answer:
Science is a systematic body of knowledge and scientific methods.

Question 8.
What is the meaning of a profession?
Answer:
Profession means an individual having adequate knowledge and abilities which is helpful to handle different situations. They are trained people having formal education in management school and have a code of conduct.

1. (I) Arrange in proper order.

Question 1.
Middle level management, Top level management, Lower level management.
Answer:
Top level management, Middle level management, Lower level management.

Question 2.
Departmental Head, CEO, Supervisors, Managing Director.
Answer:
CEO, Managing Director, Departmental Head, Supervisors.

Question 3.
Office clerk, Shareholders, Managing Director, Board of Director.
Answer:
Shareholders, Board of Directors, Managing Director, Office clerk.

1. (J) Correct the underlined word and rewrite the following sentences

Question 1.
Management is only an art.
Answer:
Management is an art, a science and a profession.

Question 2.
There are five levels of management.
Answer:
There are three levels of management.

Question 3.
Lower level management works under top level management.
Answer:
Middle level management works under top level management.

Question 4.
Middle level management works under lower level management.
Answer:
Middle level management works under top-level management.

Question 5.
Management is pure science.
Answer:
Management is a social science.

Question 6.
The entry in any profession is not restricted.
Answer:
The entry in any profession is restricted.

Question 7.
Professionals need informal education.
Answer:
Professional need formal education.

2. Explain the following terms/concepts

Question 1.
Top level management.
Answer:

1. The top level management decides the long term objectives of organization, frames plans and policies and take decisions.
2. It consists of Board of Directors, Managing Director,CEO, President, etc.

Question 2.
Middle level management.
Answer:

1. The middle level management is a link between top level and lower level management.
2. It works under top level management.
3. This level is considered with implementation of plans and policies in the organization with the help of lower level management.
4. It consists of Head of Departments / Branch managers / Incharge, etc.

Question 3.
Lower level management.
Answer:

1. This is the last level of management.
2. It is a supervisory level of management.
3. It consists of superintendents, supervisors, foremen and junior executives.
4. Lower level management receives instructions from the authorities i.e. middle level management and direct subordinates wherever necessary.

3. Study the following case/situation and express your opinion

1. While working in a company, Pranav used to give order to his subordinates about what is to be done and which work is to be done? In this organization, various employees like Pratap are doing their work assigned by Pravin. In this company, Pravin submits his report of work completion to Pranav after completing the work done by the employees like Pratap.

Question 1.
Identify different levels of management in above mentioned company.
Answer:
There are two levels of management i.e. middle and lower level of management in above mentioned company.

Question 2.
Find the level of Pranav in management of company.
Answer:
Pranav works in the middle level management of company.

Question 3.
Explain the functions and role of Pratap in his company.
Answer:
Pratap is an employee in a company. He works at the lower level. He executes the work assigned by Pravin.

4. Distinguish between the following

Question 1.
Top level Management and Middle level Management.
Answer:

Question 2.
Middle Level Management and Lower Level Management.
Answer:

Question 3.
Top Level Management and Lower Level Management.
Answer:

5. Answer in brief

Question 1.
State any four features of Management.
Answer:
Following are the features of management:
(i) Management is Goal Oriented : Management activity is done to achieve pre-decided goals. The success of organization is calculated on the basis of achievement of desired goals. The success depends on proper management of all available resources. Management decides the goals before conducting the activity. The manager takes efforts to achieve these goals. So management is goal oriented.

(ii) Management is a Group Activity : “Management is an art of getting things done through others.” The above definition explains that management is done through / with the people. It is done by co-ordinating all resources effectively and efficiently. The activities are done under the guidance of manager by its team members. Also in organisation decisions are taken by the group of people such as Board of Directors, Shareholders, etc.

(iii) Management is Intangible : Management is the collective efforts of manager. It is a process of planning, organizing, decision making, directing and controlling. These cannot be seen physically. However, the results of best management can be experienced in the form of increased profits, attainments of pre-decided so management is tangible in nature.

(iv) Management is a Continuous Process : Management is essential throughout the life of organisation. It is necessary to start the activity, to run the activity in smooth manner and also to control the activity. It is endless process. It is required for survival of the organization continuously.

Question 2.
Write any four functions of Top Level Management.
Answer:
Following are the functions of Top Level Management:

1. To decide long term objectives of the organisation.
2. To frame plans and policies to achieve the set objectives.
3. To observe that policies are properly implemented.
4. To create various department and positions.

Question 3.
Write any four functions of Middle Level Management.
Answer:
Following are the functions of Middle Level Management:

1. To link the top level management and lower level management.
2. To understand plans and policies framed by top level management and prepare plan of action according to the nature of department.
3. To assign duties and responsibilities to the staff of the concerned department to achieve pre-defined goals.
4. To appoint lower level staff.

Question 4.
State any four functions of Lower Level Management.
Answer:
Following are the functions of Lower Level Management:

1. Do work under Middle Level Management.
2. To assign work to subordinates.
3. To give instruction to subordinates.
4. To direct the subordinates wherever necessary.

Question 5.
State any two points of relationship about management as an art.
Answer:
The relationship between art and management are:
(i) Personal Skills : In organization, every manager has to handle different situations, has to solve various problems, has to handle human resource, etc. with his own style. This style varies from manager to manager and so the result. This is because of the different skills and abilities of each person.

(ii) Creativity : Creativity refers to the ability to find something new and innovative. Manager finds out new ways to conduct organizational activities and to achieve desired goals. Manager develops new ideas according to the changes in business situation and in the business environment.

Question 6.
Explain any two points of relationship about management as a science.
Answer:
The following points shows there is a relationship in management as a science:
(i) Systematic Body of Knowledge : Pure science is based on systematic experiments, certain rules and principles. Management principles and functions are also based on the experiments which can be studied through various different management theories, techniques and approaches given by different management thinkers.

(ii) Universal Applicability of Principles : Scientific principles can be applied in all over the world in similar situation. Therefore, the same result can be drawn. Management principles are universal in nature. They can be applied everywhere, anytime and in any condition.

Question 7.
State hny two points of relationship about management as a profession.
Answer:
The relationship between profession and management can be seen with the help of following points:
(i) Expertise : A professional is an expert in his field. He has acquired specific knowledge through formal education. Also he has particular skill in practicing as a professional. Manager also becomes an expert by practicing regularly in the specific field and can acquire certain knowledge and skill.

(ii) Registration : Professionals need to register themselves with their associations. For example, a Chartered Accountant should register himself with Institute of Chartered Accountant of India i.e. ICAI. Without registration certificate he cannot practice. In case of managers, there is no such body to register themselves. However, managers can take the membership of ‘Chambers of Commerce’ which gives them benefits.

6. Justify the following statements

Question 1.
Management is essential in professional and non-professional activities.
Answer:
(i) As management is universal in nature it is applicable everywhere, either it is a professional activity or non-professional activity.

(ii) Every person performs certain activity to achieve pre-decided goals. E.g. earning of profit, winning games, competitions, to increase goodwill, etc.

(iii) Organisations either large, medium or small, profit making or non-profit making, government or non-government organisation, etc. to get success, to attain goals every time management plays a vital role. It’s application ensures smooth functioning of business.

(iv) A professional acquires certain specific formal education. He has specific skill to achieve his goals. He performs management functions like planning, organizing, controlling, etc. Similarly, while performing non- professional activities like plantation of tree, blood donation campaign, a person also requires to perform certain management functions.

(v) Thus, management is essential in performing professional as well as non-professional activities.

Question 2.
Level of management depends upon the size of organization.
Answer:
(i) Making different parts for the smooth functioning of business and to achieve decided goals is called levels of management.

(ii) The size of business is small, medium or large. Every business needs to manage the activities efficiently and’ effectively.

(iii) The levels of management depends on size of organization. If the size of organization is small the classification of levels becomes easy and simple. Whereas in large organization, it becomes difficult and complicated. The levels of management in such organisation may be classified into three parts i.e. Top level, Middle level and Lower level.

(iv) These levels of management are important in organization. These levels have their own functions. As per that they have to perform their duties and responsibilities to attain their set goals and objectives.

(v) Thus, levels of management depends on size of organisation.

Question 3.
Management is a group oriented action.
Answer:
(i) In the words of Mary Parker Follet, “management is an art of getting things done through others”. Management focuses on completing the work through human resource.

(ii) It is co-ordinating of all available resources effectively and efficiently. In organisation, the activities are done by the subordinates, employees under the guidance of a manager.

(iii) A manager, though he is competent, able, has capacity, skills to perform the organizational task, it is not possible for a single manager to perform all the activities related to the said task alone.

(iv) To fulfill or accomplish the objectives and goals, he needs the help of other people, as it should be divided among all the employees, as per their skill, qualification, interest, knowledge and experience.

(v) Thus, management is a group oriented activity.

Question 4.
Management is an art.
Answer:
(i) An art is the bringing about a desired result through the application of skills. It is an innovativeness and creativeness of a person. This is a natural and inborn quality of a person. But with the help of proper education and practice one can developed the quality or qualities. E.g. acting, dancing, cycling, magician, singing, drawing, skating, musician, sports etc. comes under art.

(ii) Art does not require any specific educational qualification or it not any compulsion. It is inborn quality or a skill.

(iii) As a manager, in organisation he has to handle various kinds of situations, employees, other resources effectively and efficiently with his own style. So he uses his skills which are either inborn or developed by practice and formal education.

(iv) A manger must be innovative. He should handle the conditions. He should not use same methods all the time. Like an artist, he has to develop his skills by regular practice. He should use different techniques and skills to get perfect result. This is possible due to regular practice.

(v) Every managers has different abilities and skills. They have to use their own abilities and skills to guide the people to achieve their goals.

(vi) Thus, manager need to be creative and skilled like an artist. Hence, management is an art.

Question 5.
Answer:
There is no need of registration for managers.

1. Every professional is registered with the concerned body or organisation. A professional is formally, educated and also a skilled person.
2. A manager, now-a-days, possess a diploma or degree in management studies like Indian Institute of Management (IIM), PUMBA (Savitribai Phule Pune University, MBA) etc. A person who wants to be a manager acquires the required knowledge of the profession and trains himself / herself for the managerial job.
3. As management is a profession, a manager is not practicing independently. He is an employee of the organisation.
4. Thus, there is no need of registration for managers.

Question 6.
Management is a continuous process.
Answer:

1. Management is a continuous process. It is an important feature of management.
2. A manager of an organisation has to perform managerial work to achieve pre-defined goals of the organisation. To achieve these goals, he as a manager applies various functions of management, principles of management and also techniques of management.
3. From the beginning till the achievement of success, continuous efforts of every individual is required.
   Continuity is an integral part of management. It is necessary through out the life of an organisation.
4. Therefore, management has become necessary to start the activity and to run the activity at the business smoothly.
5. Thus, management is a continuous activity. It is not a one time process, but it is never ending process.

Question 7.
Planning is a task of top level management.
Answer:

1. Planning means thinking before doing. It is thinking in advance. Before the action, there is a thinking process.
2. In the large organisation, management levels are divided into three parts i.e. top, middle and lower.
3. At the top level management, very few personnels are involves. They are Board of Directors, Managing Directors, President, Chief Executive Officer, etc.
4. The main function of top level management is to frame the plans and policies of the whole organisation to achieve its goals.
5. It decides the long term objectives of the organisation and also frames particular plans and policies to get them. Further, it also sees that the policies are properly implemented.
6. Framing of organizational objectives and accordingly plans and policies to achieve them becomes a tough task of top level management.
7. Thus, Planning is a task of top level management.

7. Attempt the following

Question 1.
State the definition of management.
Answer:
Following are some definitions given by management thinkers :

1. “Management is an art of getting things done through others.” – Mary Parker Follet
2. “To manage is to forecast, to plan, to organize, to command, to co-ordinate and to control”. – Henry Fayol
3. “Management is knowing exactly what is to be done and seeing that it is done in the best possible manner.”
4. “Management is the process consisting of planning, organizing, actuating and controlling, performed to determine and accomplish the objectives by the use of people and resources”. George Terry.

Question 2.
State the features of management.
Answer:
(i) Managements is Dynamic : Management is dynamic and not static in character. It deals with human efforts, different situations and different activities. It adopts changes in the form of technological, socio economical, political, environmental, etc.

(ii) Management is Intangible : Management is intangible in nature. It can’t be seen and touched. It is abstract. The principles, theories, techniques, concept are practically invisible. The result of best management can be experienced in the form of increased profit, smooth functioning of the organization and achievement.

(iii) Management is a Social Process : Management is a process because it sets objectives and takes steps to achieve them. It is said to be a social process because management is concerned with people. For example employees, shareholders, investors, customers, community, etc.

(iv) Management is a Continuous Process : Management is essential through the life of an organization. It is necessary to begin the activity, to run the activity smoothly and to control the activity. This is never ending process.

(v) Management is Different from Ownership : In an organization, management is different from ownership. Owners contribute capital which is taken care of by efficient and paid managers.

(vi) Management is an Inborn Quality : Management in the older days, was considered to be an inborn quality. But with the inception of various business schools, management is a quality which can be developed if a person has the interest and perseverance.

Question 3.
State management is as a science.
Answer:
1. Systematic Body of Knowledge : Management is not a science like physics, chemistry or biology. It is a science which deals with human beings. Management has a theories and concepts. Various principle of management like unity of command, division of labour, unity of direction are all universally accepted principle. Management follows procedures like collecting data, analyzing and drawing inferences from it. This makes management a science.

2. Use of Scientific Methods of Observation : In science the conclusions are drawn only on the basis of scientific methods of observation. Management also uses systematic methods of data collection, verification and analysis of that collected data and interpretation of data, then a manager takes decisions in the organisation.

3. Cause and Effect Relationship : Science is based on cause and effect relationship. After using specific formulae or their combination, we get particular result in science. Management theories are also based on relationships. Fair and regular salary along with good working conditions motivates people to work hard and to give best results. Whereas, old machineries, techniques, untrained employees may not give good / excepted output to the organization.

4. Universal Applicability of Principles : The management principles are universally accepted just like scientific principles are accepted all over the world. For e.g. Newton’s law, Archimedes principle, etc. are all accepted principles, similarly in management also the principle of authority and responsibility, unity of command, direction, etc. are all universally accepted and are used in all organization whether big or small. Management follows these principles in all kind of organizations, at all levels in the same organization. State the relationship between the management and art.

Question 4.
Following points clearly states the relation between management and art.
Answer:
1. Creativity: Managers must posses the quality of being creative. Every manager should be able to bring innovations in the business. This quality is developed with experience. The more experienced manager can bring about changes according to the situation.

2. Regular Practice: Practice makes a man perfect. This is the rule applied by a manager. The more the experience, the manager will be able to meet any challenge or difficult situation with ease. He is in a position to make the required changes according to the circumstances.

3. Personal Skill: Every manager being an individual is different. A good manager must posses good skills in dealing with human beings. He should use his skill in knowing the problem, allotment of work to employees, give judgment and understanding to deal with various situations in business.

4. Personal Abilities : Every person has different abilities and skills. Manager uses his own abilities to co-ordinate the activities, to guide the people and to achieve their goals.

Question 5.
State the importance of management
Answer:
1. Utilisation of Resources Optimally : Effective management is all about optimum use of available resources in the organization. Proper distribution of resources and work to right person results in higher output. It also reduces wastage and cost. Maximisation of output by reducing cost is the ultimate objective of every organization.

2. Better Relation : Different groups work at different levels in organization. The employer and the employees have different sets of demands from each other. Effective management ensures that employees fulfill their social responsibilities towards their employers. This helps in establishing good relationship among different groups in an organization.

3. Achievement of Goals : In an organization group of people performs various activities to achieve common goals of the organization. Effective management brings about harmony (cordial relationship) and good co-ordination in efforts of all group. A manager creates a feeling of team spirit among the members of the group.

4. Division of Work : Division of work means the entire work is divided into smaller lots. Each job is given to a particular employee as per his ability and skill to carry out the required activity. Division of work leads to specialization of work and completion of the work in the stipulated period of time.

Question 6.
State the similarities between management and profession.
Answer:
1. Formal Education : Professionals need formal education. Today’s managers are qualified with management diploma or degrees from various institutes like IIMS, PUMBA etc. They also take formal training from management schools which helps them to work professionally.

2. Code of Conduct : Code of conduct means set of rules and regulations to be followed by practicing in their field. Every profession has their own code of conduct to control the activities. It emphasis on ethical practice in that profession. E.g. Chartered Accountants have to work according to ICAI, Lawyers have to follow the code of conduct framed by Bar Council of India, etc. However for managers there is no such association of managers. Generally managers follow the code of conduct based on customs and traditions.

3. Expertise : A professional is an expert in his field. He has acquired specific knowledge through formal education. He has particular skill of practicing as professional. He becomes an expert due to regular practice in specific field.

4. Registration : Professionals need to register themselves with their associations. For example, Lawyers must get registered themselves with India Bar Council, Chartered Accountants with Institute of Chartered Accountant of India, where as for managers there is no need of such registration with any body. They can take membership of ‘Chambers of Commerce’ which give them membership benefits.

5. Restricted Entry : The entry in any profession is restricted. It needs formal education e.g. Lawyers, Architect, Interior designer, Doctors, Chartered Accountant, etc. However, such compulsion is not there for working as a manager.

8. Answer the Following

Question 1.
What is management? State the characteristics or features of management.
Answer:
Management and its features:
(A) Meaning:
The word management is derived from the Latin word ‘manus’ which means ‘hands.
It means management is handling some activity.
Many thinkers said that management means a fine consideration of co-ordinating and controlling the work either from direct individual or from a group.

(B) Definitions:
Some definitions of management given by different management thinkers as follows:

1. “Management traditionally can be defined as “an art of getting things done through others. ” – Mary Parker Follet
2. “To manage is to forecast, to plan, to organize, to command, to co-ordinate and to control”. – Henry Fayol
3. “Management is co-ordination of resources through the process of planning, organizing, directing and controlling in order to attain stated objectives.” – F.W. Taylor

Following are the characteristics features of management:
(i) Managements is Dynamic : Management is dynamic and not static in character. It deals with human efforts, different situations and different activities. It adopts changes in the form of technological, socio economical, political, environmental, etc.

(ii) Management is Intangible : Management is intangible in nature. It can’t be seen and touched. It is abstract. The principles, theories, techniques, concept are practically invisible. The result of best management can be experienced in the form of increased profit, smooth functioning of the organization and achievement.

(iii) Management is a Social Process : Management is a process because it sets objectives and takes steps to achieve them. It is said to be a social process because management is concerned with people. For example employees, shareholders, investors, customers, community, etc.

(iv) Management is a Continuous Process : Management is essential through the life of an organization. It is necessary to begin the activity, to run the activity smoothly and to control the activity. This is never ending process.

(v) Management is Different from Ownership : In an organization, management is different from ownership. Owners contribute capital which is taken care of by efficient and paid managers.

(vi) Management is an Inborn Quality : Management in the older days, was considered to be an inborn quality. But with the inception of various business schools, management is a quality which can be developed if a person has the interest and perseverance.

(vii) Management is Situational: Management helps to take decisions and also to handle specific situation. The decisions are based on the principles, theories and techniques. They are applicable in certain situation only.

(viii) Management is Goal Orientated : Every business organization either small, medium or large, profit making or non-profit making, Governmental or NGOs have their own goals. When the organization achieves its desired goals, it is called success of that organisation. This success depends on proper management of all available resources. A manager takes lots of efforts to achieve these goals. So management is goal oriented.

(ix) Management is Universal : Management principles and theories are equally applicable every where and in every field like business, profession, hospital, education, politics, government administration social activities. These principles are the guidelines to the manager. They are flexible and capable of adaptation to every type of organization.

(x) Management is Group Activity : Management is defined as “getting work done through others” or “with the people in formally organized groups”. The tasks set by the organization is complied by employees, all levels of managers and even with the help of outside parties.

Question 2.
Discuss whether management is an art science or profession.
Answer:
Art:
1. Creativity: Managers must posses the quality of being creative. Every manager should be able to bring innovations in the business. This quality is developed with experience. The more experienced manager can bring about changes according to the situation.

2. Regular Practice: Practice makes a man perfect. This is the rule applied by a manager. The more the experience, the manager will be able to meet any challenge or difficult situation with ease. He is in a position to make the required changes according to the circumstances.

3. Personal Skill: Every manager being an individual is different. A good manager must posses good skills in dealing with human beings. He should use his skill in knowing the problem, allotment of work to employees, give judgment and understanding to deal with various situations in business.

4. Personal Abilities : Every person has different abilities and skills. Manager uses his own abilities to co-ordinate the activities, to guide the people and to achieve their goals.

Science:
1. Systematic Body of Knowledge : Management is not a science like physics, chemistry or biology. It is a science which deals with human beings. Management has a theories and concepts. Various principle of management like unity of command, division of labour, unity of direction are all universally accepted principle. Management follows procedures like collecting data, analyzing and drawing inferences from it. This makes management a science.

2. Use of Scientific Methods of Observation : In science the conclusions are drawn only on the basis of scientific methods of observation. Management also uses systematic methods of data collection, verification and analysis of that collected data and interpretation of data, then a manager takes decisions in the organisation.

3. Cause and Effect Relationship : Science is based on cause and effect relationship. After using specific formulae or their combination, we get particular result in science. Management theories are also based on relationships. Fair and regular salary along with good working conditions motivates people to work hard and to give best results. Whereas, old machineries, techniques, untrained employees may not give good / excepted output to the organization.

Profession:
1. Formal Education : Professionals need formal education. Today’s managers are qualified with management diploma or degrees from various institutes like IIMS, PUMBA etc. They also take formal training from management schools which helps them to work professionally.

2. Code of Conduct : Code of conduct means set of rules and regulations to be followed by practicing in their field. Every profession has their own code of conduct to control the activities. It emphasis on ethical practice in that profession. E.g. Chartered Accountants have to work according to ICAI, Lawyers have to follow the code of conduct framed by Bar Council of India, etc. However for managers there is no such association of managers. Generally managers follow the code of conduct based on customs and traditions.

3. Expertise : A professional is an expert in his field. He has acquired specific knowledge through formal education. He has particular skill of practicing as professional. He becomes an expert due to regular practice in specific field.

4. Registration : Professionals need to register themselves with their associations. For example, Lawyers must get registered themselves with India Bar Council, Chartered Accountants with Institute of Chartered Accountant of India, where as for managers there is no need of such registration with any body. They can take membership of ‘Chambers of Commerce’ which give them membership benefits.

Balbharti Maharashtra State Board Organisation of Commerce and Management 11th Textbook Solutions Chapter 7 Business Environment Textbook Exercise Questions and Answers.

Maharashtra State Board 11th Organisation of Commerce and Management Solutions Chapter 7 Business Environment

1. (A) Select the correct option and rewrite the sentence

Question 1.
Business environment has tremendous impact on ………………..
(a) business
(b) government
(c) society
Answer:
(a) business

Question 2.
The new Industrial policy was formulated in ………………..
(a) 1947
(b) 1951
(c) 1991
Answer:
(c) 1991

Question 3.
Changes in ruling government is an aspect of ……………….. environment.
(a) political
(b) technological
(c) economic
Answer:
(a) political

Question 4.
Literacy level is an aspect of ……………….. environment.
(a) social
(b) legal
(c) political
Answer:
(a) social

Question 5.
Privatization implies reduction in the role of ……………….. sector.
(a) public
(b) private
(c) foreign
Answer:
(a) public

Question 6.
Globalization is concerned with ……………….. market.
(a) global
(b) local
(c) rural
Answer:
(a) global

Question 7.
……………….. means linking national economy to the world economy.
(a) Globalization
(b) Privatization
(c) Liberalization
Answer:
(a) Globalization

Question 8.
Environment awareness provides ……………….. signal.
(a) warning
(b) alarming
(c) soft
Answer:
(a) warning

1. (B) Match the pairs

Question 1.

