Class 11 – Page 32 – Maharashtra Board Solutions

Maharashtra Board OCM 11th Commerce Solutions Chapter 5 Forms of Business Organisation – II

July 8, 2024July 7, 2024 by Bhagya

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.

Group A	Group B
(a) BHEL	(1) Special Legislature
(b) Statutory Corporation	(2) 49% paid up capital by Government
(c) Departmental Organisation	(3) Service Motive
(d) Private Sector	(4) Railway
(e) Public Sector	(5) Profit motive
	(6) 51% paid up capital by Government

Answer:

Group A	Group B
(a) BHEL	(6) 51% paid up capital by Government
(b) Statutory Corporation	(1) Special Legislature
(c) Departmental Organisation	(4) Railway
(d) Private Sector	(5) Profit motive
(e) Public Sector	(3) Service Motive

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:

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

Question 2.
Private Sector Organisation.
Answer:

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

Question 3.
Departmental Organisation.
Answer:

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

Question 4.
Statutory Corporation.
Answer:

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

Question 5.
Government Company.
Answer:

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

Question 6.
Multinational Corporation.
Answer:

It is a business organisation that operates in many different countries.
It conducts business activities in more then one country.
It is controlled through centrally located head office.
They are also called as transnational or international corporations.
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:

	Private Sector Organisation	Public Sector Organisation
(1) Meaning	Private enterprises are owned managed, controlled and financed by individuals or groups of individuals. Thus, ownership and management is with private organisations.	Public enterprises are owned, managed and controlled by the state on behalf of the people.
(2) Management	It is managed by industrialists through board of directors and other specialized executives.	It is managed by government officials or board of directors.
(3) Size of Entity	They are usually of small or medium size depending on volume of operation.	They are usually large in sized and they operate on large scale.
(4) Capital provider	Capital is contributed by owner from their own resources and borrowings from financial institutions.	The capital of public sector organisation is contributed by government.
(5) Decision making	Decision making is quick as very few officials are involved in decision making process.	Decision making is delayed due to bureaucratic hurdles.
(6) Business area	It generally operates in industrial and commercial areas only.	It operates in utility services areas like – railways, post, etc. and also in industrial and commercial areas.
(7) Main motive	Main motive of private sector organisation is to earn a profit.	Main motive of public sector organisation is to provide services to society.
(8) Flexibility	They are more flexible in nature as their policies can be modified as and when the need arises.	There is no flexibility in their operations as any change or modification requires the approval of thp Government.
(9) Political Interference	In private enterprises, there is no political interference and therefore executive enjoys complete autonomy and freedom of operations.	Public enterprises working is always affected by political interference. There is constant danger of undue interference by political parties and their leaders.
(10) Competition	Private enterprises operate in cut throat competition.	Public enterprises are generally monopolies or oligopolies (only two sellers in market.)
(11) Economic Equalities	Private sector increases economic inequalities.	Public Enterprises reduce economic inequalities.
(12) Regional Balance	Private enterprise increase regional imbalance because it wants to enjoy the advantages of location of industries.	Public enterprises tries to reduce the regional imbalance as it intends to bring about balanced regional development.
(13) Efficiency	Private Enterprises are more efficient due to profit maximisation, division of labour and specialisation.	Public enterprises lack initiative, flexibility and efficiency because profit motive is absent.
(14) Constituents	Sole Trading Concern, Joint Hindu Family Firm, Partnership Firm, Joint Stock Companies, Co-operative Society are different forms private sector.	Departmental Organisation, Statutory Corporations and Government companies are types of public sector.

Question 2.
Departmental Organisation and Statutory Corporation.
Answer:

	Departmental Organisatio	Statutory Corporation
Meaning	The organisation which is owned, managed, controlled, financed and operated by government is known as Departmental Organisation.	The company which is formed under a special Act of Parliament or State Legislature is known as Statutory Corporation.
Management	It is managed by government officials of the concerned ministry.	It is managed by board of directors nominated by government.
Legal Status	There is no separate legal status distinct from the government.	Statutory company has a separate legal status distinct from the government.
Borrowing Power	Departmental undertaking cannot borrow from public. It has to depend on budget allocated by the government.	Statutory Company can borrow from public by issue of shares and debentures.
Control	It is controlled by the concerned ministry.	It is controlled by government by the Act of Parliament or State Legislature.
Capital	Capital of departmental organisation comes from annual budget appropriations of the government.	Capital for statutory company comes from Central or State Government.
Formation	It is formed through Executive decision taken by the concerned ministry.	It is formed by passing a Special Act in the Parliament or in the State Legislature.
Suitability	It is suitable for defence and public utility undertakings such as infrastructure projects, e.g. Railways, Post & Telegraph, Defence, etc.	It is suitable for public utilities, development projects, service industry like banking and finance and other industrial and commercial undertakings e.g. UTI, LIC, RBI, ONGC, Air India etc.
Staff	Employees appointed are Government servants. They are subject to the same discipline and enjoy the same privileges as meant for civil servants.	Employees can be recruited independently. They are not civil servants. The corporation can have its own rule of recruitment and scale of remuneration.
Flexibility	It has low flexibility in its operation.	It has moderate flexibility in its operation.
Autonomy	It does not have autonomy in decision making.	It has autonomy in decision making.