Answer:

Question 2.

Answer:

1. (C) Write a word or a term or a phrase which can substitute each of the following statements

Question 1.
Uncontrollable factors of the business environment.
Answer:
External business environment

Question 2.
The environmental of business that includes customs and traditions, values, social trends.
Answer:
Social environment

Question 3.
The process of transferring ownership of business enterprise, agency or public service from the public service to private sector.
Answer:
Privatization

Question 4.
A boundary less worlds where there would be flow of goods, services, information, capital and people across nation.
Answer:
Globalization.

1. (D) State whether the following statements are True or False

Question 1.
External factors of business environment are controllable factors.
Answer:
False

Question 2.
Business is the product of different environmental factors.
Answer:
True

Question 3.
Business and environment are inseparable parts.
Answer:
True

Question 4.
There is no benefit of globalization on Indian economy.
Answer:
False

Question 5.
New economic policy promoted the liberal economic policy.
Answer:
True

Question 6.
There is no benefit of privatization to Indian economy.
Answer:
False

Question 7.
There is no need of consideration of the business environment factors in business.
Answer:
False

1. (E) Complete the sentence

Question 1.
The term of business environment generally refers to …………………
Answer:
External Environment

Question 2.
……………….. helps the business enterprise for overcoming challenge successfully.
Answer:
Business Environment

Question 3.
Geographical and Ecological factors are included in ………………… Environment.
Answer:
Natural

Question 4.
Literacy is the important part of ………………… Environment.
Answer:
Social

Question 5.
Stability and peace in the country includes in ………………… Environment.
Answer:
Political

Question 6.
Indian political system comprises ………………… vital institutions.
Answer:
three

Question 7.
Limited involvement of government in public sector refer to …………………
Answer:
Privatization

Question 8.
Integration of economy and society through cross country is called as …………………
Answer:
Globalization

1. (F) Select the correct option

Question 1.
In how many type environmental factors can be classified?
(Two / Three / Four)
Answer:
Two

Question 2.
Which factors of Business Environment regard as controllable?
(Internal / External)
Answer:
Internal

Question 3.
Who frames the economic policy of the business?
(Government / Business / Citizen)
Answer:
Government

Question 4.
Which economic system in known as free market economy?
(Socialist / Mixed / Capitalist)
Answer:
Capitalist

1. (G) Correct the underline word and rewrite the following sentence

Question 1.
External factors of business environment are controllable.
Answer:
Internal factors of business environment are controllable.

Question 2.
Internal factors of business are beyond control.
Answer:
External factors of business are beyond control.

Question 3.
Natural resources are related to political environment.
Answer:
Natural resources are related to natural environment.

Question 4.
Privatization helps for global village.
Answer:
Globalization helps for global village.

1. (H) Answer in one sentences

Question 1.
Which factors are included in internal environment?
Answer:
Value system, vision, mission and objective management structure, Internal power relationship, Human resources, Physical facilities, Marketing resources, etc. are the factors included in internal environment.

Question 2.
What are the powers of legislature?
Answer:
Policy making, law making, budget approving, executing control, etc. are the powers of legislature.

Question 3.
Which factor influence the economic condition of the Nation?
Answer:
Economic condition of the nation is based on the gross domestic product, per capital income, availability of capital, growth of foreign trade and strength of capital market.

Question 4.
Who possess the factors of production in socialist economy?
Answer:
In socialist economy Government possess the factors of production.

Question 5.
In which environment are the methods and techniques of production included?
Answer:
Technological environment consist of the method and technical of production.

Question 6.
When did Indian government launch New Economic Policy?
Answer:
Indian government launched New Economic Policy on 24th July, 1991.

Question 7.
What is useful to reduced political interference in industry?
Answer:
Privatisation is useful to reduce political interference in Industry.

Question 8.
How is the boundary less world possible?
Answer:
Boundary less world is possible through Globalisation.

2. Explain the following terms /concept.

Question 1.
Business environment.
Answer:
Business environment refers to the external environment which includes factor outside the business leading to opportunities or threats of the business.

According to Bayard O. Wheeler
“The total of all things external to firm and industries which affect their organization and operations is called as “Business Environment”.

Question 2.
Liberalization.
Answer:

1. Liberalization refers to the process of eliminating unnecessary controls and restrictions for smooth functioning of business.
2. Liberalization helps in achieving a high growth rate, easy availability of goods at competitive rates, high foreign exchange reserve, strong rupee and good industrial relation, etc.

Question 3.
Privatization.
Answer:

1. Privatization refers to reduce the involvement of state or public sectors by involving of private sector in economic activities.
2. It implies government Sectors to be sold or given to private individuals to run them.

Question 4.
Globalisation.
Answer:

1. Globalisation means integration of national economy and societies through cross country flows of information, ideas, technologies, good services, capital, finance and people.
2. It also means “boundary less world”.

Question 5.
Social environment.
Answer:

1. Modern business is a social system in itself and forms a part of the larger social system represented by society in general.
2. The class structure of the society affects the business. Such as occupation of the people, their education, income level, social status, attitude towards living, work and social relationship.

Question 6.
Economic environment.
Answer:
Economic environment comprises of economic condition, economic policies and economic system, basic economic philosophy, infrastructure, national income, money supply, saving stages in economic development and trade cycles.

Question 7.
Political environment.
Answer:

1. Government and its policies affects business firms.
2. It includes stability and peace in the country, specific attitudes of elected representative. Ideology of the political parties influences the business organization and attitudes of government officials towards business has an impact on business.
3. It comprises three vital institutions like Legislature, Government and Judiciary.

Question 8.
Internal environment.
Answer:
Internal environment compromises of policies decided by by shareholders, managers, labour unions and employees which can be controlled which helps to make specific, proper understanding in strengthening the business.

3. Study the following case/situation and express your opinion.

(1) The court passes an order to ban polythene bags as the bags are creating many environmental problems which affects the life of people in general.
(2) Society in general is more concerned about quality of life. The government decided to give subsidy to jute industry to promote this business.

Question 1.
Identify the different dimensions of business environment.
Answer:
The different dimensions of business environment are:

1. Legal environment
2. Natural environment
3. Social environment
4. Political environment
5. Economic environment

Question 2.
Comment on it.
Answer:
The different dimensions of business environment are

1. Legal Environment : Court passes order to ban polythene bags.
2. Natural Environment : The Court order will solve environmental problems which affects the life of people in general.
3. Social Environment : Society is concerned about quality of life and better standard of living
4. Political Environment : Government framed a policy to give subsidy to jute industry.
5. Economic Environment : Subsidy to Jute industry will promote business of Jute industry and this will help in economic development.

2. Anchor company manufacturing light tubes increased expenditure on Scientific Research and Development and discovered a technology that made it possible to produce an energy efficient light tubes that lasts at least twenty times as long as standard tubes. It resulted in growth and profitability of the company.

Question 1.
Identify the dimension of business environment.
Answer:
Technological Environment:
Scientific research for innovation in product increased its production and it resulted in growth and profitability of the company. Internal environment of company led to growth and profitability.

Question 2.
State importance of business environment.
Answer:
Business environment helps in determining opportunities and threats, identify firms strengths and weaknesses, continuous learning, image building meeting competition and give direction for growth.

3. Make in India is an initiative launched by the government of India. It focuses on job creation and skill development and it is in twenty five sectors of the economy. Under the initiative, brochures on these sectors and web portal were released. The initiative aims at high quality standards and minimizing the impact on environment .It also seeks to attract foreign capital investment in India.

Question 1.
Identify the dimension of business environment.
Answer:
The various dimensions of business environment referred in the above case are:

1. Political environment
2. Technological environment
3. Economic-environment

Question 2.
Comment on it.
Answer:
Make in India is the policy of government as per its ideology. As it focusing on job creation and skill development in 25 sectors of economy, it convey two values through this initiative. High quality standards and concern for environment. It also aims to attract foreign capital investment in India.

4. Distinguish between the following

Question 1.
Social Environment and Economic Environment.
Answer:

Question 2.
Political Environment and Legal Environment.
Answer:

Question 3.
Liberalization and Privatisation.
Answer:

Question 4.
Globalization and Liberalization.
Answer:

Question 5.
Privatization and Globalization.
Answer:

5. Answer in brief.

Question 1.
State any four features of Social environment.
Answer:
The four features of social environment are as follows:

1. Customs and Traditions : This decides the celebration of various festivals like Diwali, Id, Christmas and its effect on business.
2. Social Institutions and Groups or Social Aspects: Literacy level, educational system, cultural heritage standard of living of the various groups of people affect the social environment of business.
3. Social Values : Cultural and social justice, national integration affect the business. Beliefs also help the business to meet the customer needs.
4. Social Trends : Now a days people have become health conscious and therefore there is a sale of various types of goods like organic food, sugar free products etc.

Question 2.
Describe any two factors of economic environment.
Answer:
Economic environment has direct influence on business.

1. The Economic System : Economic activities depend upon the nature of economic system which are:
   (a) Capitalist economy : e.g. U.S.A. (b) Socialist economy : e.g. China (c) Mixed economy : e.g. India
2. Economic Policies : The various economic policies of the government has a direct influence on economic environment. For e.g. import and export policy, educational policy, agricultural policy, industrial policy, foreign investment policy, etc.
3. Economic Condition : The stage at which the growth stands, employment rate, rate of interest, etc. All those determine development of the country.

Question 3.
State any four features of globalization.
Answer:
Features of globalization are as follows:

1. Purchase and sale of goods and services from one country to another.
2. Opportunity to start and do business in any part of the world.
3. Reduction in gap between domestic and international market.
4. Possibility of quick and rapid economic development.
5. Enhances the opportunity to exchange new ideas and technology across the nations.

Question 4.
State any four reasons of the need for privatisation.
Answer:
There is need for privatisation because of the following reasons:

1. To bring more efficiency in the working of business firms.
2. To reduce political interference in the working of the firms and companies.
3. To improve the quality of products
4. To bring efficiency in management of the organization.
5. To create discipline in capital market.

6. Justify the following statements.

Question 1.
External factors of business environment are beyond control.
Answer:

1. Factors which influences the business policy of an organization can be divided into internal and external factors.
2. Business has no control over external forces.
3. These are those factors which provide opportunities or pose threats to the organization.
4. Factor such as social customs, values, economic policies, technological development, political ups and down, legislation together constitute political, social, economic, legal and technological diversions of business, hence, they are not in the hands of business organizations.
5. Internal factors are controllable and business unit can modify their plans, policies, etc.
   (Students can give example of social, political, legal environment to justify further)

Question 2.
Business firm should be aware of the changes in society.
Answer:

1. The success of every business depends on adopting itself to the environment in which it functions. Modern business is rightly termed as socio-economic activity.
2. There is reciprocal relationship between business and society.
3. Business is affected by class structure of the society which depends upon factors such as occupation its own culture, income, etc.
4. Every society depends its own culture, customs, tradition, values, ethics, etc. social trends are also changing fast. For e.g. large number of people are eating fast food and go to gyms. So many fast food outlets and gyms are coming up in towns and cities.
5. Social values and traditions such as celebration of Diwali, Eid, Christmas also affect business.

Question 3.
Political stability builds up confidence among business people.
Answer:

1. Business firms are affected by the government and its policies.
2. Political force decide the nature of business, device performance and projects for development.
3. Political environment includes stability and peace in the country. Political stability builds confidence among different interest groups and investors because long term policies and projects will be started by the government and if the government keep on changing every six months or in a year.
4. This will impact long term decisions of development for the country, because political parties identify forms their decision making, hence if a government gets its full tenure of 5 years, it can complete its projects and plans and win the confidence of the people.

Question 4.
Economic environment has direct influence on business.
Answer:

1. Economic environment consists of economic condition, economic policies and economic system along with basic economic philosophy, infrastructure, national income, money supply etc.
2. Economic condition is based on GDP, per capital income, availability of capital, growth of foreign trade and capital market.
3. Where as economic polices framed by the government from time to time changes with changes in the government.
4. Every business has to function within the policy framework and responds to changes accordingly.
5. This relates to Industrial Policy, monetary policy, foreign investment, EXIM policy education policy etc. Also the scope of private business and government regulation depends on the economic system such as capitalist economy, Socialist or mixed economy which impacts business decisions.

Question 5.
Social trends provide business opportunities.
Answer:

1. Society and business are inter-dependent.
2. Class structure such as occupation,education,income level social status, attributes etc impact business decisions.
3. Social trends are any type of activity that is practised in the society as a whole.
4. Trends can be for short period or long lasting. As technology progresses the changes in social trends do changes.
5. Companies use their ability to anticipate the social change as part of their business marketing policy, to grab the business opportunities.

Question 6.
An adequate knowledge of rules and regulations is essential for better business performance.
Answer:

1. Any business in a country can be started, regulated and controlled within the legal framework of a country.
2. Separate set of laws are framed by all countries to control and direct the business affairs.
3. Knowledge of law, rules and relegations helps the business managers to take prompt decision in making business policies.
4. Various laws are implemented for influencing the business, protect and safeguard the business, as well as the consumers.

7. Attempt the following

Question 1.
Importance of business environment.
Answer:
Importance of Business Environment:
(i) Flexible and Dynamic : Changing environmental factors should be appraised from time to time. So as to keep the business flexible and dynamic. The new opportunities and threats created by the environment can be appraised by the corporate planners to make the most of it. Turbulent market conditions, less brand loyalty, more demanding customers and intense global competition are some of the images of todays business environment. In order to cope with these significant changes, organization must understand and examine the environment and develop suitable course of activity.

(ii) Opportunities and Threats : Study of business environment enables a business enterprise to visualise future problems that can arises as also future business prospects in advance. Deriving benefit from honourable business opportunities is possible as also it can face the problems boldly. Awareness of environment help an organisation to take advantage of such opportunities instead of loosing them to competition. It helps organisation to identify various threats on time and serves as an early signal.

(iii) Competition : Understanding the business environment helps to obtain qualitative information which in turn is useful in formulating business plans, policies and strategies for the future course of action.

(iv) Utilization of Resources Optimally : Optimum use of available resources for the business enterprise is possible by studying the business environment. It enables the enterprise to take full advantage of the policies implemented by the government.

(v) Strength and Weakness Identification : With the change of technology and global development it helps to analyze individual strength and weakness of the business understanding the challenges, appropriate decisions are taken on timely basis.

(vi) Knowledge : Study of environment is necessary to discover and exploit new opportunities for business expansion broad strategies and long term planning enable the development of a formidable business wait.

(vii) Image Building: Environment study makes it possible for the business to expand and to make it acceptable and agreeable to different social groups. By fulfilling its social obligations towards different groups of society, business can create goodwill and reputation for itself.

(viii) Adaptability to Socio-Economic Changes : A business organization needs to show its keen intentions towards adapting to the socio-economic changes.

Question 2.
Social Environment.
Answer:
Business is a economic and social activity. It has to produce goods according to the requirement of the customers. Satisfying customer is the basic need of business. Therefore, while manufacturing or producing goods, business has to take into consideration social factors like traditions, customs, education, habits, values, life styles, thinking and earnings of the people of country. Changes in social environment are a must and management has to take into consideration these factors which determines the following aspects.
1. Social Aspect : Literacy level, educational system, tradition and customs, transition of labour, etc. are the important aspect of social environment. It helps to analyze the needs of the people and accordingly the business opportunities are identified.

2. Social Trends : Business practices and procedures must be in tune with the social beliefs. Growing number of working women and changing life style have increased the demand for household appliances in India.

3. Social Values : Cultural and social values, (social justice, national integration, etc.), family organization and caste structure, social institutions and groups, are taken to consideration while making practices and procedures of business.

4. Traditions : Customs and traditions. (Diwali, Id, Christmas, etc.) also has an effect on the business. The businessmen have to be more responsible towards the demand of the people accordingly.

Question 3.
Economic environment.
Answer:
1. Economic environment comprises of economic condition economic policies and economic system which are the important factors influencing development and trade cycles, national income, etc.

2. Economic Condition : If refers to present state of economy of a country or region based on gross domestic product, per capita income, availability of capital, etc.

3. Economic Policies: Government frames economic policies time to time influencing the business activities. In order to controls the business in the interest of the politics, e.g. – Industrial policy, monetary policy, foreign investment policy etc.

4. Economic System: It refers to the scope of private business and extent of government regulation on economic activities determines the nature of economic system i.e. – capitalist social or mixed economic.

Question 4.
Political Environment.
Answer:
Political dimensions or environment includes the country’s political system or its ideologies or condition i.e. dictatorship or democracy or communist government or socialistic government. It indicates the general stability and peace in the country and attitude of the elected government representatives towards business.

Political stability builds up confidence among business people to invest in long-term projects for the growth of the economy. In India we have adopted mixed economy and growth rate often remains moderate. Indian political system comprises three vital institutions like Legislature, Government and Judiciary.

1. Legislature : legislature is very powerful force that decides the nature of business, programmes, project, for the development of the country through policy making, law making, budget approving, etc.
2. Government : The framework of policies are implemented by government which effects the business organization to under take the responsibilities of the society.
3. Judiciary : It determines the work of executives to carry out the policies in a systematic manner, in order to settle relationship between citizens and the government.

Question 5.
Impact of new economic policy on business and industry.
Answer:
(A) Introduction : On July, 1991, the Government of India announced its New Industrial Policy. It brought about radical changes in the Economic Policy. The three main pillars of Economic reforms are L – P – G (Liberalisation, Privatisation and Globalisation). The main purpose was to modernise India’s Industrial system, implement new techniques, remove unproductive control, encourage private investment and integrate our economy with the global economy.

(B) Impact of changes in Government Policy on Business and Industry:
1. Budgetary Support: The Central Government’s budgetary support for financing the public sector outlays has declined over the years. In order to survive and grow, PSUs have to be more efficient and self sufficient so as to compete with private sector.

2. Increase in Competition : Competition for Indian firms has increased due to the changes in the rules of industrial licensing and entry of foreign firms, for e.g. Service Industries like Insurance, Banking, Telecommunications, Hotel and Airlines, etc. which were earlier in the public sector are now facing competition from private players such as Bajaj Alliance, Max Life, Star Life, Insurance, low cost airlines like Indigo, etc.

3. New Trade Policy : The new trade policy has helped the Indian Firms to enter into foreign markets and earn the foreign exchange required for importing raw materials, spare parts and components they needed for keeping their production lines going.

4. Demanding Customers : Today’s market is customer oriented as customers are well informed and there is growing awareness among them about the malpractices adopted by traders, consumer rights, consumer education and so on. Moreover, competition in the market gives the customer wider choice in purchasing good quality product and makes customer more demanding.

5. Need for Human Resource Development : New technologies require expert knowledge and skill in various fields. Moreover, newer markets made it compulsory for companies to acquire trained personnel with high degree of competence and commitment. Hence, there is a need for well trained staff and thereby develop human resources.

6. Change in Technological Environment : Increased competition and advancements in the field of technology have forced the business units to develop new ways to survive and grow in the market and keep pace with latest technological developments.

7. Change in the Concept of Marketing : Earlier business organisations were production oriented but due to fast changing business world it has now become market oriented. This changed to societal concept where needs of society are kept in mind by the producers. The latest is relationship marketing whereby it is not only producing goods for consumers but maintaining long term relationship with them so as to sustain them.

8. Answer the following

Question 1.
What is business environment? Explain the important of business environment.
Answer:
(A) Business Environment:
A business is defined as buying and selling activity to generate income. Business consists of several interrelated and interacting elements. Business is an economic and social activity of the society. Society is an integral part of the business and its interest cannot be ignored.

Business environment consists of economic, social, legal, technological and political situation. Business obtains money, material, machinery and manpower and other resources from environment.
According to B. O. Wheeler – Business environment is “the total of all things external to firms and individuals which effect their organisation and operations”.
According to Oxford English Dictionary – “Business Environment refers to those aspects of the surroundings of a business enterprise which influence or effect its operations and determine its effectiveness.”
Basically business environment consists of all internal and external factors that influence the nature and scope of business activity.

(B) Importance of Business Environment:
(i) Flexible and Dynamic : Changing environmental factors should be appraised from time to time. So as to keep the business flexible and dynamic. The new opportunities and threats created by the environment can be appraised by the corporate planners to make the most of it. Turbulent market conditions, less brand loyalty, more demanding customers and intense global competition are some of the images of todays business environment. In order to cope with these significant changes, organization must understand and examine the environment and develop suitable course of activity.

(ii) Opportunities and Threats : Study of business environment enables a business enterprise to visualise future problems that can arises as also future business prospects in advance. Deriving benefit from honourable business opportunities is possible as also it can face the problems boldly. Awareness of environment help an organisation to take advantage of such opportunities instead of loosing them to competition. It helps organisation to identify various threats on time and serves as an early signal.

(iii) Competition : Understanding the business environment helps to obtain qualitative information which in turn is useful in formulating business plans, policies and strategies for the future course of action.

(iv) Utilization of Resources Optimally : Optimum use of available resources for the business enterprise is possible by studying the business environment. It enables the enterprise to take full advantage of the policies implemented by the government.

(v) Strength and Weakness Identification : With the change of technology and global development it helps to analyze individual strength and weakness of the business understanding the challenges, appropriate decisions are taken on timely basis.

(vi) Knowledge : Study of environment is necessary to discover and exploit new opportunities for business expansion broad strategies and long term planning enable the development of a formidable business wait.

(vii) Image Building: Environment study makes it possible for the business to expand and to make it acceptable and agreeable to different social groups. By fulfilling its social obligations towards different groups of society, business can create goodwill and reputation for itself.

(viii) Adaptability to Socio-Economic Changes : A business organization needs to show its keen intentions towards adapting to the socio-economic changes.

Question 2.
Explain the new economic policy in details.
Answer:
The new economic policy was introduced by the Government on 24th July, 1991, on the failure of the earlier Industrial policy prevailing in India.
The new policy was known as LPG i.e. Liberalisation, Privatisation and Globalisation. This was the brain child of the Prime Minister P. V. Narasimha Rao and the finance minister Dr. Manmohan Singh.

(i) Liberalisation:
It means to liberate the industry, trade and commerce from the unnecessary restrictions and regulations that curtailed the freedom of enterprise.
Liberalisation has helped the Indian economy to open up and allowed the entry of foreign business in India. The interaction with the world has happened after the 1991 policy.

Liberalisation policy has brought about the following measures:

1. Encouraging Direct Foreign Investment.
2. Wide Choice of products and services enjoyed by the customers.
3. Reduction in control of Foreign Exchange.
4. Cost of products, price and quality in tune to the global markets.
5. Changing the approach towards industrial sickness.
6. Production of quality products to meet the competitive markets.
7. Freedom to choose the Scale of business.
8. Reduction in tax rates, tax holidays, etc.
9. Encouraging new technology, technological upgradation and foreign collaboration.
10. I mport of machinery, goods and other services on easy terms.
11. Abolishing licensing system for most of the industries.
12. Opening telecommunication sector.

Liberalisation has thus made the country achieve high growth rate, made the rupee stronger and helped good industrial relations.

(ii) Privatisation:
Privatisation is a process of transferring ownership of business, enterprise agency or public service from the public sector (government) to the private sector.
Features of Privatisation are:

1. To provide variety of business units to consumers.
2. To ensure less political interference in running the business.
3. To bring about more accountability.
4. To reduce labour problem.
5. To bring about a market oriented approach.
6. To make competition more intense.
7. To bring about more efficiency.
8. To maintain capital market discipline.

The government of the country has followed a disinvestment policy.

Disinvestment means:

1. When there is a sale of a public undertaking in full or part of private sector without transferring the ownership to private sector.
2. The management and control is transfered to public undertaking e.g. Maruti Udyog Ltd., SAIL, ONGC, etc.
3. Improvement in the performance of the industries through Memorandum of Understanding (MoU). Privatisation helps the private sector to be efficient result oriented, productive and active. Capitalist countries like America and Japan have followed privatisation.

(iii) Globalisation:
When the operation and organization of business activities are on a global scale, it is called as Globalisation. It is integration of business activities by considering the entire world is one market.

In short globalisation means a boundary less world, where there would be a free flow of goods, services, information, capital and people across nations. Globalisation has effect on socio-economic and political sphere of life.

Features of Globalisation:

1. Buying and selling goods from/to any country is possible due to globalisation.
2. Establishing manufacturing, production and distribution facilities in any part of the world.
3. Freedom to set up’ and operate business in any part of the world.
4. Render faster economic development of any country.
5. Exchange of new ideas and technology across nations.
6. Narrowing differences between domestic and international market.
7. Direct Foreign private participation in the industrial development of any country.

Thus it could be seen that globalisation is an evolutionary concept. Through the policy of 1991 the government moved the country to this globalisation pattern.

Balbharti Maharashtra State Board Organisation of Commerce and Management 11th Textbook Solutions Chapter 6 Institutes Supporting Business Textbook Exercise Questions and Answers.

Maharashtra State Board 11th Organisation of Commerce and Management Solutions Chapter 6 Institutes Supporting Business

1. (A) Select the correct option and rewrite the sentence

Question 1.
Small Industrial Development Bank of India (SIDBI) was established in …………………
(a) 1989
(b) 1990
(c) 1991
Answer:
(b) 1990

Question 2.
SIDBI was established under the Small Industrial Development Bank of India Act, …………………
(a) 1988
(b) 1992
(c) 1996
Answer:
(a) 1988

Question 3.
………………… is Principal Financial Institution for Promotion, the Micro, Small and Medium Enterprise (MSME) sector in India.
(a) NABARD
(b) KVIC
(c) SIDBI
Answer:
(c) SIDBI

Question 4.
………………… came into existence on July 12, 1982
(a) NABARD
(b) KVIC
(c) SIDBI
Answer:
(a) NABARD

Question 5.
A Committee to Review the Arrangements for Institutional Credit for Agriculture and Rural Development (CRAFICARD) was constituted under the Chairmanship of …………………
(a) Kothari
(b) Shivaraman
(c) Rangrajan
Answer:
(b) Shivaraman

Question 6.
All India Khadi and Village Industries Board was set up in the year …………………
(a) 1953
(b) 1949
(c) 1948
Answer:
(a) 1953

Question 7.
In April ………………… KVIC was established.
(a) 1955
(b) 1953
(c) 1957
Answer:
(c) 1957

1. (B) Match the pairs

Question 1.

Answer:

1. (C) Give one word/phrase/term

Question 1.
Life blood of business.
Answer:
Finance

Question 2.
Principal financial institution of promotion of the Micro, Small and Medium Enterprise (MSME) sector in India.
Answer:
SIDBI

Question 3.
Advisor and mentor for MSMEs
Answer:
SIDBI

Question 4.
Wholly owned subsidiary of IDBI was set up in July 1999, is providing venture capital.
Answer:
SIDBI Venture Capital Ltd. (SVCL)

Question 5.
Digital initiative by SIDBI launched on March, 17th, 2016
Answer:
SIDBI Startup Mitra,

Question 6.
The apex institution for agricultural finance.
Answer:
NABARD

Question 7.
The Bangladeshi economist, known as the Father of Micro-finance.
Answer:
Dr. Muhammad Yunus

Question 8.
An international organization dedicated to providing finance, advice and research to developing nations.
Answer:
World Bank

1. (D) State True or False

Question 1.
Small Industrial Development Bank was established on 2nd April, 1990.
Answer:
True

Question 2.
SIDBI has its head office at Mumbai.
Answer:
False

Question 3.
SIDBI is not working towards sustainable development of MSME’s in India.
Answer:
False

Question 4.
SIDBI, Startup Mitra scheme is launched on March 17th, 2016.
Answer:
True

Question 5.
NABARD came into existence on July 12, 1982.
Answer:
True

Question 6.
The NABARD has been recognised as the apex institution for financing large scale industries.
Answer:
False

Question 7.
KVIC is actively working for planning, promotion and production of Khadi as well as in setting up of village and rural industries of India.
Answer:
True

Question 8.
Dr. Muhammad Yunus is known as the ‘Father of Rural Banking’.
Answer:
False

Question 9.
Self Help Group is a large group of homogeneous individuals.
Answer:
False

1. (E) Complete the sentences

Question 1.
The lifeblood of a business is …………………
Answer:
Finance

Question 2.
Micro, Small and Medium Enterprises (MSME’s) are focused domains for …………………
Answer:
SIDBI

Question 3.
SIDBI takes structural initiatives to resolve the financial and non-financial hurdles of …………………
Answer:
MSMEs

Question 4.
SIDBI is established to provide short-term and long-term finance to
Answer:
MSME’s

Question 5.
‘SIDBI Startup Mitra’ launched on …………………
Answer:
March 17th, 2016

Question 6.
To improve accessibility of credit and handholing services to MSME’s, SIDBI has launched the …………………
Answer:
Udyami Mitra

Question 7.
NABARD came into existence on …………………
Answer:
July 12th, 1982

Question 8.
Khadi and Village Industries Commision was set up in …………………
Answer:
1953

Question 9.
A statutory body of Khadi and Village Industries Commission (KVIC) was created with a special Act of …………………
Answer:
Parliament

Question 10.
The Grameen Bank in Bangladesh was set up in …………………
Answer:
October 1983

Question 11.
The father of Micro finance is …………………
Answer:
Dr. Muhammad Yunus

Question 12.
The World Bank came into existence on …………………
Answer:
1944 Bretton Woods Conference

Question 13.
The headquarter of World Bank is in …………………
Answer:
Washington D.C.

Question 14.
Dr. Muhammad Yunus jointly won the Noble Prize in …………………
Answer:
2006.

1. (F) Select the correct option

Question 1.
(1953, 1944, 2nd April 1990, Oct. 1983, 12 July 1982)

Answer:

1. (G) Answer in one sentence

Question 1.
What is SIDBI?
Answer:
SIDBI is Small Industrial Development Bank of India, which takes initiative to resolve the financial and non-financial hurdles of MSMEs.

Question 2.
What do you mean by NABARD?
Answer:
NABARD is a National Bank for Agriculture and Rural Development, which was formed with an objective to provide and regulate credit and other facilities for the development of agriculture, small scale industries, cottage village industries, handicraft and other rural crafts and allied economic activities.

Question 3.
What is meant by Grameen Bank?
Answer:
Bank which gives small loans to landless poor women to promote self employment is called Grameen Bank.

Question 4.
What is SHG?
Answer:
SHG is a small group of homogeneous individuals who come together with the objective creating common fund through savings and meet members emergency needs by providing collateral free loan.

Question 5.
What do you mean by World Bank?
Answer:
The World Bank is an international organization dedicated to provide finance, advice and research to developing nations.

Question 6.
WhatisMSME’s
Answer:
MSME’s are Micro, Small and Medium Enterprises, which play an important role in promoting entrepreneurship among women and economically weaker section in the country.

Question 7.
What is Udyami Mitra?
Answer:
‘Udyami Mitra’ is the digital portal launched by SIDBI, to improve accessibility of credit and handholding services to MSMEs.

1. (H) Correct the Underlined word and rewrite the following sentences

Question 1.
SIDBI is established to provide only long-term finance to the MSME’s.
Answer:
SIDBI is established to provide short-term and long term finance to the MSME’s.

Question 2.
The NABARD has been recognised as the apex institution for industrial finance.
Answer:
The NABARD has been recognised as the apex institution for Agricultural finance.

Question 3.
Khadi was symbol and the spirit of self reliance in post independence India.
Answer:
Khadi was symbol and the spirit of self reliance in pre independence India.

Question 4.
Self help group are based on the fundamental principle of to earn profit.
Answer:
Self help group are based on the fundamental principle of ‘helping each other’ and “unity is strength”.

Question 5.
World Bank provides high interest loan.
Answer:
World Bank provides low interest loan.

2. Explain the following terms/concepts

Question 1.
Udyami Mitra.
Answer:

1. This is the portal launched by SIDBI to improve accessibility of credit and handholding services to MSME’s.
2. Under this portal entrepreneurs can apply for loan without physically visiting any bank branches.
3. The entrepreneurs can select and apply for preferred banks.
4. They can select suitable branch, track their application status and avail multiple loan benefits.

Question 2.
KVIC.
Answer:

1. KVIC was established to take over the work from All India Khadi and Village Industries Board.
2. KVIC is working for planning, promotion and production of Khadi and setting up of village and rural industries in India.
3. It gives emphasis on utilizing the locally available raw materials and human skills to generate non-farm employment opportunities in the rural areas.

Question 3.
World Bank.
Answer:

1. The World Bank is an international organization formed to provide finance, advice and research to developing nations.
2. It was created at the 1944 Bretton Woods Conference along with the International Monetary Fund (IMF)
3. The head quarter of World Bank is in Washington D.C.
4. It provides financial as well as technical assistance to the member countries of the world.
5. It comprises of two institutions namely – the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA).

Question 4.
Self Help-Groups
Answer:

1. Self Help Group (SHG) is a voluntary association.
2. It is a small homogeneous group of people who come together with the objective of creating common fund through small savings and meet members emergency needs by providing collateral free loan at reasonable rate.
3. Many SHG are linked to banking institutions for getting micro-credit.
4. All decisions are taken collectively by SHG members.

Question 5.
Collateral Free Loan
Answer:

1. Collateral free loan are SHGs small loans provided to the poor individuals for undertaking self-employment projects.
2. Loans are given on the principle of mutual trust and either minimum or no documentation.
3. The rate of interest generally charged are higher than the interest charged by banks.
4. It saves the poor individuals from the clutches of local money lenders.

3. Study the following case/situation and express your opinion

Anand completed his MBA and wants to start a Small Scale Industry. He is good at using technology. He has very good business idea in mind and looking for a lender or investor.

Question 1.
Who is promoter or businessman in this case?
Answer:
A person who gets the idea of starting the business enterprise is called as promoter or businessman. In the above case Anand is promoter or businessman.

Question 2.
What is full form SSI?
Answer:
The full form of SSI is Small Scale Industry.

Question 3.
Suggest digital ways to find lender or investor for this initiative
Answer:
SIDBI has started Digital initiatives / Digital ways to find lender or investor. For this initiative I can suggest the following ways:
(a) SIDBI Startup Mitra:
It brings together all stakeholders, start-up entrepreneurs, incubators, investors, industry bodies, mentors and advisors and banks on one platform. It helps in financing and development of new entrepreneurs.

(b) Udyami Mitra:
This is a portal launched by SIDBI to improve accessibility of credit and handholding services to MSME’s. Under this portal entrepreneurs can apply for loan without physically visiting any bank branches. The entrepreneurs can select and apply for preferred banks, they can select suitable branch, track their application status and avail multiple loan benefits.

4. Answer in brief

Question 1.
State any four features of NABARD.
Answer:
Features of NABARD:
(i) Apex Bank : NABARD acts as an apex bank for meeting the credit needs of all type of financial institutions working in the field of agricultural and rural development. It works to frame policies and guidelines for rural financial institutions in India. It provides credit facilities to institutes working in agricultural finance.

(ii) Refinancing Facilities : It provides refinancing facilities to State Co-operative Banks (SCBs), Land Development Banks (LDBs), Regional Rural Banks (RRBs) and other approved financial institutions for financing rural economic activities. It also provides short-term, medium term and long term credit to these institutes.

(iii) Provides Credit for Rural Development : It takes initiatives in the development and promotion of different activities in rural area by providing funds to State governments. It also provides refinancing for upliftment of weaker section of the society. It also works on improvement of small and minor irrigation by way of promoting agricultural activities.

(iv) Financing Rural Industries : It provides refinancing facility to small scale industries and other village and cottage industries. It provides loans to commercial and co-operative banks to promote rural employment. It organizes skill and entrepreneurship development programs to promote an entrepreneurial culture among the rural youth and encourage them to start enterprises in the rural areas.

Question 2.
State four objectives of KVIC.
Answer:
Objectives of KVIC :
(i) Development of Khadi and Other Village Industries : KVIC is actively working for planning, promotion and production of khadi as well as in setting up of village and rural industries in India. It identifies the potential for the development of rural industries and undertakes the valuable task of promoting and developing locally operating village enterprises.

(ii) Special Objective : KVIC has a special objective of providing employment. It gives emphasis on utilizing the locally available raw materials and human skills to generate non-farm employment opportunities in the rural areas. It plays a role of co-ordinator with other agencies engaged in rural development.

(iii) Economic Objective : KVIC is actively working for planning, promotion and production of khadi as well as in setting up of village and rural industries in India. KVIC receives fund from the Ministry of MSMEs for effective implementation of various programs and schemes. It helps in producing saleable articles which helps the economic development of the country.

(iv) Wider Objective : It has a wider objective of creating self-reliance amongst the poor and building up of a strong rural community spirit.

Question 3.
Write any four features of World Bank.
Answer:
Features of World Bank:
(i) Organization and Structure : The organization of bank consists of the Board of Governors, the Board of Executive Directors and the Advisory Committee, the Loan Committee and the President and other staff members. All the powers of the bank are vested in the Board of Governors which is the supreme policy making body of the bank. The board consists of one Governor and an Alternative Governor appointed for five years by each member country. The Board of Executive Directors consists of 21 members, 6 of them are appointed by the six largest shareholders, namely USA, UK, Germany, France, Japan and India. The rest of the 15 members are elected by the remaining countries.

(ii) Goals : The World Bank Group has two goals to be achieved by 2030.

• To end extreme poverty by decreasing the percentage of people living on less than 1.90 dollars a day to no more than 3%.
• To promote shared prosperity by fostering the income growth of the bottom 40% for every country.

(iii) Innovative Knowledge Sharing : World Bank offers support to developing countries through policy, advice, research and analysis and technical assistance. Analytical works of World Bank often helps developing countries. It also helps in capacity development of the developing countries. World Bank also sponsors, host or participates in many conferences and forums on issues of development.

(iv) Social Development : Social Development focuses on the need to “put people first” in development process. The World Bank work with governments, communities, civil societies, the private sector and the marginalized for the cause of social development. Social Development promotes economic growth and leads to higher quality of life.

Question 4.
Describe any two features of Self Help Groups.
Answer:
Features of Self Help Groups:
(i) Democratic Set up : SHG is group of the members, for the members and by the members. Every member of the group actively participates in the functioning of SHGs. Members are responsible for their own future by organizing themselves into SHGs. They elect or select leader for proper functioning of the group. Leader is responsible for holding regular meetings and maintaining records and accounts of the group.

(ii) Collateral Free Loan : SHGs provide small loans to the poor individuals for undertaking self-employment projects. Loans are given on the principle of mutual trust and either minimum or no documentation. Generally the rate of interest are higher than the interest charged by banks. It saves the poor individuals from the clutches of local money lenders. The repayment of loans is ensured timely as all members of group are responsible for collecting repayment amount from the members who borrowed the loan.

Question 5.
Describe any two features of SIDBI.
Answer:
Features of SIDBI:
(i) Financial Institute for Promotion of MSMEs : SIDBI is established to provide short term and long term finance to the MSMEs. It is principal financial institution for micro, small and medium sector units. It also co-ordinate the functions of institutions engaged in financing MSME’s. It provides refinance to Banking and Non-Banking Financial Companies to increase supply of credit to MSMEs.

(ii) Advisory Function : SIDBI also works as advisor and mentor of MSMEs. It helps MSMEs in expanding marketing channels for the products both in domestic as well as international markets. It also initiates steps for modernization and technological upgradation of current units.

5. Justify the following statements

Question 1.
SIDBI acts as an institute for promotion of MSMEs
Answer:

1. There are many efforts taken by SIDBI to emerge as a brand which is customer friendly towards MSME’s.
2. It facilitates and strengthens credit flow to MSME’s.
3. It identifies financial and developmental gaps in the MSME’s and take efforts to resolve the same.
4. SIDBI has dedicated its resources towards evolution of a vibrant ecosystem.
5. SIDBI has taken steps for technological upgradation and modernization of existing MSME’s
6. Thus, we can say that SIDBI acts as an institute for promotion of MSME’s.

Question 2.
SIDBI provides different types of financial and non-financial services through its subsidiaries.
Answer:
The following are the subsidiaries of SIDBI that provides financial and non-financial services:
(i) SIDBI Venture Capital Ltd. provides venture capital to emerging sectors, such as life sciences, biotechnology, pharmaceuticals, engineering and information technology.

(ii) Credit Guarantee Fund Trust for Micro and Small Enterprises is a trust to implement the Credit Guarantee Scheme through which credit facilities are extended without third party guarantee on collateral security by eligible lending banks/financial institutions.

(iii) SME Rating Agency of India Ltd. was set up by SIDBI, Dum & Brandstreet Information Services India Pvt. Ltd. and several public, private and foreign sector banks as an MSME. It is dedicated third-party rating agency and provide comprehensive, transparent and reliable ratings and risk profiling.

(iv) India SME Technology Services Limited is a platform where MSME’s can tap global opportunities for acquiring new emerging technologies and establish business collaborations.

(v) India SME Asset Reconstruction Company Ltd. is an asset reconstruction company. It acquires non-performing assets and try to resolve them through its innovative mechanisms. It specially focus on the non-performing assets of MSME sector.

(vi) Micro Units Development and Refinance Agency is established for ‘funding the unfunded’ micro enterprises in the country.

(vii) Thus, SIDBI provides different types of financial and non-financial services through its subsidiaries.

Question 3.
The NABARD has been recognized as the apex institution for agricultural finance.
Answer:

1. India is an agricultural country.
2. Agriculture and its allied activities act as main source of livelihood for most of the rural population of India.
3. Government of India is aware about the need of boosting institutional credit in rural economy.
4. The RBI constituted a Committee to review the arrangements for Institutional Credit for Agricultural and Rural Development under the Chairmanship of Shri B. Sivaram, to take review of agricultural credit in India.
5. The recommendation of the Committee was accepted and National Bank for Agriculture and Rural Development came into existence on July, 12 1982 under the special Act of the Parliament, with an objective of providing credit and other facilities for the development of agriculture.
6. Thus, we can say the NABARD has been recognized as an apex institution for agricultural finance.

Question 4.
KVIC plays an important role in development of entrepreneurship.
Answer:

1. Entrepreneurship Development is one of the major functions of KVIC.
2. KVIC helps to provide additional livelihood avenues to the village communities.
3. KVIC generate self-employment opportunities through establishment of micro enterprises by organizing traditional artisans and unemployed youth. It increases the earning capacity as well as prevents migration.
4. KVIC actively participates in many international trade exhibitions for popularising its products in international markets.
5. Thus, we can say that KVIC plays an important role in development of entrepreneurship.

Question 5.
Mutual Trust is the soul of SHG.
Answer:

1. Most of the Indian villagers are facing challenges such as poverty, illiteracy, lack of skills, health care, etc.
2. There is a need of group efforts to solve these problems.
3. The basic philosophy of forming SHGs is to overcome individual shortcomings and weaknesses with collective efforts.
4. Through mutual trust thousands of poor and the marginalized individuals are building their lives, their families and their society.
5. Thus, we can say mutual trust is the soul of SHG.

Question 6.
SHGs play an important role in empowerment of women.
Answer:

1. The empowerment of women through SHG’s would lead to benefits not only to the individual women but also for the family and community as a whole.
2. The SHGs empower women and trains them to take active part in socio-economic progress of the nation.
3. SHG develops saving habits among the women.
4. It enhances status of women as they participate, lead, take decisions and get benefited through collective efforts,
5. Thus, we can say that SHG’s play an important role in empowerment of women.

Question 7.
World Bank plays vital role in social development.
Answer:

1. The World Bank work with governments, communities, civil societies, private sectors and the marginalized for the cause of social development.
2. Social development promotes economic growth and leads to higher quality of life.
3. The World Bank work on social development, brings voices of the poor and vulnerable into development process.
4. World Bank is also undertaking timely social risk analysis, including poverty and social impact analysis,
5. Thus, World Bank plays a vital role in social development.

6. Attempt the following

Question 1.
State the different forms of finance provided by SIDBI.
Answer:
SIDBI offers the following finance facilities to its customers:

1. Direct Finance : SIDBI offers direct financing to the MSMEs through financing Working Capital, Term Loan, Foreign Currency Loan, Equity Support, Energy Saving Schemes etc.
2. Indirect Finance : SIDBI offers indirect assistance by providing refinance to banks, State Level Financial Institutions, etc. with an extensive branch network across the country.
3. Micro Finance : SIDBI offers micro-finance to small businessmen and entrepreneurs for establishing their business.

Question 2.
State the role of SIDBI in sustainable development.
Answer:
Role of SIDBI in sustainable development:

1. SIDBI helps MSMEs in creation of economic wealth while preventing ecological wealth of the country.
2. It promotes the culture of energy efficient and sustainable finance.
3. It takes initiative to enhance awareness of benefits of climate control amongst MSMEs.
4. It focuses on lending schemes, promoting investments in clean production and energy efficient technologies.
5. It helps to reduce the emission of greenhouse gases to contribute towards reduction in pollution.

Question 3.
Explain the role of NABARD in financing rural industries.
Answer:
Role of NABARD in financing rural industries:

1. It plays an important role in providing refinance to small scale industries and other village and cottage industries.
2. It provides loans to commercial and co-operative banks to promote rural employment.
3. It organizes skill and entrepreneurship development programmes to promote an entrepreneurial culture among the rural youth and encourage them to start enterprises in the rural areas.

Question 4.
Explain the objectives of KVIC.
Answer:
Objectives of KVIC are:

1. The objectives of KVIC are broadly classified into three, i.e. social objective, economic objectives and wider objective.
2. Through social objective, KVIC aims at providing employment to the rural unemployed.
3. Through economic objective, it tries to produce saleable articles which will give promotion to KVIC products.
4. Through wider objective, it attempts to create self refinance amongst the poor and building a strong rural community spirit.

Question 5.
Explain the role of KVIC in employment generation.
Answer:
Role of KVIC in employment generation:

1. Due to massive population growth agricultural sector is losing its ability to generate additional employment in rural areas.
2. It is necessary to create employment opportunities for the fast increasing workforce in rural areas.
3. Khadi and village industries are labour intensive in nature.
4. The KVIC is established with the broader objective to promote non-farm employment opportunities in rural areas.
5. It also concentrates on the betterment of rural artisans and socio-economic weaker section of the society.