Question 3.
Government Company and Multinational Corporation.
Answer:

	Government Company	Multinational Corporation
Meaning	Government Company means company where minimum 51% of the paid up capital is held by the Central or State Government jointly or individually.	Multinational Corporation is a company which is incorporated in one country and has business units in several countries.
Capital	The capital is contributed by the Central Government or State Government or even by general public.	The capital is contributed by the shareholders or financial institutions in several countries.
Management and Control	Government Company is managed by Board of Directors appointed by government and shareholders.	Multinational corporation is managed by a parent company. It manages affairs of the subsidiary from the respective home country.
Establishment	Government companies are formed and registered under provisions of Companies Act, 2013.	Multinational corporations have to seek permission from the government and host countries.
Borrowing power	Government companies can borrow funds by the way of debt or issuing shares to the public.	Multinational corporation use resources of different countries.
Area of Operations	Government company operates within the local boundaries of a nation.	MNC operates in several countries, having headquarters in one country.
Motive	Government companies are service oriented and hence take interest in the social welfare activities of the country.	MNCs are profit motivated rather than service oriented.
Accountability	Government Company has to take its annual reports in the Parliament where its working is discussed and debated. Though it has autonomy in financial matters, it is indirectly accountable to the publics.	MNC is accountable to the taxation authorities in host countries and have to follow procedures such as Income Tax law procedure, FEMA, EXIM Policy etc. and as such will have to obey the laws of the host countries.
Currency	They have to deal with single currency.	They have to deal with multiple currencies and exchange rates.
Resource availability	Government company uses resources of government and its employees are government employees and are permanent.	MNCS use resources of different countries and their employees are on contract basis.
Trust and Public Confidence	Government company enjoy more public confidence as they have government backing and support.	MNCS do not have government backing and support in host countries.
Example	Steel Authority of India Ltd., State Trading Corporation, Indian Oil Corporation, BHEL, HMT, etc.	Hindustan Lever Ltd., Colgate Palmolive India Ltd; Coca Cola, IBM Computers, Sony, etc.

Question 4.
Departmental Organisation and Multinational Corporation.
Answer:

	Departmental Organisation	Multinational Corporation
Meaning	The organisation which is owned, managed, controlled, financed and operated by government is known as Departmental Organisation.	Multinational Corporation is a company which is incorporated in one country and has business units in several countries.
Management	Departmental Organisation is managed by government officials of the concerned ministry.	Multinational Corporation is managed by parent company. It manages affairs of the subsidiary from the respective home country.
Legal status	There is no separate legal status distinct from the government.	It has separate legal status.
Borrowing power	Departmental undertaking cannot borrow from public. It has to depend on budget allocated by the government.	Multinational corporation use resources of different countries.
Control	Departmental Organisations are controlled by the concerned ministry.	Multinational corporations are controlled by respective parent companies and mostly home strategic.
Capital	Capital of the Departmental Organisation comes from annual budget appropriations of the government.	The capital is contributed by the shareholders or financial institutions in several countries.
Ownership	Departmental undertaking is fully owned by the Government.	Ownership of MNC is in hands of shareholder’s of the company.
Privileges & Concessions	It receives highest government concessions and privileges.	MNC do not have any concessions. They have to pay duties and taxes.

Question 5.
Government Company and Statutory Corporation.
Answer:

	Government Company	Statutory Corporation
Meaning	Government Company means company where minimum 51% of the paid up capital is held by the Central or State Government jointly or individually.	The company which is formed under a special Act of Parliament or State Legislature is known as Statutory Corporation.
Capital	The capital is contributed by the Central Government or State Government or even by general public and financial institutions.	Capital for the statutory corporation comes from Central or State government.
Managemen	Government Company is managed by Board of Directors appointed by government and shareholders.	Statutory Corporation is managed by Board of Directors nominated by government.
Control	These companies are controlled by government or shareholders.	Statutory corporation is controlled by government by the Act of Parliament or State Legislature.
Establishment	Government companies are formed and registered under provisions of Companies Act, 2013.	The statutory corporation is established by special Act of the Parliament or State Legislature.
Borrowing power	Government companies can borrow funds by the way of debt or issuing shares to the public.	tatutory corporation can borrow from public by issue of bonds.
Privileges & Concessions	It has no privileges and concessions by government.	It enjoys moderate privileges and concessions.
Suitability	It is suitable for industrial and commercial undertakings, e.g. BHEL, SAIL, HMT, Indian Oil Corporation, Indian Refineries, Madras Refineries, Gujarat Refineries, etc.	It is suitable for public utilities, development projects, service industry like banking and finance and other industrial and commercial undertakings e.g. UTI, LIC, RBI, ONGC, Air India etc.
Political Interference	It has less political interference in management of company as it has its own Board of Director.	It has more political interference as it is controlled by State and Central Government.
Flexibility	Government companies are more flexible in operations of business. They can change line of business as per market trend.	Statutory company are rigid in operations they are formed for the particular purpose.
Accountability	It is accountable to public.	It is accountable to State and Central Government.
Autonomy	It has full autonomy as its incorporated under Companies Act, 2013.	It has theoretical autonomy as its established with certain purpose by Central or State Government.

Question 6.
Departmental Organisation and Government Company.
Answer:

	Departmental Organisation	Government Company
Meaning	The organisation which is owned, managed, controlled, financed and operated by Government is known as Departmental Organisation.	Government Company means company where minimum 51% of the paid up capital is held by the Central or State Government jointly or individually.
Management	Departmental Organisation is managed by government officials of the concerned ministry.	Government Company is managed by Board of Directors appointed by government and shareholders.
Legal Status	There is no separate legal status distinct from the government.	A Government company has legal status separate from the Government.
Borrowing power	Departmental undertaking cannot borrow from public. It has to depend on budget allocated by the government.	Government companies can borrow funds by the way of debt or issuing shares to the public.
Control	Departmental Organisations is controlled by the concerned ministry.	These companies are controlled by government or shareholders.