Question 6.
Explain in detail democratic setup in SHGs.
Answer:
Democratic set up in SHGs:

1. SHG is group of the members, for the members and by the members.
2. It is the group which reflects the people’s real participation in the process of development.
3. Every member of the group actively participates in the functioning of SHGs.
4. Members are responsible for their own future by organizing themselves into SHGs.
5. They elect or select leader for proper functioning of the group.
6. Leader is responsible for holding regular meetings and maintaining records and accounts of the group.

Question 7.
Explain organizational structure of World Bank.
Answer:
Organizational Structure of World Bank:

1. The organization of the bank consists of the Board of Governors, the Board of Executive Directors and the Advisory Committee, the Loan Committee and the President and other staff members.
2. Board of Governors is the supreme policy making body of the bank.
3. The board consists of one Governor and one Alternative Governor appointed for 5 years by each member country.
4. The Board of Executive Directors consists of 21 member, 6 of them are appointed by the six largest shareholders, namely USA, UK, Germany, France, Japan and India. The rest 15 members are elected by the remaining countries.

7. Answer the following

Question 1.
Write important features of SIDBI.
Answer:
Important features of SIDBI are as follows:
(i) Sustainable Development : SIDBI is working towards sustainable development of MSMEs in India. It helps MSMEs in creation of economic wealth while preventing ecological wealth of the country. It promotes culture of energy efficient and sustainable finance. It helps to reduce the emission of greenhouse gases to contribute towards reduction in pollution.

(ii) Nodal/Implementing Agency : SIDBI has been assigned the role of nodal agency by the Government of India. It helps in implementing various subsidy schemes for MSMEs. These schemes help in upgradation, modernization and expansion of business.

(iii) Financial Institute for Promotion of MSMEs : SIDBI is established to provide short term and long term finance to the MSMEs. It provides refinance to Banking and Non-Banking Financial Companies to increase supply of credit to MSMEs. SIDBI cater to the specific needs of Indian MSMEs that are not fulfilled through traditional sources of finance.

(iv) Advisory Function: SIDBI also works as an advisor and mentor for MSMEs. It helps MSMEs in expanding marketing channels for the products both in the domestic as well as international markets. It also initiates steps for modernization and technological upgradation of current units.

(v) Forms of Finance : SIDBI offers the following facilities to its customers:

• Direct Finance
• Indirect Finance
• Micro Finance

(vi) Digital Initiatives:
(a) SIDBI Startup Mitra:
It brings together all stakeholders, start-up entrepreneurs, incubators, investors, industry bodies, mentors and advisors and banks at one platform. It helps in financing and development of new entrepreneurs. It also works as knowledge partner for State and Central Government.

(b) Udyami Mitra:
This is the portal launched by SIDBI to improve accessibility of credit and handholding services to MSME’s. Under this portal entrepreneurs can apply for loan without physically visiting any bank branches. The entrepreneurs can select and apply for preferred banks, they can select suitable branch, track their application status an avail multiple loan benefits.

(vii) Achievement of National Goals : SIDBI helps in poverty alleviation and employment generation by financing MSMEs. It promotes entrepreneurship and fosters competitiveness in MSME sector. It promotes entrepreneurship among women and economically weaker section of the society.

(viii) Services of MSMEs : SIDBI provides different types of financial and non financial services through its associates and subsidiaries. These associates and subsidiaries are as follows:

• SIDBI Ventures Capital Ltd.
• Credit Guarantee Fund Trust for Micro and Small Enterprises
• SME Rating Agency of India Ltd.
• India SME Technology Services Limited
• India SME Asset Reconstruction Company Ltd.
• Micro Units Development & Refinance Agency

Question 2.
Write important features of NABARD.
Answer:
Important features of NABARD are as follows:
(i) Financing Rural Industries : It plays an important role in providing refinance for small scale industries and other village and cottage industries. It provides loans to commercial and co-operative banks to promote rural employment. It organizes skill and entrepreneurship development programs to promote an entrepreneurial culture among the rural youth and encourage them to start enterprises in the rural areas.

(ii) Assistance to Financial Institutes : It plays an important role in preparing and developing action plans for Co-operative Banks and Regional Rural Banks. It also monitors implementation of developmental action plans of these banks. It provides financial assistance to co-operative banks for building improved Management Information System, computerization of operations and development of human resources.

(iii) Refinancing Facilities : It provides refinancing facilities to State Co-operative Banks (SCBs), Land Development Banks (LDBs), Regional Rural Banks (RRBs) and other approved financial institutions for financing rural economic activities. It also provides short-term, medium term and long term credit to these institutes.

(iv) Credit for Rural Development: It takes initiative in development and promotion of different activities in rural area by providing funds to State government. It also works on improvement of small and minor irrigation by way of promoting agricultural activities.

(v) Apex Bank : NABARD acts as an apex bank for meeting the credit needs of all type of financial institutions working in the field of agricultural and rural development. It works to frame policies and guidelines for rural financial institutions in India. It provides credit facilities to institutes working in agricultural finance.

(vi) Recommendations to Reserve Bank of India : It provides recommendations to Reserve Bank of India on issue of licenses to Co-operative Banks, opening of new branches by State Co-operative Banks and Regional Rural Banks.

(vii) Development of Nation: It plays an important role in the improvement of storage facilities for agricultural commodities by promoting development of warehousing facilities. It also promotes the export of agricultural commodities. It plays a key role in sustainable development of the country through Green, Blue and White revolution.

(viii) Supervision of Financial Institutes Engaged in Agricultural Finance :It undertakes inspection of Regional Rural Banks and Co-operative Banks as per the guidelines of Banking Regulation Act, 1949. It can also undertake inspection of State Co-operative Agriculture and Rural Development Banks and apex non-credit co-operative societies on a voluntary basis.

Question 3.
Write important features of KVIC.
Answer:
Important features of KVIC are as follows:
(i) Research and Development: To face the challenge of globalisation, KVIC has introduced a number of new products range like khadi denim jeans to cater the need of the market. The KVIC undertake trainings of sales staff for effective marketing of the products. KVIC is taking several steps to set standards of quality to ensure genuineness of the khadi products. KVIC signed Memorandum of Understanding with National Institute of Design to provide design support, services in packaging, marketing, communication, publicity, disseminating materials and other design-related activities.

(ii) Other Functions : The KVIC is charged with the planning, promotion, organization and implementation of programs for the development of Khadi and other village industries in the rural area. It organizes training programme for artisans engaged in Khadi and Village Industries.

(iii) Marketing Promotion : In order to attract younger generation, the KVIC is holding exhibitions, seminars, lectures in universities and colleges to disseminate knowledge of KVIC products. KVIC has also launched a massive marketing development plan to generate interest, awareness and attraction amongst masses.

(iv) Financial Assistance : It finances the projects for rural industrialization and also provides for margin money by way of subsidy. There are provisions for higher rate of subsidies in case of beneficiaries of the weaker section, tribal areas and backward regions. KVIC also provides financial assistance to institutions and individuals for development and operation of Khadi and Village industries.

(v) Rural Development : The Khadi and Village Industries plays an important role in the development of Indian economy, particularly in the development of the rural areas. KVIC facilitates proper utilization of natural resources in rural India for generating income for the rural masses.

(vi) Employment Generation: Due to increasing workforce, it is necessary to create employment opportunities. KVIC are labour intensive in nature. The broader objective of KVIC is to promote non-farm employment opportunities in rural areas.

(vii) Entrepreneurship Development : KVIC helps to provide additional livelihood avenues to the village communities. KVIC generate self-employment opportunities through establishment of micro enterprises by organizing traditional artisans and unemployed youth.

Question 4.
Write important features of SHGs.
Answer:
Important features of SHGs are as follows:
(i) Formation : It is generally formed by NGO’s or team of the government. It is an informal group. It is recognized by the government and does not require any formal registration. SHGs have well-defined rules and by-laws, hold regular meetings and maintain records.

(ii) Membership : As per the National Urban Livelihood Mission at least 5 members are required. It is difficult to manage bigger group and members cannot actively participate. From one family only one person can become a member so that more families can participate. Mixed groups are generally not preferred.

(iii) Entrepreneurship Development : The poor individuals in rural area face scarcity of capital and managerial skills. SHGs provide them capital at low interest rate which give them opportunity to start micro enterprise. These micro enterprises use untapped manpower in the area which generates employment opportunities in rural area.

(iv) Collateral Free L oan: SHGs provide small loans to the poor individuals for undertaking self-employment projects. Loans are given on the principle of mutual trust and either minimum or no documentation is required to get loan. The rate of interest differs from group to group and it is little higher than the interest charged by banks. It ensures timely repayment of loans as all members of the group are responsible for collecting repayment amount from the members who borrowed the loan.

(v) Democratic Setup : SHG is group of members, for the members and by the members. It is the group which reflects the people’s real participation in the process of development. Members elect or select leader for proper functioning of the group. Leader is responsible for holding regular meetings and maintaining records and accounts of the group.

(vi) Empowerment of Women : SHG is an emerging tool for socio-economic development of women all over the world. SHGs are working effectively in promoting women entrepreneurship. SHGs empower women by providing her knowledge, finance and opportunities.

(vii) Saving Habits : The SHG encourages small saving habits at regular interval among its members. The Self Help Group inculcates the thrift and savings habit among the members of each group.

(viii) Mutual Trust : Most of the Indian villages are facing challenges such as poverty, illiteracy, lack of skills, health care, etc. The basic philosophy of forming SHGs is to overcome individual shortcomings and weaknesses with collective efforts. Through mutual trust thousands of the poor and marginalized individuals are building their lives, their families and their society.

Question 5.
Write important features of World Bank.
Answer:
Important features of World Bank are as follows:
(i) Organisation and Structure : The organization of the bank consists of the Board of Governors, the Board of Executive Directors and the Advisory Committee, the loan Committee and the President and other staff members. Board of Governors is the supreme policy making body of the bank. The board consists of one Governor and one Alternative Governor appointed for 5 years by each member country. The Board of Executive Directors consists of 21 member, 6 of them are appointed by the six largest shareholders, namely USA, UK, Germany, France, Japan and India. The rest 15 members are elected by the remaining countries.

(ii) Innovation and Entrepreneurship : Innovation and Entrepreneurship helps in higher productivity which leads to increased economic growth. It helps in creation of employment to eradicate poverty. Young and growth oriented companies contribute in employment growth. They help in enhancing competitiveness and productivity by introducing new products, developing novel business models and opening new markets. The World Bank brings global experience, knowledge, research and investments to help client countries develop effective innovation and entrepreneurship ecosystems, such as policies, strategies, regulations and institutions that foster investments and jobs.

(iii) Financial Products and Services : World Bank provides low-interest loans, zero to low interest credits, and grants to developing countries. It supports in areas such as education, health, public administration, infrastructure, financial and private sector development, agriculture and environmental and natural resource management.

(iv) Innovative Knowledge Sharing : World bank sponsors, host or participates in many conferences and forums on issues of development. It also collaborates with partners on many developing issues. It also takes effort to provide access to the best global expertise to the developing countries.

(v) Goals :
The world bank group has set 2 goals to be achieved by 2030.

• End extreme poverty by decreasing the percentage of people living on less than 1.90 dollars a day to no more than 3%.
• Promote shared prosperity by fostering the income growth of the bottom 40% of every country.

(vi) Social Development : Social Development focuses on the need to ‘put people first’ in development process. The World Bank’s work on social development, brings voices of the poor and vulnerable into development.

Balbharti Maharashtra Board Organisation of Commerce and Management 11th Textbook Solutions Chapter 5 Forms of Business Organisation – II Textbook Exercise Questions and Answers.

Maharashtra State Board 11th Organisation of Commerce and Management Solutions Chapter 5 Forms of Business Organisation – II

1. (A) Select the correct option and rewrite the sentence

Question 1.
Departmental Organisation is financed through …………………… appropriations made by the legislature.
(a) annual budget
(b) monthly budget
(c) quarterly budget
Answer:
(a) annual budget

Question 2.
A ………………. is an autonomous corporate body created by the special Act of the parliament or State legislature.
(a) Statutory corporation
(b) government company
(c) MNC
Answer:
(a) Statutory corporation

Question 3.
A statutory corporation is answerable to ……………… or state assembly whosoever creates it.
(a) Parliament
(b) public
(c) employees
Answer:
(a) Parliament

Question 4.
In government company minimum …………………. % paid up capital is held by government.
(a) 51
(b) 41
(c) 31
Answer:
(a) 51

Question 5.
The shares of government company are purchased in the name of ………………
(a) President of India
(b) Chief Minister
(c) Defence Minister
Answer:
(a) President of India

Question 6.
Government on the advice of ………………… appoints auditor of government company.
(a) Comptroller and Auditor General of India
(b) auditor
(c) chartered accountant
Answer:
(a) Comptroller and Auditor General of India

Question 7.
A government company is a ………………… entity separate from the government.
(a) natural
(b) legal
(c) human
Answer:
(b) legal

Question 8.
……………… company has public accountability.
(a) MNC
(b) Private
(c) Government
Answer:
(c) Government

Question 9.
MNCs are powerful ……………….. entities.
(a) economical
(b) political
(c) social
Answer:
(a) economical

1. (B) Match the pairs

Question 1.

Answer:

1. (C) Give one word / phrase / term

Question 1.
Organisations which are owned by individual or group of individuals.
Answer:
Private Sector Organisations

Question 2.
Organisations which are owned by government.
Answer:
Public Sector Organisations

Question 3.
The sector which aims at profit maximization.
Answer:
Private sector

Question 4.
The sector which aims at providing reliable services to customers.
Answer:
Public sector Organisation

Question 5.
Organisations which are owned, financed, managed and controlled by government or combination of governments.
Answer:
Public sector Organisation

Question 6.
The organisation which is owned, managed, controlled and financed by government.
Answer:
Departmental Organisation

Question 7.
The oldest form of business organisation under public sector.
Answer:
Departmental Organisation

Question 8.
The organisation which performs it’s all activities as an integral part for government only.
Answer:
Departmental Organisation

Question 9.
The organisation which is financed through annual budget appropriations made by the legislature.
Answer:
Departmental Organisation

Question 10.
The organisation in which there is direct and absolute control of government over the enterprise.
Answer:
Departmental Organisation

Question 11.
An autonomous corporate body created by the Special Act of the parliament or state legislature with defined powers, functions and duties.
Answer:
Statutory Corporation

Question 12.
An organisation which is answerable to parliament or state assembly whosoever creates it.
Answer:
Statutory Corporation

Question 13.
An organisation which is not subject to the budget, accounting and audit controls by the government.
Answer:
Statutory Corporation

1. (D) State True or False

Question 1.
Private sector organisations are owned by individual or group of individuals.
Answer:
True

Question 2.
Public sector organisations are owned by government.
Answer:
True

Question 3.
Private sector aims at providing reliable services to customers.
Answer:
False

Question 4.
Public sector was undertaken as a part of industrial policy, 1956.
Answer:
True

Question 5.
Departmental organisation is the oldest form of business organisation under public sector.
Answer:
True

Question 6.
Departmental organisation performs its all activities separately from government.
Answer:
False

Question 7.
The Minister-in-charge of ministry is the head of departmental organisation.
Answer:
True

Question 8.
There is always problem of red tapism and bureaucracy in departmental organisation.
Answer:
True

Question 9.
There is large scope for the initiative and skill in departmental organisation.
Answer:
False

Question 10.
In departmental organisation there is flexibility in operations.
Answer:
False

1. (E) Find the odd word out

Question 1.
Indian Post, Indian Railway, Bank of India, Air India.
Answer:
Bank of India

Question 2.
Life Insurance Corporation, Reserve Bank of India, Bharat Heavy Electricals Limited, ONGC.
Answer:
Bharat Heavy Electricals Limited

Question 3.
Pepsi, Coca Cola, Dabur, Proctor & Gamble.
Answer:
Dabur

Question 4.
Tata Motors, Hindustan Aeronautics Limited, Steel Authority of India Limited, Gas Authority of India Limited.
Answer:
Tata Motors

1. (F) Complete the sentences

Question 1.
A Government company is a ………………… entity separate from the government.
Answer:
Legal

Question 2.
………………… is owned, managed, controlled and financed by government.
Answer:
Departmental Organisation

Question 3.
A ………………… has defined powers, functions and duties.
Answer:
Statutory corporation

Question 4.
All government companies are registered under ………………… Act, 2013.
Answer:
Companies

Question 5.
MNCs are powerful ………………… entities.
Answer:
economical

1. (G) Answer in one sentence

Question 1.
What is Government Company?
Answer:
The Company which is registered under Companies Act, 2013 having minimum 51% of paid up share capital held by central government or any state government or partly by central government and partly by one or more state governments is known as Government company.

Question 2.
What is Departmental Organisation?
Answer:
It is the oldest form of business organisation. Departmental Organisation performs its all activities as an integral part for government only.

Question 3.
What is Statutory Corporation?
Answer:
Statutory Corporation is an autonomous corporate body created by the special act of the parliament or state legislature with defined powers, functions and duties.

Question 4.
What is Multinational Corporation?
Answer:
A multinational corporation is a business organisation that operates in many different countries at the same time.

Question 5.
What is Public Sector?
Answer:
Public sector organisations are those organisations which are setup by the government with the main object of providing essential services to the general public.

Question 6.
What is Private Sector?
Answer:
Private sector business which are owned by private individuals or group of individuals are termed as private sector organisation.

1. (H) Correct the underlined word and rewrite the following sentences

Question 1.
Statutory Corporation is a natural person created by Special Act.
Answer:
Statutory Corporation is an artificial person created by special act.

Question 2.
A Statutory Corporation is not answerable to parliament or state assembly.
Answer:
A statutory corporation is answerable to parliament or state assembly.

Question 3.
MNC have existence only in single country.
Answer:
MNC have existence in many countries.

Question 4.
Departmental Organisation has separate existence from government.
Answer:
Departmental Organisation has no separate existence from government.

Question 5.
Private sector aims at providing essential services to customers.
Answer:
Public sector aims at providing essential services to customers.

2. Explain the following terms/concepts

Question 1.
Public Sector Organisation.
Answer:

1. It is owned, managed, controlled and financed by government.
2. It includes – Departmental Organisation, Statutory Corporation and Government Companies.
3. Its main objective is to provide services to society.
4. It is managed by government officials or Board of Director.
5. It is large in size and operates on large scale.

Question 2.
Private Sector Organisation.
Answer:

1. It is owned, managed, controlled and financed by individuals or group of individuals.
2. It includes – Sole Trading Concern, Joint Hindu Family Firm, Partnership Firm, Joint Stock Company and Co-operative Society.
3. Its main objective is to maximise profit.
4. It is managed by the owner himself or by their elected representatives.
5. It generally operate in industrial and commercial areas only.

Question 3.
Departmental Organisation.
Answer:

1. It is owned, managed, controlled and financed by government.
2. It is managed by government officials of concerned ministry.
3. They do not have autonomy in decision making.
4. They do not have separate legal entity distinct from government.
5. It is funded through annual budget of the government.

Question 4.
Statutory Corporation.
Answer:

1. It is formed under a Special Act of Parliament or State Legislature.
2. It is managed by Board of Director who are appointed by the government.
3. They enjoy autonomy in decision making.
4. They have separate legal entity distinct from government.
5. It is funded by the government initially and also in need of additional capital.

Question 5.
Government Company.
Answer:

1. It is a company where 51% of the paid up capital is held by Central Government or State Government jointly or individually.
2. It is managed by Board of Directors appointed by Government and Shareholders.
3. It is formed and registered under Companies Act, 2013.
4. They can borrow funds by issuing shares to the public or through debentures, deposits, etc.

Question 6.
Multinational Corporation.
Answer:

1. It is a business organisation that operates in many different countries.
2. It conducts business activities in more then one country.
3. It is controlled through centrally located head office.
4. They are also called as transnational or international corporations.
5. Example : Bata India, Infosys, Tata Motors, etc.

3. Study the following case/situation and express your opinion

1. There is X company in which capital contribution by different entities are as follows : Madhya Pradesh Government 35%, Maharashtra Government 35% and Government of India 30% of company.

Question 1.
Find out type of this company.
Answer:
‘X’ company is a Government Company.

Question 2.
Tell any two features of this company.
Answer:
Separate legal entity and Registration under the Companies Act, 2013 are the features of “X Government Company.

Question 3.
Give an example of this type of company.
Answer:
Hindustan Machine Tools (HMT), State Trading Corporation (STC), are the examples of the Government Company.

2. There is a company which is having a registered office in Singapore and such company is having branch offices in Varanasi (India) and Hambantota (Sri Lanka). This company provides cellular services to host countries through their respective branch offices.

Question 1.
Find out type of organisation.
Answer:
This type of organisation is called as Multinational Corporation.

Question 2.
Comment on it.
Answer:
Multinational Corporation means the companies which undertake business activities in more than one country. So this company is registered in Singapore and having branches in India and Sri Lanka.

Question 3.
Name the business organisation, which is self-financed, delegates authority and run by government as an integral part of it.
Answer:
It is a Departmental Organisation.

Question 4.
State any two merits of this organisation.
Answer:
No separate legal entity and Government employees are the merits of Departmental Organisation.

3. A central government passes a statute in the parliament and forms a business organisation which is having autonomy in administration and this organisation is answerable to legislature.

Question 1.
Which type of organisation is this?
Answer:
It is a Statutory Corporation.

Question 2.
Give any three Features of this organisation.
Answer:
Corporate body, No political interference, Own staffing system are the features of Statutory Corporation.

Question 3.
Give any one example of this type of organisation.
Answer:
“Life Insurance Corporation of India” is the example of Statutory Corporation.

4. Distinguish between the following

Question 1.
Private Sector Organisation and Public Sector Organisation.
Answer:

Question 2.
Departmental Organisation and Statutory Corporation.
Answer:

Question 3.
Government Company and Multinational Corporation.
Answer:

Question 4.
Departmental Organisation and Multinational Corporation.
Answer:

Question 5.
Government Company and Statutory Corporation.
Answer:

Question 6.
Departmental Organisation and Government Company.
Answer:

Question 7.
Statutory Corporation and Multinational Corporation.
Answer:

5. Answer in brief

Question 1.
State any four features of Departmental Organisation.
Answer:
Features of Departmental Organizations:
(i) Delegation of Authority : All major policy decisions are taken by the ministry. The day-to-day working is looked after by the staff consisting of civil servants of IAS, IPS cadres.

(ii) Organizational Structure : The internal organizational structure is of line type. The department is headed by minister who is responsible for the working of the department. Then there is Board of Directors or Managing Committee who are assisted by Chief Executive, Executive Assistant, Supervisory and General Staff. This is termed as bureaucracy style or military style of organisation.

(iii) Government Employees : The employees of departmental organization are civil servants and they are selected through Union Public Service Commission. Staff selection Board, Railway Recruitment Board etc. and as such they are treated as Government employees.

(iv) Financed by the Government: The funds are arranged for their operation from Government treasury. This enterprise cannot borrow money from the public without Government consent.

Question 2.
State any four features of Statutory Corporation.
Answer:
Features of Statutory Corporation:
(i) No political Interference : It enjoys freedom from political, parliamentary and government interference in day-to-day management.

(ii) Own Staffing System: They recruit their own employees and they are not government servant. Employees terms and services are not governed by civil services rules.

(iii) No Political Interference : It enjoys freedom from political, parliamentary and government interference in day to day management of its affairs.

(iv) Financial Autonomy : Statutory Corporations are financially autonomous. After getting the prior permission from the Government, it can even borrow money within and outside the country.

(v) Independent Identity : They have an independent identity different from the government. Though, the overall business policies are formulated by the government, they have administrative autonomy and hence operational flexibility.

Question 3.
State any two demerits of Multinational Corporation.
Answer:
Demerits of Multinational Corporation:
(i) Danger for Domestic Industries : Multinational Corporations have vast economic power so they are danger to domestic industries which are still in process of development. Domestic industries not so powerful to face the challenges of Multinational Corporation.

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

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

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

Question 4.
State any four merits of Government Company.
Answer:
Merits of Government Company:
(i) Profitability and Accountability : It works on business principles and follows commercial approach. Though not profit oriented like private sector, it does make reasonable profit which is used for public welfare, modernisation, renovation and development. Moreover, its performance can be evaluated by the Parliament as it has public accountability.

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

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

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

6. Justify the following statements

Question 1.
Departmental Organisations are run for providing public services.
Answer:

1. Departmental Organisations are the oldest forms of public enterprises.
2. Indian railways, post office, defence, All India Radio are the Departmental Organisations.
3. Indian Railways give services to public.
4. Main objective of Departmental Organisations is to provide services to public.
5. Private sector aims at profit maximization while public sector aims to providing reliable services to customers.
6. Thus, Departmental Organisations are run for providing public services.

Question 2.
There is direct control of Government on departmental organisation.
Answer:

1. Departmental organisations are run by the Government.
2. Departmental organisations are financed through annual budget of Government.
3. Revenues of departmental organisation is directly paid to Government treasury.
4. Departmental organisation has no separate existence from Government.
5. The staff of enterprises is treated equally with other civil servants.
6. Thus, there is direct control of Government on departmental organisation.

Question 3.
There is no political interference in statutory corporation.
Answer:

1. A Statutory corporation is an autonomous corporate body.
2. Statutory corporation is an artificial person created by law and it has an independent legal entity.
3. Employees are not government servants.
4. A statutory corporation enjoys financial autonomy or independence.
5. A statutory corporation comes into existence by following particular act, therefore, there is no political interference in formation.
6. Thus, all statutory corporations are free from political interference.

Question 4.
There is professional management in statutory corporation.
Answer:

1. A statutory corporation is able to manage its affairs with independence and flexibility.
2. Management of statutory corporation is done without any government interference.
3. The statutory corporation is relatively free from red tapism.
4. There is less file work and less formality to be completed before taking decisions.
5. Board of directors of statutory corporation consists of business experts and the representatives of various groups such as labour, consumers, etc. who are nominated by the government.
6. Thus, there is professional management in statutory corporation.

Question 5.
MNC helps to end local monopolies.
Answer:
Multinational corporation helps to end local monopolies.

1. Multinational corporations lead to competition in the host countries.
2. Local monopolies of host countries either start improving their products or reduces their prices.
3. Multinational corporation put an end to exploitative practices of local monopolists.
4. As a matter of fact, MNCs compel domestic companies to improve their efficiency and quality.
5. Thus, MNC helps to end local monopolies.

Question 6.
MNC has worldwide existence.
Answer:

1. As multinational corporation is operating on a global basis.
2. Multinational corporation have marketing operations in several countries operating through a network and branches.
3. They have production facilities in several countries.
4. Advanced Technology and international business operations are done by MNC.
5. It brings in much needed foreign capital for the rapid development.
6. Multinational corporation integrate economies of various nations with the world economy.
7. Thus, MNC has worldwide existence.

Question 7.
MNC has mighty economic powers.
Answer:

1. As MNC is operating on a global basis, they have huge physical and financial assets.
2. In terms of assets and turnover, many MNCs are bigger than national economies of several countries.
3. Multinational corporations are powerful economic entities.
4. Multinational corporation keep on adding to their economic power through constant mergers and acquisitions of companies in host countries.
5. Thus, MNC has mighty economic powers.

7. Attempt the following

Question 1.
Merits of Departmental Organisation.
Answer:
Merits of Departmental Organization:
1. Qualified Staff : Departmental organizations are properly managed and supervised by the qualified government staff.

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

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

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

Question 2.
Demerits of Departmental Organisation.
Answer:
Demerits of Departmental Organisation:
(i) Delay in Action : In Departmental organisation there is always centralization of authorities. Such excessive centralization of authority leads to delay in action.

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

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

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

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

Question 3.
Merits of Statutory Corporation.
Answer:
Merits of Statutory Corporation:
(i) Professional Management: Statutory Corporations are managed professionally. The directors and other executives are highly trained and specialize in their respective fields. This leads to efficiency in working.

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

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

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

Question 4.
Demerits of Statutory Corporation.
Answer:
Demerits of Statutory Corporation:
Though statutory corporations are autonomous bodies and enjoy flexibility in their working, they have certain limitations which are as follows:
(i) Clashes Amongst Interests : All or majority directors of Statutory Corporations are appointed by the Government from different fields. As there are many members it is quite possible that their interests may clash. The smooth functioning of the corporation may be hampered.

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

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

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

Question 5.
Features of Government Company.
Answer:
Features of Government Company:
The Government Company may be registered as public or private limited companies. These companies are established for purely business purpose and to compete with the private sector.
Following are the features of Government Company:
(i) Free from Procedural Controls: The Government companies have a right to formulate their independent policies and even make necessary changes in them. It enjoys freedom from budgetary, accounting and audit controls which are applicable to Government undertakings.

(ii) Majority of Government Directors : All or majority of directors of such companies are appointed by the Government from different fields. They may be experts from banking sector, insurance sector, who manage the day to day business affairs.

(iii) Public Accountability : The annual accounts of the company are tabled before Parliament or State Legislature for review and discussion. Thus, Government Company is accountable and answerable to the Parliament or State Legislature through the concerned Minister.

(iv) Registration under the Companies Act: The Government Company is registered under the Companies Act, 2013 and its formation, working, management and winding up a business is governed by provisions of- the Act. Government has power to modify or change certain provisions laid down in the Act.

Question 6.
Demerits of Government Company.
Answer:
Demerits of Government Company:
Though Government Company enjoys various benefits due to Government ownership and autonomy, it has following limitations:
(i) Inefficiency and Corruption : The Directors have no financial stake in the company and as a result they are indifferent towards working of the company. Due to limited autonomy and petty politics, the efficiency of the enterprise is affected. It results in corruption.

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

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

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

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

Question 7.
Features of Multinational Corporation.
Answer:
Features of Multinational Corporation:
Following are the features of Multinational Corporation:
(i) Advanced and Sophisticated Technology : Multinational company has large capital and sophisticated technology and infrastructure. As a result it undertakes diversified and multifarious activities including manufacturing, marketing, financial, research and development.

(ii) Legal Existence : MNCs are registered in their home country as per their laws and as such they enjoy separate legal status. It can sue and be sued, enter into contracts and own property in their own name.

(iii) Government: MNCs have to bring about the necessary changes in their functioning based upon the laws prevailing in the countries of their operations. For e.g. advertisement about various products on TV is given in local languages in India and in national language Hindi, to cover maximum target audience. In some cases they have to change the menu to suit local demands for e.g. McDonalds had to change its menu for its business in India.

(iv) Origin: The MNCs have origin in one country and the country to which they belong is called home country. The country in which they operate their business activities is called host country. These companies are registered in their home country and have a place of business in different countries of the world. The head office controls the operations of different branches through a network of internet. They also appoint their representatives in host countries for smooth business operations.

Question 8.
Merits of Multinational Corporation.
Answer:
Merits of Multinational Corporation:
Following are the merits of Multinational Corporation.
(i) Proper use of Idle Resources : The national income of host country increases as MNCs use idle physical and human resources with latest technologies.

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

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

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

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

8. Answer the following in details

Question 1.
Explain Departmental Organization and its features.
Answer:
(A) Meaning:
Departmental organizations are oldest form of public enterprises. These are run by Government departments headed by a minister who guides and controls the activities of the undertaking e.g. Indian Railways, all India Radio, Indian Post, Defence etc. A Departmental organization is organized, financed and controlled by Government like any other Government department. Under this type of organization, no distinction is made between public sector and traditional Government functions.

(B) Features of Departmental Organizations:
(i) Delegation of Authority : All major policy decisions are taken by the ministry. The day-to-day working is looked after by the staff consisting of civil servants of IAS, IPS cadres.

(ii) Organizational Structure : The internal organizational structure is of line type. The department is headed by minister who is responsible for the working of the department. Then there is Board of Directors or Managing Committee who are assisted by Chief Executive, Executive Assistant, Supervisory and General Staff. This is termed as bureaucracy style or military style of organisation.

(iii) Government Employees : The employees of departmental organization are civil servants and they are selected through Union Public Service Commission. Staff selection Board, Railway Recruitment Board etc. and as such they are treated as Government employees.

(iv) Financed by the Government: The funds are arranged for their operation from Government treasury. This enterprise cannot borrow money from the public without Government consent.

(v) Useful for Secret: matters like defence, atomic energy, etc.

(vi) No Legal Status : A government department does not enjoy an independent legal status. It is dependent on the Government. It cannot be taken to court without the consent of the Government. Thus, the above are the features of Departmental Organization.

(vii) Government Sanction for Expansion : Public Enterprises need to take the sanction of the Government for expansion and diversification of business or for changing the policies, etc.

(viii) Examples of Departmental Organisation : Ordinance factories, Railways, Broadcasting, Post and Telegraph, BHEL, Indian Drug and Pharmaceuticals Ltd. Hindustan Aeronautics Ltd. Army Clothing Factory, Gun Factory and so on.

(ix) Run by Government : Different procedures like accounting, auditing and budgeting are at par with Government department.

(x) Managed by Government : The Departmental organization is managed by Government officials of the concern ministry.

(xi) Accounting Control : The organisation is subject to accounting and audit procedures and controls as applicable to government departments or to the concerned ministry.

(xii) Accountability : The enterprise is funded by the government and hence the government controls its affairs. In other words, it is answerable to the Parliament.

(xiii) No Separate Legal Entity : A Government department does not enjoy an independent legal status. It is dependent on the Government. It cannot be taken to court without the consent of the Government.

Question 2.
Explain merits and demerits of Departmental Organization.
Answer:
(A) Meaning:
Departmental organizations are run by the Government departments headed by a minister who guides and controls the activities of the undertaking.

(B) Merits of Departmental Organization:
1. Qualified Staff : Departmental organizations are properly managed and supervised by the qualified government staff.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Question 3.
Explain Statutory Corporation and its features.
Answer:
(A) Meaning:
Statutory Corporations are autonomous bodies established under special legislative Acts. A statutory corporation is formed under a Special Act of Parliament or State Legislature. The powers, duties, functions and scope of operations are laid down in the Act.
LIC, IFCI, SBI, UTI, Air India are the examples of public corporation.
Statutory Corporation is a body with a separate existence, which can sue and be sued and is responsible for its own finance. It is administered by a board appointed by public authority to which it is answerable.

(B) Features of Statutory Corporation:
(i) No political Interference : It enjoys freedom from political, parliamentary and government interference in day-to-day management.

(ii) Own Staffing System: They recruit their own employees and they are not government servant. Employees terms and services are not governed by civil services rules.

(iii) No Political Interference : It enjoys freedom from political, parliamentary and government interference in day to day management of its affairs.

(iv) Financial Autonomy : Statutory Corporations are financially autonomous. After getting the prior permission from the Government, it can even borrow money within and outside the country.

(v) Independent Identity : They have an independent identity different from the government. Though, the overall business policies are formulated by the government, they have administrative autonomy and hence operational flexibility.

(vi) Special Act : They are established under a special Act passed by the Parliament. Its objectives, powers 98and functions are regulated by the Act.

(vii) Corporate Body : Statutory Corporation is a corporate body. It has a separate legal entity distinct from its members and thereby can enter into contracts and acquire property on its own name.

(viii) Answerable to the Legislature : A statutory corporation is answerable to Parliament or State Assembly whomsoever creates it. Parliament has no right to interfere. Though the overall business policies are formulated by the government, they have administrative autonomy and hence operational flexibility.

(ix) Legal Status : As a body corporate, it has a separate legal entity, distinct from its members and thereby can enter into contracts and acquire property in its own name.

(x) Independent Accounting System : They are not subject to budget accounting and audit laws and procedures applicable to government departments. But financial reports are placed in the Parliament for discussion.

(xi) Public Accountability : It’s accounts are audited by the Comptroller and Auditor General of India. Its annual reports and results are placed in Parliament or Legislative Assembly for discussion and hence answerable for their working and results to the Parliament.

(xii) Objective : It is service oriented and not profit oriented. It works efficiently to earn profit which is used for its day to day functioning.

Question 4.
Explain merits and demerits of statutory corporation.
Answer:
(A) Introduction
Statutory Corporations are autonomous bodies established under special legislative Acts. A statutory corporation is formed under a Special Act of Parliament or State Legislature. The powers, duties, functions and scope of operations are laid down in the Act.
LIC, IFCI, SBI, UTI, Air India are the examples of public corporation.

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

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

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

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

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

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

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

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

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

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

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

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

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

(C) Demerits of Statutory Corporation:
Though statutory corporations are autonomous bodies and enjoy flexibility in their working, they have certain limitations which are as follows:
(i) Clashes Amongst Interests : All or majority directors of Statutory Corporations are appointed by the Government from different fields. As there are many members it is quite possible that their interests may clash. The smooth functioning of the corporation may be hampered.

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

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

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

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

Question 5.
Explain Government Company and its features.
Answer:
(A) Meaning:

1. A Government Company is one in which atleast 51% of its paid up capital is held by the Central Government and / or the State Government.
2. State Trading Corporation (STC), Steel Authority of India (SAIL), Bharat Heavy Electricals Ltd (BHEL) etc. are some of the examples of Government Companies.
3. These companies are registered under the Indian Companies Act, 2013 and its working is governed by the rules and regulations of the act.
4. Government Companies are established for purely business purpose and to complete with the private sector. The shares of the company are purchased in the name of the President of India.
5. Government Companies may be registered as public or private limited companies.

(B) Features of Government Company:
The Government Company may be registered as public or private limited companies. These companies are established for purely business purpose and to compete with the private sector.
Following are the features of Government Company:
(i) Free from Procedural Controls: The Government companies have a right to formulate their independent policies and even make necessary changes in them. It enjoys freedom from budgetary, accounting and audit controls which are applicable to Government undertakings.

(ii) Majority of Government Directors : All or majority of directors of such companies are appointed by the Government from different fields. They may be experts from banking sector, insurance sector, who manage the day to day business affairs.

(iii) Public Accountability : The annual accounts of the company are tabled before Parliament or State Legislature for review and discussion. Thus, Government Company is accountable and answerable to the Parliament or State Legislature through the concerned Minister.

(iv) Registration under the Companies Act: The Government Company is registered under the Companies Act, 2013 and its formation, working, management and winding up a business is governed by provisions of- the Act. Government has power to modify or change certain provisions laid down in the Act.

(v) Own Staff: The employees are appointed as per the rules and regulations set by the company. Its employees are not governed by respective Government.

(vi) Promotes Social Welfare : Government Companies aims to optimise national and natural resources such as land, water, electricity, etc. It produces arms, ammunition and other defence equipments. It also brings about balanced regional development and leads to equality of income.

(vii) Objective : It operates on commercial principles and as such its aim is to make profit.

(viii) Separate Legal Entity : A Government Company is a corporate body created under the Companies Act. It has all features of a company such as legal entity, common seal, limited liability, etc. It can enter into contracts and acquire property in its own name.

(ix) Exemptions : Government Company is exempted from budget, accounting and audit laws applicable to government departments. Its accounts are audited by the Government Auditor. The Government has a right to exempt the company from any provisions of Companies Act which may come in its way of providing welfare services to the public at large.

(ix) Suitability : Government Companies are suitable for conducting manufacturing and marketing activities.

Question 6.
Explain Merits and Demerits of Government Company.
Answer:
(A) Merits of Government Company:
(i) Profitability and Accountability : It works on business principles and follows commercial approach. Though not profit oriented like private sector, it does make reasonable profit which is used for public welfare, modernisation, renovation and development. Moreover, its performance can be evaluated by the Parliament as it has public accountability.

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

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

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

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

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

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

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

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

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

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

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

(B) Demerits of Government Company:
Though Government Company enjoys various benefits due to Government ownership and autonomy, it has following limitations:
(i) Inefficiency and Corruption : The Directors have no financial stake in the company and as a result they are indifferent towards working of the company. Due to limited autonomy and petty politics, the efficiency of the enterprise is affected. It results in corruption.

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

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

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

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

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

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

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

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

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

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

Question 7.
Explain Multinational Corporation and its features.
Answer:
(A) Meaning:
(i) Global enterprises or Multinational Corporations are the Corporations which under take business activities in more than one country. Any company having its head office in one country and place of business in other countries is called a Multinational Corporation.

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

(B) Features of Multinational Corporation:
Following are the features of Multinational Corporation:
(i) Advanced and Sophisticated Technology : Multinational company has large capital and sophisticated technology and infrastructure. As a result it undertakes diversified and multifarious activities including manufacturing, marketing, financial, research and development.

(ii) Legal Existence : MNCs are registered in their home country as per their laws and as such they enjoy separate legal status. It can sue and be sued, enter into contracts and own property in their own name.

(iii) Government: MNCs have to bring about the necessary changes in their functioning based upon the laws prevailing in the countries of their operations. For e.g. advertisement about various products on TV is given in local languages in India and in national language Hindi, to cover maximum target audience. In some cases they have to change the menu to suit local demands for e.g. McDonalds had to change its menu for its business in India.

(iv) Origin: The MNCs have origin in one country and the country to which they belong is called home country. The country in which they operate their business activities is called host country. These companies are registered in their home country and have a place of business in different countries of the world. The head office controls the operations of different branches through a network of internet. They also appoint their representatives in host countries for smooth business operations.

(v) Research & Development: MNCs give lot of importance to research and development activities. They are also fully equipped and have necessary infrastructure. The R&D is undertaken for finding out new product, new system, new technology, new methods of doing business in an economical way.

(vi) International Operations : Multinational Corporation play a significant role in world trade. Nearly 40% of the world is contributed by the multinational companies.

(vii) Target Profit Oriented : Earning profit is the main motive of MNCs. For this purpose they introduce new and novel products, launch new marketing schemes, organize trade fairs and exhibitions, does lots of publicity and adopts professional approach in all its dealings.

(viii) Huge Assets and Turnover : Multinational Corporation have huge financial strength because of huge capital and assets. This enables it to develop its business potential in developing and under developing nations where they can earn handsome profits.

(ix) Mighty Economic Power: Multinational Corporation has a huge capital and assets so they have a mighty economic power. They keep on adding to their economic power through constant mergers and acquisitions of companies in host countries.

(x) Centralized Control: Multinational Corporation is managed by parent company. It manages affairs of the subsidiary company from the respective home country. Multinational corporations are controlled by parent companies and mostly home strategic.

(xi) Area of Operation : MNCs operate in different countries of the world and deal in multiple products on a large scale. They operate in those countries where chance of maximizing profit is more. MNCs of developed nations dominate the global market and they undertake production or marketing activities and so on. For . e.g. Coca Cola, Tata Tea and so on have global presence.

(xii) Professional Management: A MNC employs professionally qualified personnel to handle huge funds, advanced technology and international operations.

Question 8.
Explain Merits and Demerits of Multinational Corporation
Answer:
(A) Introduction:
(i) Global enterprises or Multinational Corporations are the Corporations which under take business activities in more than one country. Any company having its head office in one country and place of business in other countries is called a Multinational Corporation.

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

(B) Merits of Multinational Corporation:
Following are the merits of Multinational Corporation.
(i) Proper use of Idle Resources : The national income of host country increases as MNCs use idle physical and human resources with latest technologies.

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

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

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

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

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

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

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

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

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

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

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

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

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

(vii) Take away Profits to Home Country : Profits made by multinational corporations are not used in the same country from where they are earned. They are not interested in development of other countries. They do not use their profits on infrastructural development of other countries.

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

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

Balbharti Maharashtra State Board Organisation of Commerce and Management 11th Textbook Solutions Chapter 4 Forms of Business Organisation – I Textbook Exercise Questions and Answers.

Maharashtra State Board 11th Organisation of Commerce and Management Solutions Chapter 4 Forms of Business Organisation – I

1. (A) Select the Correct option and rewrite the sentence

Question 1.
A sole trading concern ensures ……………….. business secrecy.
(a) maximum
(b) minimum
(c) limited
Answer:
(a) maximum

Question 2.
The members of Hindu undivided family business are called ………………..
(a) carpenter
(b) co-parcener
(c) parceners
Answer:
(b) co-parcener

Question 3.
The head of Joint Hindu Family Business is called as ………………..
(a) KARTA
(b) owner
(c) manager
Answer:
(a) KARTA

Question 4.
Registration of partnership firm is ………………. in Maharashtra.
(a) voluntary
(b) compulsory
(c) easy
Answer:
(b) compulsory

Question 5.
The liability of the shareholders in Joint Stock Company is ………………
(a) limited
(b) unlimited
(c) restricted
Answer:
(a) limited

Question 6.
A Joint Stock Company is an artificial person created by ………………….
(a) Law
(b) Articles
(c) Memorandum
Answer:
(a) Law

Question 7.
Registration of a Joint Stock Company is ………………..
(a) compulsory
(b) free
(c) not required
Answer:
(a) compulsory

Question 8.
Liability of member of a Co-operative Society is ………………
(a) limited
(b) restricted
(c) maximum
Answer:
(a) limited

Question 9.
Indian Co-operative Society’s Act was passed in ………………
(a) 1912
(b) 1913
(c) 1911
Answer:
(a) 1912

Question 10.
…………………. acts as a signature of the company.
(a) Common seal
(b) Common sign
(c) Common image
Answer:
(a) Common seal

1. (B) Match the pairs

Answer:

1. (C) Give one word/phrase/term.

Question 1.
An elected body of representatives of co-operative Society for its day to day administrations.
Answer:
Managing Committee

Question 2.
The owner is the sole manager and decision maker of his business.
Answer:
Sole Trader

Question 3.
One man show type of business organisation.
Answer:
Sole trading concern

Question 4.
The members of the Joint Hindu Family firm.
Answer:
Co-parceners

Question 5.
A partner who gives his name to partnership firm.
Answer:
Nominal partner

Question 6.
There is free transferability of shares in this company.
Answer:
Public Company

Question 7.
A partnership agreement in writing.
Answer:
Partnership Deed

Question 8.
The motto of the co-operative society.
Answer:
Service

Question 9.
An organization which is service oriented.
Answer:
Co-operatives Society

1. (D) State True or False

Question 1.
Sole trader is the decision maker of the business.
Answer:
True

Question 2.
Sole trading concern operates in local markets.
Answer:
True

Question 3.
Sole proprietorship is useful for small business.
Answer:
True

Question 4.
The liability of KARTA is unlimited.
Answer:
True

Question 5.
The maximum number of members is unlimited in Joint Hindu Family Firm.
Answer:
True

Question 6.
Joint Stock company can raise huge amount of capital.
Answer:
True

Question 7.
There is a separation of ownership and management in Joint Stock Company.
Answer:
True

Question 8.
Board of Directors manage the business of Joint Stock Company.
Answer:
True

Question 9.
Partnership agreement may be oral or written.
Answer:
True

Question 10.
In partnership firm, the liability of every partner is limited, joint and several.
Answer:
False

Question 11.
The main motto of co-operative society is to render services to its shareholders.
Answer:
False

Question 12.
The membership of a co-operative society is compulsory.
Answer:
False

1. (E) Find the odd one

Question 1.
Sole proprietorship, Joint Hindu Family, Non-Government Organization (NGO), Partnership firm.
Answer:
NGO

Question 2.
Active partner, Shareholder, Nominal partner, Secret partner.
Answer:
Shareholder

1. (F) Complete the sentences

Question 1.
Private sector enterprises are owned and managed by the …………………
Answer:
Private entities

Question 2.
There is only one owner in …………………
Answer:
Sole Trading Concern

Question 3.
Admission of new individual into existing business has given birth to …………………
Answer:
Partnership Firm

Question 4.
A partner who takes active participation in the day to day working of the business is known as …………………
Answer:
active partner

Question 5.
When there is no provision in partnership agreement regarding time period for partnership then it is known as …………………
Answer:
Partnership at will

Question 6.
The property of JHF business is jointly owned by the …………………
Answer:
KARTA

Question 7.
The management of Co-operative society is based on …………………
Answer:
democratic principles

Question 8.
The rule for voting in Co-operative society is …………………
Answer:
one member one vote

Question 9.
The rule for voting in Joint Stock company is …………………
Answer:
one share one vote

Question 10.
The face value of the shares of Co-operative society is very …………………
Answer:
less

Question 11.
Consumer’s co-operatives are formed by the …………………
Answer:
consumers

Question 12.
Registration of Joint Stock Company is compulsory according to the Companies Act …………………
Answer:
2013

1. (G) Complete the following table

Question 1.
(Public company, Private company, Co-operative Society, Partnership Firm, Sole Trading Concern)

Answer:

1. (H) Answer in one sentences

Question 1.
What is Sole Trading Concern?
Answer:
Sole Trading Concern is a type of business which is owned, managed and controlled by one person.

Question 2.
What do you mean by partnership firm?
Answer:
A business owned and managed by two or more persons sharing profits and losses is called a partnership firm.

Question 3.
What is the meaning of Joint Stock Company?
Answer:
Joint Stock Company is an artificial person created by law, having an independent legal status, owned by shareholders and managed by Board of Directors.

Question 4.
What is Joint Hindu Family business?
Answer:
A Joint Hindu Family is a form of business organization which runs from one generation to another according to the Hindu Law.

Question 5.
What do you mean by Co-operative Society?
Answer:
Co-operative Society is a voluntary association of individuals which is formed for providing services to members.

Question 6.
What do you mean by minor partner?
Answer:
A minor partner is a partner who is admitted into the partnership firm for the benefit of the firm with the consent of all partners.

Question 7.
What is Quasi Partner?
Answer:
Quasi partner is a partner of the partnership firm who has retired from the firm but has left his capital behind in the firm.

Question 8.
What do you mean by partner-in-profits only?
Answer:
A partner-in-profits only is a partner who gets into an agreement to share only the profits of the partnership firm and not the losses.

Question 9.
What do you mean by general partnership?
Answer:
General partnership is a form of partnership where, the liability of all the partners is unlimited, joint and several. Every partner has an equal right and it can be formed under the Partnership Act of 1932.

Question 10.
What is the meaning of Private company?
Answer:
A Private Limited company is a company which by its articles restricts the right to transfer share, limits the maximum number of members to 200.

Question 11.
What do you mean by Public company?
Answer:
A public company means a company which is not a private company.

1. (I) Correct the underlined word and rewrite the following sentences.

Question 1.
In Public company, shares are not freely transferable.
Answer:
In Private company, shares are not freely transferable.

Question 2.
In Private company, there are minimum 3 (Three) directors.
Answer:
In Private company, there are minimum 2 (Two) directors.

Question 3.
Registration of Joint Stock company is not compulsory.
Answer:
Registration of Joint Stock company is compulsory.

Question 4.
There is less secrecy in Sole Trading concern.
Answer:
There is maximum secrecy in Sole Trading concern.

Question 5.
In Partnership firm, minimum three members are required.
Answer:
In partnership firm, minimum two members are required.

Question 6.
In Joint Hindu Family business, the senior most member of family is called as Co-parcener.
Answer:
In Joint Hindu Family business, the senior most member of family is called as Karta.

Question 7.
Indian Partnership Act, 1940 is applicable in India.
Answer:
Indian Partnership Act, 1932 is applicable in India.

2. Explain the following terms/concepts

Question 1.
Sole Trading Concern.
Answer:

1. It is a form of business organization which is owned, managed and controlled by one person.
2. It need not be registered.
3. It does not have a legal status i.e. It does not have a stable life.
4. Maximum secrecy can be maintained in Sole Trading concern.

Question 2.
Partnership Firm.
Answer:

1. It is a voluntary association of two or more persons with a common objective.
2. It is formed by an agreement called Partnership deed.
3. It is governed by Indian Partnership Act, 1932.
4. Registration of partnership firm is optional as per Partnership Act, 1932.
5. In Maharashtra, registration of partnership firm is made compulsory.

Question 3.
Joint Hindu Family Firm.
Answer:

1. It is a form of business organization which is carried from one generation to another generation.
2. It comes into existence by operation of Hindu Law.
3. This form of organization is found in India only.
4. The seniormost member of the family is called ‘Karta’ while other members are called ‘Co-parceners’.

Question 4.
Co-operative Society.
Answer:

1. It is a voluntary association of individuals which is formed for providing services to members.
2. Its main motto is ‘service’ rather than ‘profit’.
3. It runs on principle of ‘One member One Vote’.
4. It enjoys an independent legal status, distinct from its members.

Question 5.
Joint Stock Company.
Answer:

1. It is an incorporated association created by law, having an independent legal status, owned by shareholders and managed by Board of Directors.
2. The main motive of Joint Stock company is maximisation of profit.
3. It works as principle of “One share One vote”.
4. It has to follow Indian Companies Act, 2013.

Question 6.
Karta.
Answer:

1. Karta is a seniormost member of the family, who runs the Joint Hindu Family Business.
2. The Karta has unlimited liability in such type of business.
3. Karta has the right to manage the business.
4. Karta need not consult any body about business decisions.

Question 7.
Managing Committee.
Answer:

1. Managing committee is a group of members of a Co-operative society, who looks after the working of Co-operative society.
2. They are elected by the shareholders of Co-operative society.
3. All important decisions are taken by the managing committee.
4. In short, they look after day to day administration of the Society.

Question 8.
Nominal Partner.
Answer:

1. A partner who only lends his name and reputation to the partnership firm is called as nominal partner.
2. He is simply obliging his friends by allowing the firm to use his name as a partner.
3. He may or may not be given any share in the profits of the firm.
4. He does not contribute to the capital of the business.
5. He is liable to the debts of the firm.

3. Study the following case/situation and express your opinion

1. Mr. Raghunath is running business from last 30 years. This business is ancestoral business of Mr. Raghunath. Kiran and Naman, two sons of Mr. Raghunath are helping him along with their wives.

Question 1.
Find out the type of business.
Answer:
Joint Hindu Family Firm.

Question 2.
Who is Raghunath?
Answer:
Raghunath is the Karta.

Question 3.
What Kiran and Naman are called?
Answer:
Kiran and Naman are called as co-parceners.

2. Mr. Sawant a Chartered Accountant by profession and Mrs. Tambe, an Architect by profession running a firm namely ‘ST Firms’ in Nagpur.

Question 1.
Identify the form of business organisation in the above examples.
Question 2.
Is it a registered organisation?
Question 3.
What is the Profession of Mr. Sawant?

4. Distinguish between the following

Question 1.
Private Limited Company and Public Limited Company
Answer:

Question 2.
Sole Trading Concern and Partnership Firm.
Answer:

Question 3.
Partnership Firm and Joint Hindu Family.
Answer:

Question 4.
Co-operative Society and Joint Stock Company.
Answer:

Question 5.
Joint Hindu Family Firm and Joint Stock Company.
Answer:

Question 6.
Co-operative Society and Partnership Firm.
Answer:

5. Answer in brief

Question 1.
State any four features of Sole Trading Concern.
Answer:
(i) Suitable for some Special Business : Sole trading concern is suitable for business where personal attention and individual skill is needed e.g., Beauty parlour, groceries, fashion designing, sweet shops, tailoring, restaurants etc.

(ii) Unlimited Liability : Liability of the sole trader is unlimited. In case business assets are not sufficient to meet business expenses, private property of the sole trader will be used. There is no difference made between private property and business property of sole trader.

(iii) No Sharing of Profits and Risks : A sole trader enjoys all the profits of business. As he is the single owner of business he assumes full responsibility in business. He alone bears all the losses or risks involved in business.

(iv) Business Secrecy : Maximum business secrecy can be maintained in a sole trading concern. A sole trader is responsible only to himself. He need not discuss any matter of business with outsiders. Moreover, there is no legal compulsion for sole trader to publish books of accounts of business.

Question 2.
State any four types of partners.
Answer:
The different types of partners are:
(i) Active or Working Partners : In practice one or two partners take active part in the management. Such partners are called active or working partners. They contribute capital, shares profits or losses, and has unlimited, joint and several liability. They take an active interest in the day to day working of the firm. These partners are also known as ordinary / general / actual partners.

(ii) Dormant or Sleeping Partners : A dormant or sleeping partner is one who contributes capital to the firm. He does not take any active part in the management of the firm. He shares the profits and losses of the firm like any other partner. He voluntarily surrenders the right of management. However, he is liable for the debts of the firm.

(iii) Nominal Partners : A nominal partner is one who does not contribute any capital to the firm. He lends his name to the firm. He is simply obliging his friends by allowing the firm to use his name as a partner. He may or may not be given any share in the profits of the firm. His goodwill is used to attract business. However, he is liable for the debts of the firm.

(iv) Minor as Partner : According to the Indian Contract Act 1872, a person below 18 years is called a minor. But according to the Indian Partnership Act 1932, a minor can be admitted for the benefit of the firm with the consent of all other partners. He has a right to inspect the books of accounts. Minor partner has limited liability and is not liable for losses. He has the option to continue as a full-fledged partner or discontinue as a partner on attaining the age of majority. If he wishes to discontinue, he must give a public notice within 6 months from the age of majority.

Question 3.
Describe any four types of Co-operative Society.
Answer:
Types of Co-operative Society are as follows:
(i) Consumer Co-operative Societies : A consumer co-operative is a business owned by its customers. They purchase in large quantities from wholesalers and supply in small quantities to customers. Goods are provided to buyers at reasonable prices and also provide services to them. Members get a share in the profit. The consumer society is formed to eliminate middlemen from distribution process e.g.-Apana Bazar, Sahakari Bhandar.

(ii) Credit Co-operative Societies : Members pool their savings together with the aim of obtaining loans from their pooled resources for productive purposes and non-productive purposes. They may be established in rural areas by agriculturist or artisans called as a Rural Credit Society. They may be established by salary earners or industrial areas called as Urban Banks, Salary Earners Society or Workers Society.

(iii) Marketing Co-operatives Societies : These co-operatives find better markets for members produce. They also provide credit and other inputs to increase members production levels. They perform marketing functions such as standardising, grading, branding, packing, advertising etc. The proceeds are then distributed among members depending on the quantities sold.

(iv) Co-operative Farming Societies: Farmers voluntarily come together and pool their land. The agricultural operations are carried out jointly. They make use of scientific method of cultivation.

Question 4.
State any four merits of Joint Hindu Family Firm.
Answer:
Merits of Joint Hindu Family are as follows:
1. Easy Formation : Joint Hindu Family Firm can be easily formed. The formation is simple. Registration is also not compulsory. There is no limit on minimum or maximum members in the business. Family members become co-parceners by birth in the family.

2. Quick Decision : Only the Karta is involved in the decision making process. This helps to take quick decisions in business. If decisions are taken quickly there can be prompt actions.

3. Business Secrecy : Complete business secrecy can be maintained. All decisions are taken by Karta only. Co-parceners cannot even inspect books of accounts. There is no compulsion to publish books of accounts.

4. Co-parceners Liability : The liability of co-parceners is limited. It is to the extent of their share in Joint Family Business. Private property of co-parceners cannot be attached to business property.

Question 5.
State any four demerits of Joint Stock Company.
Answer:
The demerits of Joint Stock Company are as follows:
1. Rigid Formation : The formation of a joint stock company is lengthy, difficult and time consuming. There are many legal formalities for starting business. Promoters have to prepare documents like Articles of Association, Memorandum of Association, etc. A private company has to go through two stages in formation. A public company has to go through four stages in formation.

2. Delay in Decision Making Process : In company form of organization no single individual can make a policy decision. All important decisions are taken by Board of Directors. Decision taking process is time consuming. Business may lose opportunities because of delay in decision making.

3. Lack of Secrecy : The management of companies remain in the hands of many persons. Everything is discussed in the meetings of Board of Directors. All important documents are available at registered office for inspection. Thus, there is no secrecy in business matters.

4. Excessive Government Control: A large number of rules are framed for the working of companies. The companies will have to follow rules for internal working. The government tries to regulate the working of the companies because large public money is involved. In case regulations are not complied with, large penalties are involved.

6. Justify the following statements

Question 1.
The Liability of a ‘Sole trader’ is Unlimited.
Answer:

1. One of the main features of a sole traders is unlimited liability.
2. If the sole trader becomes insolvent and if his business assets are insufficient to pay off his business debts, he will have to use his private property in order to pay off his creditors.
3. There is no distinction between business property and private property in case of a sole trading concern.
4. Thus, liability of a sole trader is unlimited.

Question 2.
Karta is the sole manager of‘Joint Hindu Family Business’.
Answer:

1. The Karta is the eldest or senior most person in the family business.
2. Karta has unlimited liability.
3. He has the entire decision making power and he is not binding on the views of the co-parceners.
4. Thus, the Karta is the sole manager of Joint Hindu Family business.

Question 3.
The main objective of Co-operative society is to provide services to its members.
Answer:

1. The Co-operative Society is a voluntary association of persons formed for the purpose of promoting the interest of its members. It is different from all other organizations.
2. The main objective of a co-operative organization is not to make profit but to give service to its members.
3. The co-operative society is formed for the welfare of the people.
4. Co-operative societies are rightly called as service oriented organization. Maximisation of profit is not the aim.
5. Thus, the main objective of Co-Operative society is to provide services to its members.

Question 4.
A Joint Stock Company can raise huge capital.
Answer:

1. A Joint Stock Company is an incorporated association.
2. It has a legal status independent of its members.
3. A Joint Stock Company has large membership. There is no maximum limit.
4. Shares are available in the open market.
5. Large number of investors are interested in buying shares.
6. Shares are freely transferable and members have limited liability.
7. Thus, a Joint Stock Company can raise huge capital.
8. Capital can also be raised by company from financial institutions.

Question 5.
The liability of Co-parceners is limited in ‘Joint Hindu Family Business’.
Answer:

1. In a Joint Hindu Family Business, there are two types of members – Karta and Co-parceners.
2. The karta has unlimited liability and he is the only decision making authority. The co-parcerns have limited liability and therefore cannot take part in the management of the firm. They can only share the profit but cannot challenge decisions taken by the Karta.
3. The liability of co-parceners is limited upto the extent of their share in the Joint Hindu Family Business.
4. The personal property of co-parceners is not used for payment of the liability of the Joint Hindu Family business.
5. Thus, the liability of Co-parcerners is limited in ‘Joint Hindu Family Business’.

Question 6.
Sole proprietorship is useful for small business.
Answer:

1. Sole trading concern is owned by only one person.
2. He uses his own skill and intelligence for his business.
3. Sole trader brings capital from his own savings. He may borrow from friends and relatives. However, capital collected is limited.
4. He alone takes decisions of business. Therefore, managerial ability is also limited.
5. Because of limited capital and limited managerial ability, it is not possible to expand business beyond a certain limit.
6. Thus, sole proprietorship is useful for small business where limited capital and less managerial ability is needed.

Question 7.
Co-operative society follows democratic principles.
Answer:

1. The members of a Co-operative organisation form the general body which manages the co-operatives. This body exercises the power through annual general meetings. They elect their representatives who look after the day to day management which is collectively known as Managing Committee.
2. ‘One member One vote’ is the principle followed by Co-operative Societies.
3. All these denote that it follows democratic principles.
4. Thus, Co-operative society follows democratic principles.

Question 8.
There is separation of ownership and management in Joint Stock Company.
Answer:

1. The shareholders are the owners of the company. The company is managed by the Board of Directors who are elected representatives of the shareholders.
2. There is separation of ownership and management because of the following reasons:
   (a) Scattered membership (b) Large membership (c) Disinterested shareholder (d) Heterogenous members (e) Separate legal entity.
3. Thus, ownership is in the hands of shareholders and the management is with the Board of Directors who are paid employees of the company.

Question 9.
Shares of Private Limited company are not freely transferable.
Answer:

1. According to the Companies Act, the right to transfer shares is restricted by its articles.
2. Only a public limited company has right to transfer shares freely.
3. Thus, shares of Private Limited company are not freely transferable.

Question 10.
All partners are joint owners of Partnership firm.
Answer:

1. According to the Indian Partnership Act, 1932, all the partners are joint owners of the property of the partnership firm.
2. No partner can use the property of the firm for his personal interest.
3. No partner is allowed to take any decision without the consent of all the partners.
4. No partners can make any secret profit in the business.
5. Profits and losses are shared among the partners in the profit sharing ratio mentioned in the deed.
6. Thus all partners are joint owners of Partnership firm.

Question 11.
Active partners take active part in day to day management of partnership firm.
Answer:

1. Active partner is also called a working partner. He brings in capital and also takes active part in the business of the firm.
2. He has unlimited liability and shares the profits and losses of the firm. He is also called a managing partner.
3. Thus, active partners take active part in day to day management of partnership firm.

7. Attempt the following

Question 1.
Explain various types of Co-operative Society.
Answer:
Types of Co-operative Society are as follows:
(i) Consumer Co-operative Societies : A consumer co-operative is a business owned by its customers. They purchase in large quantities from wholesalers and supply in small quantities to customers. Goods are provided to buyers at reasonable prices and also provide services to them. Members get a share in the profit. The consumer society is formed to eliminate middlemen from distribution process e.g.-Apana Bazar, Sahakari Bhandar.

(ii) Credit Co-operative Societies : Members pool their savings together with the aim of obtaining loans from their pooled resources for productive purposes and non-productive purposes. They may be established in rural areas by agriculturist or artisans called as a Rural Credit Society. They may be established by salary earners or industrial areas called as Urban Banks, Salary Earners Society or Workers Society.

(iii) Producer’s Co-operatives : Producer’s Co-operatives are voluntary associations of small producers and artisans who come together to face competition and increase production. These societies are of two types:
(a) Industrial Service Co-operatives : This society supply raw materials, tools and machinery to the members. The producers work independently and sell their industrial output to the co-operative society. The output of members is marketed by the society.

(b) Manufacturing Co-operatives : In this type, producer members are treated as employees of the society and are paid wages for their work. The society provides raw material and equipment to every member. The members produce goods at a common place or in their houses. The society sells the output in the market and its profits is distributed among the members.

(iv) Marketing Co-operatives Societies : These co-operatives find better markets for members produce. They also provide credit and other inputs to increase members production levels. They perform marketing functions such as standardising, grading, branding, packing, advertising etc. The proceeds are then distributed among members depending on the quantities sold.

(v) Co-operative Farming Societies: Farmers voluntarily come together and pool their land. The agricultural operations are carried out jointly. They make use of scientific method of cultivation.

(vi) Housing Co-operative Societies : Housing Co-operatives are owned by residents. The society purchases land and develops it. Houses are constructed for residential purpose on ownership basis. They aim at establishing houses at fair and reasonable rents to members. For construction purposes loans are made available from Governmental or Non-Governmental sources. The society also looks after the maintenance of its buildings.

Question 2.
Explain the features of Joint Stock Company.
Answer:
The features of Joint Stock Company are as follows:
(i) Common Seal : A company being an artificial person cannot sign on its own. The law requires every company to have a seal and have its name engraved on it. Common seal is a symbol of company’s incorporate existence. As common seal is the signature of the company, it has to be affixed on all important documents of the company. When the seal is used it has to be witnessed by two Directors of the Company. The common seal is under the custody of Company Secretary.

(ii) Registration : The registration of Joint Stock Company is compulsory. All the companies have to be registered under Indian Companies Act, 2013. A private limited company can start its business immediately after getting ‘Incorporation Certificate’ while public limited company has to obtain. “Certificate of Commencement of Business” before it starts business.

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

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

(v) Perpetual Succession : A Joint Stock company enjoys a long and stable life. There is continuity in existence, which means perpetual existence. Life of the company is not affected by life of the shareholders. If a shareholder dies, becomes insolvent or insane, the company will not be closed down. “Members may come and members may go but a company goes on forever”.

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

(vii) Registered Office : Registered office of the company is a place where all the important documents of the company are kept e.g., Register of Members, Annual Returns, Minute Books, etc. All correspondence work of the company is done through registered office. The address of the registered office has to be mentioned in the domicile clause of the company.

(viii) Transferability of Shares : Shareholders are the owners of the company. Shares of a public limited company are freely transferable. There is a high degree of liquidity involved in buying shares of the company. Members can buy or sell shares as needed. However, there are restrictions on transferability of shares of a private company.

(ix) Voluntary Association : Any person can purchase shares and become a member of the company. The company is a voluntary association. No difference is made on the basis of religion, caste, creed, etc.

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

(xi) Separate Legal Status : The company is created by law. It has a separate legal entity. A company acts independently. The company can take legal action against anybody in its individual capacity.

Question 3.
Describe the features of Co-operative Society.
Answer:
(i) Limited Liability : The liability of members is limited. It depends upon the value of shares purchased by members. Therefore, their personal property is not used for payment of society’s debt.

(ii) Management : Elected representatives of members form the Managing Committee. The Managing Committee works according to bye-laws. Collective decisions are taken after conducting meetings. The organisation is managed on democratic principles.

(iii) Service Motive : The main motive of co-operative organisation is to give service to the people. It is not profit oriented. Utmost importance is given to the welfare of the people. In that sense, a co-operative society differs from other forms of organisation.

(iv) Surplus Profit: Profits are made in the course of business after payment of dividend to shareholders. A percentage of profit is always used for welfare of the people. Bonus is given to employees and as bonus on purchase made by members.

(v) Separate Legal Status : A Co-operative Society is formed according to Co-operative Societies Act, 1912, which gives it independent legal status. It is distinct from its members. Therefore it can enter into contract purchase property, etc. in its name.

(vi) Equal Voting Rights : All the members in a Co-operative Societies have equal voting rights irrespective of number of shares held by them.

(vii) Number of Members : Minimum 10 members are required for the formation of Co-operative Society. There is no limit on maximum number of members.

(viii) Democratic Principle : Democracy is followed in the working of co-operatives. Equality of voting rights is the main principle of the organisation. The principle of ‘One member One vote’ is followed. All members are equal in society.

(ix) Voluntary Association and Open Membership : Co-operative organisation is a voluntary association of individuals. Membership is voluntary. Any person can become a member of the organisation. No difference is made on the basis of language, religion, caste, etc. There is open membership. A person can become a member on his own free will and terminate membership whenever he wants.

(x) Registration : Registration of a Co-operative organisation is compulsory under Co-operative Society’s Act, 1912. Registration is done according to the Act of every state. In Maharashtra, Societies are registered under Maharashtra State Co-operative Societies Act, 1960.

(xi) State Support : Co-operatives receive support from the government. They are under the control and supervision of the State. All of them are registered under the Co-operative Societies Act, 1912. They get a corporate status. They get concessions from government in purchase of land, payment of tax etc. They get legal and financial assistance also.

8. Answer the following

Question 1.
Explain the features of Sole Trading Concern.
Answer:
A sole trading concern is one of the oldest and simplest form of organisation. An individual owns the entire business. The individual is the owner, controller and manager of the firm. Such an individual is called a Sole Trader or Sole Proprietor. This type of business is a one-man show.
(1) According to Prof. J. Hanse, “Sometimes known as one man business, it is a type of business unit where one person is solely responsible for providing the capital, for bearing the risk of the enterprise and for the risk of ownership”.

(2) According to Prof. James Lundy : “The sole proprietorship is an informal type of business owned by one person.” The features of Sole Trading Concern are as follows:
(i) Suitable for some Special Business : Sole trading concern is suitable for business where personal attention and individual skill is needed e.g., Beauty parlour, groceries, fashion designing, sweet shops, tailoring, restaurants etc.

(ii) Unlimited Liability : Liability of the sole trader is unlimited. In case business assets are not sufficient to meet business expenses, private property of the sole trader will be used. There is no difference made between private property and business property of sole trader.

(iii) No Sharing of Profits and Risks : A sole trader enjoys all the profits of business. As he is the single owner of business he assumes full responsibility in business. He alone bears all the losses or risks involved in business.

(iv) Business Secrecy : Maximum business secrecy can be maintained in a sole trading concern. A sole trader is responsible only to himself. He need not discuss any matter of business with outsiders. Moreover, there is no legal compulsion for sole trader to publish books of accounts of business.

(v) Local Market Operations : A sole trader has limited capital and limited managerial skills, which forces him to operates in local are market only.

(vi) Individual Ownership : A sole trader is the single owner of business. He owns all the property and assets of the concern. He brings in the required capital for business. A sole trading concern is a ‘One man show”.

(vii) No separate legal status : Sole trader and his business are considered one and the same in the eyes of . law. Thus, it does not enjoy separate legal status.

(viii) Direct Contacts with Customers and Employees : A sole trader directly deals with customers and employees. A sole trader can pay personal attention to his customers. This helps him to maintain good relations with his customers. He can serve customers according to their likes and dislikes. As there are less number of employees, he can build good relations with them. He can listen to their grievances and try to solve them.

(ix) Self-employment : Such business form is best suitable for self-employment. Instead of being remaining unemployed one can start such business as it requires low capital and has less legal formalities.

(x) Freedom in Selection of Business : A sole trader has freedom to select any type of business. Business selected must be allowed legally. A sole trader can use any method of maintaining books of accounts.

(xi) Minimum Government Regulations : Sole trading concern need not follow any special Act. There are not much legal formalities needed for forming and closing a sole trading concern. Only the general law of the country has to be followed.

Question 2.
Explain different types of Partnership Firms.
Answer:

(i) General Partnership : These partnership can be formed under the Indian Partnership Act, 1932, where the liability of all partners are unlimited, joint and several.
General Partnership can be divided into three Kinds:
(a) Partnership at will: Such partnership are formed and continued as per the will of the partners. They are formed for an indefinite period. Any partner can terminate the partnership by giving a notice to the firm. Such firms exists so long as there is mutual trust and co-operation among the partners.

(b) Partnership for a particular period : Such partnerships are formed for a particular period of time. On the completion of the duration, the partnership firm automatically dissolves irrespective of the venture being complete.

(c) Partnership for a venture or particular partnership : Such partnerships are formed for a particular venture or job. It comes to an end on the completion of the venture. For e.g. construction of roads, dams, bridges, buildings, etc.

(ii) Limited Liability Partnership : This kind of partnership is formed under the Limited Liability Partnership Act 2008. There are 2 kinds of partners.

• Designated Partner : Limited liability partnership is one where there are atleast two partners of which one must be a resident of India.
• General Partner : In limited liability partnership a apart from the designated partners all other partners have limited liability. They are called general partners.

Question 3.
Explain different types of Partners.
Answer:
The different types of partners are:
(i) Active or Working Partners : In practice one or two partners take active part in the management. Such partners are called active or working partners. They contribute capital, shares profits or losses, and has unlimited, joint and several liability. They take an active interest in the day to day working of the firm. These partners are also known as ordinary / general / actual partners.

(ii) Dormant or Sleeping Partners : A dormant or sleeping partner is one who contributes capital to the firm. He does not take any active part in the management of the firm. He shares the profits and losses of the firm like any other partner. He voluntarily surrenders the right of management. However, he is liable for the debts of the firm.

(iii) Nominal Partners : A nominal partner is one who does not contribute any capital to the firm. He lends his name to the firm. He is simply obliging his friends by allowing the firm to use his name as a partner. He may or may not be given any share in the profits of the firm. His goodwill is used to attract business. However, he is liable for the debts of the firm.

(iv) Minor as Partner : According to the Indian Contract Act 1872, a person below 18 years is called a minor. But according to the Indian Partnership Act 1932, a minor can be admitted for the benefit of the firm with the consent of all other partners. He has a right to inspect the books of accounts. Minor partner has limited liability and is not liable for losses. He has the option to continue as a full-fledged partner or discontinue as a partner on attaining the age of majority. If he wishes to discontinue, he must give a public notice within 6 months from the age of majority.

(v) Partner in Profits only : A partner may clearly state that he will have a share only in the profits of the firm and that he will not share losses. Such a partner is known as “Partner in Profits Only”. He has no rights of management. He may not take active participation in the management of the firm.

(vi) Partner with Limited Liability : A limited partner has limited liability. A partner whose liability depends upon the extent of investment is called a limited partner. He has no right to take part in the day to day work. But such a partnership must have at least one partner having unlimited liability.

(vii) Secret Partner : A person is a partner of the firm and not known to general public is a secret partner. Secret partners have all the features like other partners. He brings capital to the firm and also gets a share in profit. He has unlimited liability. He can take part in the working of the business.

(viii) Sub-Partner : A partner when agrees to share his own profit derived from the firm with third person, it is known as sub-partner. A sub-partner cannot call himself as a partner in the firm.

(ix) Quasi Partner : A retired partner leaving his capital with the firm is called as Quasi Partner. He does not participate in the working of the firm, but share profit of the firm. He is also liable for the debts of the firm.

Question 4.
Explain the five features of Joint Stock Company.
Answer:
The features of Joint Stock Company are as follows:
(i) Common Seal : A company being an artificial person cannot sign on its own. The law requires every company to have a seal and have its name engraved on it. Common seal is a symbol of company’s incorporate existence. As common seal is the signature of the company, it has to be affixed on all important documents of the company. When the seal is used it has to be witnessed by two Directors of the Company. The common seal is under the custody of Company Secretary.

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

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

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

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

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

Question 5.
Explain the merits of a Co-operative Society.
Answer:
The merits of a Co-operative Society are as follow:
(i) E asy Formation: It is easy to form a Co-operative organisation. Minimum ten members are needed to form the organisation. It does not involve much legal formalities. It is compulsory to register the organisation. However, the procedure for registration is simple and the fees are nominal.

(ii) Tax Concession : Co-operatives always get support of the government. As they play an important role in economic and social development, government gives them concessions in payment of tax.

(iii) Open Membership : Membership of a Co-operative organisation is open to all. A person can become a member by purchasing shares. No difference is made on the basis of language, religion, caste, etc. A person can become a member whenever he wants and terminate membership at his own will. Membership is voluntary.

(iv) Stability : A Co-operative organisation enjoys a long and stable life. The life of the organisation is distinct from the life of its members. If any member dies, becomes insolvent or insane, business is not closed.

(v) Self Financing and Charity : After providing 15% dividend to members, surplus amount is used for self-financing by the Co-operative Societies. Some amount of leftover profit is used for charity, social activities and for the growth of the co-operative society.

(vi) Less O perating Expenses: Cost of operation is low as salary is not paid to members who manage business. Members of Co-operative organisations work on honorary basis. They are not given any remuneration for their services. There are no expenses on advertising and publicity. This helps to increase profit.

(vii) Limited Liability : The liability of members is limited. It depends upon the value of shares purchased by members. Therefore, people are interested in investing in a Co-operative organisation.

(viii) Democratic Management: Democracy is followed in the management of co-operative organisation. All members are equal. The principle of “One member One vote” is followed. Members elect representatives who form the managing committee. They work according to bye-laws. The managing committee looks after day to day administration. Decisions are taken collectively in meetings.

(ix) Supply of Goods at Cheaper Rate : Goods are sold at lesser price through a Co-operative store. This is because the organisation is service – oriented. The store does not make use of services of middlemen and there are no expenses on advertising. So goods are sold at cheap rates.

Question 6.
Explain the demerits of Partnership firm.
Answer:
The demerits of Partnership firm are as follows:
(i) Non-transferability of Interest: In a partnership firm no one partner can transfer his share of interest to another outsider without the consent of all the partners.

(ii) Limited Capital: There is a limitation in raising additional capital for business. The business resources are limited to personal funds of the partners. Borrowing capacity of partners is limited. The maximum number of partners is fifty only. So financial capacity is less.

(iii) Absence of Legal Status : The Indian Partnership Act, 1932 does not give a legal status to a partnership firm. There is no independent legal status. The firm and its partners are one and the same.

(iv) Problem of Continuity : The partnership firm is not a separate legal entity. The firm is dependent oh mutual trust between partners. If a partner dies, becomes insolvent or insane, the firm has to be dissolved compulsorily whether the partners wish or not.

(v) Risk of Implied Authority : A partner works in two capacities. He has a dual role – Principal and Agent. He acts as an agent of the business. He can enter into contract with third party. However, a wrong decision can result in heavy losses, which has to be borne by all partners.

(vi) Limitations on Number of Partners : No partnership can go beyond maximum number prescribed (i.e. 50 members) by Indian Partnership Act. This restriction effects the raising of capital for further expansion.

(vii) Disputes : It is difficult to maintain harmony among partners. They may have different opinions and may not agree on certain matters. Partners may have conflicts if some partners work for self interest. This reduces team spirit and may finally lead to dissolution of the firm.

(viii) Difficulty in Admission of Partner : As consent of all partners is required to take any decision in the partnership firm, it becomes difficult to admit a new partner. This is a disadvantage to the firm as it cannot bring in new talent if the other partners are not agreeing to it.

(ix) Unlimited Liability : The liability of partners is unlimited. There is no difference between business property and personal property of partners. If business assets are not enough to meet business expenses, personal property can be used.

(x) Problem of Secrecy : Partnership firms lack complete business secrecy as some secrets may be disclosed by some partner to the competitor for personal benefit.

Question 7.
Explain the merits of Joint Stock Company.
Answer:
The merits of Joint Stock Company are as follows:
(i) Transferability of Shares : Shares of a public company can be transferred easily and freely. There is a high degree of liquidity in shares. Permission of directors or members need not be taken for buying and selling shares. This helps to attract investors to public company.

(ii) Relief in Taxation : The tax burden in the company is less. Provisions of Income Tax Act says that companies have to pay tax at flat rate. This is less than taxes paid by individuals earning very high income. If company is started in backward areas, the company gets relief in the form of tax holding.

(iii) More Scope for Expansion : The capital raising capacity of the company is high. The company has a lot of funds at its disposal. A part of the profit is also ploughed back for business. This enables growth and expansion of business.

(iv) Public Confidence : Joint Stock Company has to publish books of accounts. Which is audited by CA. Annual reports of the company have to be published. The activities of the Company are regulated by the provision of Companies Act, 2013. Therefore, the company gets public support.

(v) Limited Liability : The liability of shareholders is limited. It is to the extent of unpaid value of shares. Shareholders cannot be liable for the debts of the company. Features of limited liability attract more investors to business.

(vi) Expert Services : Joint Stock Company an appoint experts for managing their huge business operations. They appoint experts like Legal advisors, management experts, auditors, consultants, etc.

(vii) Democratic Management: Management of a company is democratic. Shareholders elect representatives called as Board of Directors. They manage business. Directors are accountable to shareholders. Policy decisions are taken by Directors but have to be approved by shareholders. The shareholders can also remove inefficient Directors.

(viii) Perpetual Succession : Joint Stock Company enjoy long and stable life. Its stability is not affected by death insolvency or retirement, of any of its members.

(ix) Professional Management : Large funds are at the disposal of the companies. Therefore, experts can be appointed in different areas of business. As good salaries can be paid, highly qualified personnel like Cost Accountants, Sales Experts, Market Experts, etc. can be appointed. Even Board of Directors have competent persons who manage business efficiently.

(x) Large Amount of Capital: A company can collect large amount of capital. There is no limit on maximum number of members. Due to features of limited liability, transferability of shares and liquidity, many investors are attracted to become shareholders of the company. Loans are also available to Joint Stock Companies.

Question 8.
Explain the features of partnership firm.
Answer:
The features of partnership firm are as follows:
(i) Lawful Business : Business undertaken by partnership should be lawful. It cannot undertake business forbidden by state. The definition of partnership also does not permit any association like club or charitable institution. Illegal business like smuggling or gambling is not allowed.

(ii) Agreement : Partnership is a result of agreement between partners. There could be a written or oral agreement between partners. A written agreement is preferred so that it can be used as a proof in the court of law if needed.

(iii) Number of Partners : Minimum two members are needed to start a partnership firm. The maximum number of members is 50.

(iv) Dissolution : A Partnership Firm can be dissolved through agreement between partners. If a partner wants, he can dissolve the firm by giving 14 days notice to the firm. The firm can be dissolved if a partner dies, becomes insolvent or insane.

(v) Sharing of Profits and Losses : The purpose of partnership is to earn profit. Its object cannot be a charitable one. Partners have to share profits and losses according to the ratio given in the agreement. If the agreement is silent about the proportion then profit and loss sharing will be equal.

(vi) Termination of Partner : A partner may resign by giving proper notice in writing to the other partners. A partner can also be removed if he has been found doing any fraudulent activities.

(vii) Joint Ownership : Each partner is the joint owner of the property of the firm. All partners are equal owners of business property. No partner can use property for personal use.

(viii) Registration : It is not compulsory as per Indian Partnership Act, 1932. However, in the State of Maharashtra, it has been made compulsory to get register with ‘Registrar of Firms’ of the state.

(ix) Joint Management: All partners have equal rights in managing the firm. Some partners take interest in management of the firm and others voluntarily surrender their management rights. However, all partners are jointly responsible for the management of the firm.

(x) Unlimited Liability : The liability of partners is unlimited joint and several. If assets of business is not sufficient to pay liabilities, personal property of partners can be used. If any one of the partners is declared insolvent, his liability will be borne by the solvent partners.

(xi) Principal and Agent : Each partner works in two capacities – Principal and Agent. A partner acts as principal when within the firm and acts as an agent while dealing with outsider. The partners play a dual role.

(xii) Restriction on Transfer of Interest : A partner cannot transfer or sell his interests in the firm to outsider without the prior consent of all other partners in the firm.

Question 9.
Explain the types of co-operative societies.
Answer:
Types of Co-operative Society are as follows:
(i) Consumer Co-operative Societies : A consumer co-operative is a business owned by its customers. They purchase in large quantities from wholesalers and supply in small quantities to customers. Goods are provided to buyers at reasonable prices and also provide services to them. Members get a share in the profit. The consumer society is formed to eliminate middlemen from distribution process e.g.-Apana Bazar, Sahakari Bhandar.

(ii) Credit Co-operative Societies : Members pool their savings together with the aim of obtaining loans from their pooled resources for productive purposes and non-productive purposes. They may be established in rural areas by agriculturist or artisans called as a Rural Credit Society. They may be established by salary earners or industrial areas called as Urban Banks, Salary Earners Society or Workers Society.

(iii) Producer’s Co-operatives : Producer’s Co-operatives are voluntary associations of small producers and artisans who come together to face competition and increase production. These societies are of two types:
(a) Industrial Service Co-operatives : This society supply raw materials, tools and machinery to the members. The producers work independently and sell their industrial output to the co-operative society. The output of members is marketed by the society.

(b) Manufacturing Co-operatives : In this type, producer members are treated as employees of the society and are paid wages for their work. The society provides raw material and equipment to every member. The members produce goods at a common place or in their houses. The society sells the output in the market and its profits is distributed among the members.

(iv) Marketing Co-operatives Societies : These co-operatives find better markets for members produce. They also provide credit and other inputs to increase members production levels. They perform marketing functions such as standardising, grading, branding, packing, advertising etc. The proceeds are then distributed among members depending on the quantities sold.

(v) Co-operative Farming Societies: Farmers voluntarily come together and pool their land. The agricultural operations are carried out jointly. They make use of scientific method of cultivation.

(vi) Housing Co-operative Societies : Housing Co-operatives are owned by residents. The society purchases land and develops it. Houses are constructed for residential purpose on ownership basis. They aim at establishing houses at fair and reasonable rents to members. For construction purposes loans are made available from Governmental or Non-Governmental sources. The society also looks after the maintenance of its buildings.

Question 10.
Explain the demerits of Joint Stock Company.
Answer:
The demerits of Joint Stock Company are as follows:
1. Rigid Formation : The formation of a joint stock company is lengthy, difficult and time consuming. There are many legal formalities for starting business. Promoters have to prepare documents like Articles of Association, Memorandum of Association, etc. A private company has to go through two stages in formation. A public company has to go through four stages in formation.

2. Delay in Decision Making Process : In company form of organization no single individual can make a policy decision. All important decisions are taken by Board of Directors. Decision taking process is time consuming. Business may lose opportunities because of delay in decision making.

3. Lack of Secrecy : The management of companies remain in the hands of many persons. Everything is discussed in the meetings of Board of Directors. All important documents are available at registered office for inspection. Thus, there is no secrecy in business matters.

4. Excessive Government Control: A large number of rules are framed for the working of companies. The companies will have to follow rules for internal working. The government tries to regulate the working of the companies because large public money is involved. In case regulations are not complied with, large penalties are involved.

5. High Cost of Management : The management of joint stock company form of organization is costly. Services of experts like share brokers, underwriters, solicitors, bankers is needed which is costly. Highly qualified staff is needed. They are paid good salaries. Dissolution of the firm is also costly.

6. Reckless Speculation: Directors look after management of the company. They have full information about the progress of the company. They use these details for speculation in shares. This results in fluctuations in share prices. This affects public confidence.

7. No Personal Contact : There are large number of employees in the organization. There is no personal contact of owners and managers with employees. Lack of appreciation demotivates employees. Similarly, managers and directors are not able to maintain personal contacts with their customers. Thus, customers likes and dislikes are ignored.

8. No Direct Effort Reward Relationship : Joint Stock Company is owned by shareholders and managed – by Board of Directors. Board of Directors are paid for managing and profit is shared by shareholders. There is no direct relation between efforts and rewards. Directors may not take a lot of interest in the working of the company.

Balbharti Maharashtra State Board Class 11 Secretarial Practice Solutions Chapter 5 Members of a Company Textbook Exercise Questions and Answers.

Maharashtra State Board Class 11 Secretarial Practice Solutions Chapter 5 Members of a Company

1A. Select the correct answer from the options given below and rewrite the statements.

Question 1.
____________ is a person whose name is entered in the Register of Members.
(a) Member
(b) Creditors
(c) Registrar
Answer:
(a) Member

Question 2.
A person can be called as a Member when the name is entered in ____________
(a) Register of charges
(b) Register of Members
(c) List of Members
Answer:
(b) Register of Members

Question 3.
A ____________ cannot be a member of a company.
(a) foreigner
(b) woman
(c) minor
Answer:
(c) minor

Question 4.
When a person buys shares of a company by filling up an application form, a person becomes a member by ____________
(a) Application and Allotment of shares
(b) Subscribing to Memorandum
(c) Transmission of Shares
Answer:
(a) Application and Allotment of shares

Question 5.
____________ means a person ceases being a member of the company of membership.
(a) Termination of membership
(b) Acquisition of membership
(c) Subscription to membership
Answer:
(a) Termination of membership

Question 6.
A member has right to participate in General Meetings means, he has a right to ____________
(a) receive dividends
(b) receive notice and agenda of a meeting
(c) to transfer his shares
Answer:
(b) receive notice and agenda of a meeting

1B. Match the pairs.

Question 1.

Answer:

1C. Write a word or a term or a phrase that can substitute each of the following statements.

Question 1.
End of membership of a person.
Answer:
Termination of membership

Question 2.
A person whose name is entered in the Register of Members.
Answer:
Member

Question 3.
Book in which names of all members are entered.
Answer:
Register of Members

Question 4.
Becoming a member of a company.
Answer:
Acquisition of membership

Question 5.
The subscribers of this document are considered Members of the company.
Answer:
Memorandum of Association

1D. State whether the following statements are True or False.

Question 1.
Buying shares is the most common way to become a Member of the company.
Answer:
True

Question 2.
Both individuals and body corporates can be members of the company.
Answer:
True

Question 3.
Legal competency to enter into contracts is one of the criteria to become a member of the company.
Answer:
True

Question 4.
Limited Liability Partnership cannot be a member of the company.
Answer:
False

Question 5.
Karta of HUF can be a member of the company.
Answer:
True

Question 6.
Member of the company is conferred with several rights.
Answer:
True

Question 7.
Member is entitled to profits of the company when a dividend is declared.
Answer:
True

Question 8.
Members of the company can attend general and Board meetings of the company.
Answer:
False

Question 9.
The right to appoint Director is given to Members.
Answer:
True

Question 10.
Minor can be a member of the company.
Answer:
False

1E. Find the odd one.

Question 1.
Subscribing to Memorandum, Forfeiture of Shares, Application, and allotment of shares.
Answer:
Forfeiture of shares

Question 2.
Death or insolvency of member, Application, and allotment of shares. Surrender of shares.
Answer:
Application and Allotment of shares

1F. Complete the sentences.

Question 1.
A person whose name is entered in the Register of Member of a company is called ____________
Answer:
Member

Question 2.
In case of death or insolvency of a member, he will cease to be a ____________
Answer:
Member of a Company

Question 3.
Members have a right to appoint and remove the ____________
Answer:
Director

1G. Select the correct option from the bracket.

Question 1.

(Partnership firm, Cannot become a member of a company, Can become a member of a company)
Answer:

1H. Answer in one sentence.

Question 1.
Which individuals cannot become a member of a company?
Answer:
Minor, insolvent, insane, or lunatic cannot become a member of a company.

Question 2.
What is the common way of becoming a member of a company?
Answer:
Buying shares is the common way of becoming a member of a company.

1I. Correct the underlined word and rewrite the following sentences.

Question 1.
A Minor can be a member of a company.
Answer:
A Guardian/Mai or person can be a member of a company.

Question 2.
Partnership Firm can be a member of the company.
Answer:
The Partnership firm cannot be a member of a company.

2. Explain the following terms/concepts.

Question 1.
Member
Answer:
A person who is a subscriber to the Memorandum of Association of a Company is called a member.
OR
A person whose name is entered in the Register of Members of the company is called a member of a company.

Question 2.
Transmission of shares
Answer:
Transmission of shares refers to the transfer or passing of property or titles in shares by the operation of law from a member to his legal representative. When transmission of shares takes place the membership of the original shareholder is terminated.

Question 3.
Cessation of Membership
Answer:
Cessation of Membership of a company means the discontinuation of membership. The name of the old member is removed from the Register of the member.

Question 4.
Acquisition of Membership
Answer:
Any person who is competent to contract can become a member after fulfilling certain requirements for the membership of the company.

Question 5.
Eligibility of Membership
Answer:
Buying shares amount to making a contract, so any entity i.e. person/organization competent to make contact can be a member of the company.

3. Study the following case/situation and express your opinion.

1. Mrs. & Mr. A work in a Bank. They have a daughter named Ms. Z who is 11 years old.

Question (a).
Can Mrs. & Mr. A invest in shares of the company?
Answer:
Yes, Mrs & Mr. A can invest in shares of the Company.

Question (b).
Can they buy shares in the name of their daughter Ms. Z?
Answer:
Yes, Mrs. A and Mr. A can buy shares in the name of their daughter Ms. Z.

Question (c).
Justify your answer in (a) & (b) in one sentence only.
Answer:
Justification:
Mrs. A and Mr. A can invest in shares of the Company as they are major citizens.
Similarly, they can buy shares on behalf of their daughter as they are guardians of Ms. Z.

2. M/s. ABC is a Partnership firm owned by Dr. A, Dr. B, Dr. C. The doctors want to invest the profits of ABC in the shares of a company.

Question (a).
Can M/s ABC buy the shares of the company?
Answer:
Yes M/s ABC can buy the shares of the company.

Question (b).
Can profits of M/s. ABC be invested in shares held in the names of Dr. A or Dr. B or Dr. C?
Answer:
They can invest profit of M/s ABC in the names of Dr. A or Dr. B or Dr.C.

Question (c).
Are the doctors eligible to invest in shares of the company?
Answer:
Yes, doctors are eligible to invest in shares of the company.

3. ZEN Limited has some investible profits. Please guide Zen limited with respect to the following?

Question (a).
Can ZEN Limited invest in the shares of itself?
Answer:
No, ZEN Limited cannot invest in the shares of itself.

Question (b).
Can ZEN Limited invest in the shares of TEN Limited?
Answer:
Yes, ZEN Limited can invest in the shares of TEN Limited.

Question (c).
Justify your answers in (a) & (b) in one sentence only.
Answer:
Justification:
ZEN limited being a legal person can be a member of another company TEN Limited. It cannot be a member of its own company as per the Companies act.

4. Answer in brief.

Question 1.
State any four ways of acquiring membership of a company.
Answer:
Any person who is competent to contract can become a member after fulfilling certain requirements for membership in a company.
The different ways to acquire membership of a company are explained below:
(i) By Subscription:

• The subscriber to the Memorandum of Association of a company, who are signatories to the Memorandum of the company is deemed to have agreed to become the members of the company.
• When the company is registered, their names are entered as the members in the Register of Members. In this case, neither an application nor the allotment of shares is important to become a member.

(ii) By Application and Allotment of shares:

• This is one of the methods of acquiring membership. An application for shares is made by an applicant in response to the invitation given by the company through its prospectus.
• The company then allots the shares as an acceptance to his application and offers the shares. The applicant then becomes the shareholder and his name is entered in the ‘ Register of Members’.

(iii) By Transfer of shares:

• After acquiring the shares by way of sale or gift, the buyer (transferee) is required to get the shares registered in his name in the Register of Members of the company.
• For this an instrument of transfer signed by the buyer and the seller accompanied by the share certificate is to be lodged (sent to) with the company.
• When the company approves the transfer, the name of the transferee is entered in the Register of Members and thus, be becomes a member of a company. The name of the earlier member is struck off from the Register.

(iv) By Transmission of shares:

• In the event of the death or lunacy of a member, his legal heir or representative automatically becomes the shareholder.
• He is entitled to have his name entered in the Register of Members. He can do so by making an application to the company, supported by legal evidence of his title.
• When the company approves the title the name of the legal representative is entered in the Register of Members and thus, he becomes a member of a company.
• This transfer of shares by the operation of law is called the transmission of shares.

Question 2.
State any four ways of cessation of membership of a company.
Answer:

• Cessation/Termination of a member means the discontinuation of membership. His relationship with the company comes to an end.
• The name of the members is removed from the Register of Members as cessation.
• The original member is thus prevented from exercising his rights of membership.

The membership of a person may be terminated in any one of the following ways:

• Winding up of a company: When a company is ‘winding up’ or exists no more due to the process of law, the membership of all the members stands terminated or cessation automatically.
• Surrender of shares: When the company accepts surrender of partly paid-up shares, if permitted by its Articles, the membership of the shareholder is terminated.
• Transmission of shares: Transmission of shares refers to the transfer or passing of property or titles in shares by the operation of law from a member to his legal representatives. Such an automatic transfer of shares takes place in the event of the death or lunacy of a shareholder. When the transmission of shares takes place, the membership of the original shareholder is terminated.
• Transfer of shares: The transfer of shares is effected by registering an instrument called ‘Instrument of Transfer’ with the company. When the company approves the transfer, the Secretary cancels the name of the seller from the Register of Members and thus the membership of the shareholder is terminated.
• Forfeiture of shares: When the company forfeits the shares on account of non-payment of call money, the membership of the shareholder whose shares are forfeited comes to an end.

Question 3.
State the rights of members with regard to participation in general meeting.
Answer:
As an integral part of a company, a member enjoys certain rights and has to fulfill certain duties and liabilities.
Following are the rights of members:

• Right to receive the notice and agenda of all general meetings, attend them in person or appoint a proxy, speak and vote at the meeting, demand to call Extra-Ordinary General meeting and pass resolutions.
• Right to receive the copy of annual reports, auditors’ reports, statutory reports, and the annual account are on his registered address.
• Right to transfer shares, if any, imposed by the Article of Association.
• Right to receive bonus shares whenever issued by the company.
• Right to get the name entered in the Register of members and be registered as a member of the company,
• Right to receive a share in the surplus property and assets of the company on winding up of the company after all other claims have been paid.

5. Justify the following statements.

Question 1.
Member and Shareholder are interchangeable terms.
Answer:

• A person whose name is entered in the register of members of a company is called a member and a person who owns shares of a company and holds actual possession of shares is called a shareholder of a company.
• A shareholder becomes a member of a company only when his name is recorded in the Register of Members. A person who buys a share in an open market is a shareholder. But he cannot be called a member until the procedure of transfer of shares in his name is completed.
• In the case of death, or lunacy of a member of a company, his legal representative becomes the shareholder but he cannot be called a member until the procedure for transmission of shares in his name is completed.
• A shareholder who transfers his share to another person is not a member until the transfer is registered and the name of the transferee is recorded in the Register of Members.
• A person who subscribes to the Memorandum of Association may not be called a member until the shares are actually allotted to them. Thus, I agree with the above statement.

Question 2.
A foreigner can invest in shares of an Indian company.
Answer:

• A foreigner can enter into contract.
• Foreigners can buy shares and become a member of an Indian company, subject to provisions of FEMA Act 1999.
• ‘FEMA’ aims at facilitating external trade and promote the foreign exchange market in India.
• Foreigner falls under the category of individual eligibility to be a member of a company.
• Thus, I agree with the above statement.

Question 3.
The insolvent person ceases to be a member of the company.
Answer:
Yes, I agree with the statement.

• On, becoming insolvent, a person’s beneficial rights of shareholders passes to Official Receiver or Assignee.
• Thus, the insolvent person stops being a member of the company on his insolvency.
• Official Receiver is an officer appointed by the court, to deal with the property and assets of the insolvent person.
• On being insolvent a member ceases to be a member of the company and thus he can neither attend Annual General
• Meeting nor can he vote on matters of the company.
• Thus, I agree with the above statement.

Question 4.
The Co-operative Society is eligible to be a member of the company.
Answer:

• The Co-operative Society falls under the category of Organizations eligible for membership of a company.
• Co-operative Societies are registered under the State Co-operative Societies Act of respective states.
• A Co-operative Society is a registered entity, it can become a member of the company.
• Thus, it can invest in shares of the company and also enjoys all the rights of membership.
• It also has a right to receive notice of meeting, attend the meeting, vote in meeting, etc.
• Thus, I agree with the above statement.

Question 5.
Subscribers to the Memorandum of Association are the first members of the Company.
Answer:

• There are different ways for the acquisition of membership in a company.
• Subscribing to Memorandum of Association is one is of the way of acquiring membership in a company,
• Subscribers to the Memorandum of Association of companies are different in different cases i.e. Seven (7) members in the case of a Public Company, Two (2) members in the case of a Private company, and One (1) in case of One Person Company.
• Thus, I agree with the above statement.

Question 6.
The nominee of the member of OPC becomes its member on the death of the member.
Answer:

• In an acquisition of membership, there are different ways to become a member of the company.
• In the case of One Person Company, the name of the nominee is given beforehand in the Memorandum of One Person Company.
• So, in case of the death of a member, his nominee automatically becomes the sole owner of the company.
• But he cannot be called as a member of the company until all procedure of transmission of shares is completed.
• Thus, I agree with the above statement.

Question 7.
Members of the company are entitled to several rights.
Answer:

• Being an integral part of a company, members enjoy certain rights and have to fulfill the duties and liabilities.
• Member has the right of accessing books and documents of a company. He can make copies of the Memorandum and Article of Association. He has the right to appoint Auditors and Directors and decide their salary and remuneration.
• He can inspect the Register of Members and Debentureholders register.
• He has right to make a Fundamental Corporate Decision like – Change of Registered office of the company, increase authorized capital, change in the object of the company, make amendment in Articles of Association, right of winding up the company, etc.
• He has the right to receive the notice and agenda of a meeting. He can attend the Annual General Meeting in personal or he can send his proxy to attend the meeting.
• Thus, I agree with the above statement.

Question 8.
Members of the company have some fundamental corporate decision-making rights.
Answer:

• Members hold powers to decide at meetings on important matters.
• He has certain fundamental rights like a change of registered office of the company.
• He can increase the authorized capital of the company.
• He can change the objects of the company because he is a member of the company as well as the owner of the company.
• He also has a right to amend the Articles of Association.
• He also has a right to acquisitions, mergers, and takeovers by the company. He can appoint sole selling agents for the company.
• He also has a fundamental right to close or wind up the company.
• Thus, I agree with the above statement.

Question 9.
Transfer of shares results in termination of membership.
Answer:

• On termination of membership, the name of the member is removed from the Register of Members.
• Companies Act empowers every shareholder to transfer his share in the manner laid down in the Articles and in accordance with the provisions of the law.
• A transfer of share takes place when a registered shareholder transfers his shares by sale or gift to another person voluntarily.
• Transfer of shares by operation of law in event of death or insolvency of members is called the transmission of shares. The legal representative/heir in case of death, official receiver in case of insolvency, and administrator in case of insanity replaces the concerned member.
• When the company approves the transfer, the Secretary cancels the name of the seller i.e. (transferor) from the Register of Members, and the membership of the shareholder stands terminated after transferring the shares.
• Thus, I agree with the above statement.

6. Answer the following questions.

Question 1.
Explain the circumstances when Member is not a shareholder and vice-versa.
Answer:
An organization is formed for purpose of education, sports, health, business with well-defined objectives and relationships. The organization is by ‘members’ and ‘only for members.’
“Member means a person whose name is entered in the Register of Members of the company and are the holder of equity shares and are a beneficial owner in the records of Depository.
Buying shares is the most common and easy way where a person becomes a member of the company.

Following are different circumstances when Member is not a shareholder:

• Member without being a shareholder:
  • Signatories to the Memorandum of Association: They are members of the company but not shareholders till the shares are not allotted to them.
  • Company Limited by Guarantee Amount: This company does not have any share capital. Therefore, it has only members, not the shareholders.
  • Transfer of shares: Transferor (seller) of shares continue to be a member of the company, till his name is removed from the Register of Members and is replaced by transferee’s (buyer)name.
  • On the death of a member: On the death of a member, his legal heir becomes the holder of deceased member shares. But he is not a member of a company until the procedure of transmission of shares is completed.
  • On insolvency of member: Shares of insolvent member are held by court-appointed Official Receiver.
    So the insolvent person continues to be a member but not the shareholder.
• Shareholder without being a member: The buyers of the shares, Official Receiver in case of insolvency; legal heir in case of death as explained above are shareholders but not the members of the company.

Question 2.
Explain the eligibility of memberships of a company.
Answer:

• The organization is formed and managed by persons termed as ‘Member’.
• So it is rightly said organization is by ‘member’ and ‘only for members’.
• Any entity i.e. person or organization who is competent to make a contract can become a member of the company.
• Subject to provisions of the Companies Act, 2013, Memorandum of Association, and Articles of Association, any person who is legally competent to manage their own affairs (‘Sui-Juris) can become a member of the company.

Eligibility Criteria:
(A) Individuals:

• Major person: Any person domiciled (staying) in India, having completed 18 years of age, having a sound mind, and not be disqualified by law can become a member of the company.
• Minor: A minor cannot be a member of a company but a guardian can be a member of a company on behalf of a minor.
• Insolvent: Insolvent person cannot be a member of a company as his beneficial rights of shareholding are held by the Official Receiver, an officer appointed by the court.
• Insane/Lunatic: Insane/Lunatic person is unable to enter into a contract which makes him ineligible to be a member of a company.
• Foreigner: A foreigner or Non-resident Indian can become a member of a company, subject to provisions of FEMAAct, 1999.

(B) Organizations:

• Company: A company being a legal person can be a member of another company if authorized by its Memorandum of Association. It cannot be a member of its own company.
• Co-operative Society: Since co-operative societies are registered entity, they can be a member of the company.
• Limited Liability Partnership (LLP): Such, firms are treated as a juristic person, hence it can be a member of the company.
• Hindu Undivided Family: HUF firm is prohibited to be a member of a Company, but ‘Karta’ can buy a share in his name on behalf of Hindu Undivided Family firm.
• Partnership Firm: Since the partnership firm is not a registered entity. It cannot be a member of the company. But partners themselves can buy shares in their individual names.
• Trust: Registered trust can become a member of a company in its own name.

Question 3.
Explain different ways to acquire membership of the company briefly.
Answer:
Any person who is competent to contract can become a member after fulfilling certain requirements for membership in a company.
The different ways to acquire membership of a company are explained below:
(i) By Subscription:

• The subscriber to the Memorandum of Association of a company, who are signatories to the Memorandum of the company is deemed to have agreed to become the members of the company.
• When the company is registered, their names are entered as the members in the Register of Members. In this case, neither an application nor the allotment of shares is important to become a member.

(ii) By Application and Allotment of shares:

• This is one of the methods of acquiring membership. An application for shares is made by an applicant in response to the invitation given by the company through its prospectus.
• The company then allots the shares as an acceptance to his application and offers the shares. The applicant then becomes the shareholder and his name is entered in the ‘ Register of Members’.

(iii) By Transfer of shares:

• After acquiring the shares by way of sale or gift, the buyer (transferee) is required to get the shares registered in his name in the Register of Members of the company.
• For this an instrument of transfer signed by the buyer and the seller accompanied by the share certificate is to be lodged (sent to) with the company.
• When the company approves the transfer, the name of the transferee is entered in the Register of Members and thus, be becomes a member of a company. The name of the earlier member is struck off from the Register.

(iv) By Transmission of shares:

• In the event of the death or lunacy of a member, his legal heir or representative automatically becomes the shareholder.
• He is entitled to have his name entered in the Register of Members. He can do so by making an application to the company, supported by legal evidence of his title.
• When the company approves the title the name of the legal representative is entered in the Register of Members and thus, he becomes a member of a company.
• This transfer of shares by the operation of law is called the transmission of shares.

(v) By holding shares in the Dematerialized form:
The person holding shares in dematerialized form and has his name as a beneficial owner in the records of Depository is treated as a member of the company.

(vi) Nominee of One Person Company (OPC):
In the case of One Person Company, the name of the nominee is given beforehand in the Memorandum of One Person Company. He becomes the sole owner of the shareholdings of the deceased member.

(vii) By Acquiescence:
If a person is wrongly entered in the Register of Members or holds or allows his name as the Register of Members without informing the company about its mistake, he is treated and made liable as a member in the event of liquidation of a company.

Question 4.
Explain how membership of the company terminates.
Answer:
Cancellation of membership of a shareholder is called Termination or Cessation of membership. On termination of membership, all rights of a member are canceled.

Following are the ways of Termination of membership:
(i) Transfer of shares: Transfer of shares is effected by registering an instrument called Instrument of Transfer with the company. The secretary cancels the name of the seller from the Register of Members and thus the membership of the shareholder is terminated.

(ii) Transmission of shares: Transmission of shares refers to the transfer of shares by operation of law. This is an automatic transfer of a share in the event of death or lunacy of a shareholder. When the transmission of shares takes place, the membership of an original shareholder is terminated.

(iii) Winding up: When a company is winding up, the membership of all the members stands terminated automatically.

(iv) Forfeiture of shares: When a company forfeits the shares on account of non-payment, of calls on shares, shareholder’s shares are forfeited and he ceases to be a member of the company.

(v) Surrender of shares: When a company accepts surrender of partly paid-up shares if permitted by its Articles, the membership of the shareholder is terminated.

(vi) Redemption of Preference shares: When the redeemable preference shares are redeemed (repaid) to the shareholder by the company as per the terms of issue, the membership comes to an end.

(vii) Right of lien as shares: When a shareholder has some obligation towards the company, it is said to be lien on shares by the company. It means shareholders cannot sell their shares until they clear their dues or obligations if any. In case of his failure to pay his dues company cancels his shares and his membership comes to an end.

Question 5.
Explain the Rights of a Member of a company.
Answer:
Being a part of a company, a member enjoys certain rights and has to fulfill certain duties.
Right of members are as follows:

1. Right of accessing books and documents: A member can get copies of Memorandum and Articles of Association, Auditors and Directors Reports, Balance Sheet and Profit and Loss A/c. Members can also check the Register of members.
2. Right to participate in General meetings: Members have the right to receive notice and agenda of all general meetings, attend the meeting personally or appoint a proxy, vote at the meeting, etc.
3. Right to appoint and remove a Director: Member of a company has the right to appoint and remove the directors.
4. Shareholding rights: Shareholders have the right to receive a share certificate, transfer his shares, to get right issue and bonus issue shares.
5. Right to Class Action Suit: The Act confers the right of Class Action Suit to members against the company or their directors in the time of any unlawful or wrongful act. They can file a petition to wind up the company.
6. Right to receive surplus assets: In the event of the winding-up of the company, the member has the right to get a share in surplus assets of the company.
7. Right with respect to the company’s accounts and its audit: Members have the right to approve the annual accounts at the Annual General Meeting. He can appoint auditors, fix their salary, and has a right to remove the auditors.
8. Right to participate in the profit of the company: Members invest money in the company and expect a certain return in form of dividends. They have the right to receive dividends within 30 days of its declaration in the Annual General Meeting.
9. Right to make Fundamental Corporate Decision: Members hold powers to decide at a meeting on important matters like a change of Registered office of the company, increase authorized capital of the company, change the objects of the company, to amend an Articles of Association, right of acquisitions, mergers and takeovers by the company, appoint a sole selling agents for the company, rights to close or wind up the company.

Activity (Textbook Page No. 72)

Find the composition of shareholding of a listed public company.
Answer:
“Listed Public Companies” means a public company that has any of its securities listed in any recognized stock exchange. One of the advantages to the shareholder(s) of a Public Company is free transferability of shares and in the case of Listed Companies such free transferability also ensures quick liquidity of the investment. However, such liquidity is only possible when there is an existence of buyers and sellers in the market. In many Listed Companies, a large chunk of the paid-up capital is held by the promoter group which reduces the public shareholding to a great extent.

The promoter group usually refrains from trading in their shares which in turn reduces the number of buyers and sellers in the market and the liquidity factor also gets affected. In order to ensure a minimum level of Public Shareholding in Listed Public Companies and to provide liquidity to the investors, the Ministry of Finance amended the Securities Contracts (Regulation) Rules, 1957 [SCCR, 1957] twice in the year 2010. The press note released by the Ministry of Finance upon the first amendment of SCCR, 1957 stated “A dispersed shareholding structure is essential for the sustenance of a continuous market for listed securities to provide liquidity to the investors and to discover fair prices”.

Balbharti Maharashtra State Board Class 11 Secretarial Practice Solutions Chapter 6 Directors and Key Managerial Personnel of a Company Textbook Exercise Questions and Answers.

Maharashtra State Board Class 11 Secretarial Practice Solutions Chapter 6 Directors and Key Managerial Personnel of a Company

1A. Select the correct answer from the options given below and rewrite the statements.

Question 1.
_____________ comprises of a team of Directors.
(a) Board of Directors
(b) Board of Trustees
(c) Board of Managers
Answer:
(a) Board of Directors

Question 2.
_____________ can be a director.
(a) An Individual
(b) A Firm
(c) A Body corporate
Answer:
(a) An individual

Question 3.
Upto _____________ as maximum directors are allowed to a company.
(a) five
(b) fifteen
(c) fifty
Answer:
(b) fifteen

Question 4.
A maximum of _____________ Directorships is allowed to a person.
(a) two
(b) ten
(c) twenty
Answer:
(c) twenty

Question 5.
A maximum of _____________ Directorships of a public company is allowed to a person.
(a) one
(b) ten
(c) twenty
Answer:
(b) ten

Question 6.
_____________ is a unique identification number required to be a Director.
(a) PIN
(b) DIN
(c) TIN
Answer:
(b) DIN

Question 7.
_____________ powers are the powers given to Board under the Act.
(a) Statutory
(b) Managerial
(c) Administrative
Answer:
(a) Statutory

Question 8.
Director represents company in his role as _____________
(a) Agent
(b) Managing Partner
(c) employee
Answer:
(a) Agent

Question 9.
Managing Director is appointed for a period of _____________ years
(a) 5
(b) 10
(c) 15
Answer:
(a) 5

Question 10.
_____________ is required to work under superintendence, control, guidance of the Board.
(a) Government
(b) ROC
(c) Managing Director
Answer:
(c) Managing Director

Question 11.
_____________ is an employee of the company.
(a) Alternate director
(b) Non-executive Director
(c) Whole-time director
Answer:
(c) Whole time Director

Question 12.
_____________ need not be a director of the company.
(a) Manager
(b) Managing Director
(c) Whole-time director
Answer:
(a) Manager

Question 13.
_____________ needs a whole time director.
(a) Listed company
(b) Partnership
(c) OPC
Answer:
(a) Listed company

Question 14.
To provide guidance to Board is _____________ duty of Company Secretary.
(a) Personal
(b) General
(c) Statutory
Answer:
(c) Statutory

Question 15.
Only a member of _____________ can be a practicing Company Secretary.
(a) ICAI
(b) ACCA
(c) ICSI
Answer:
(c) ICSI

Question 16.
_____________ is to be prepared in prescribed form MR-3.
(a) Annual Report
(b) Auditors Report
(c) Secretarial Audit Report
Answer:
(c) Secretarial Audit Report

1B. Match the pairs.

Question 1.

Answer:

Question 2.

Answer: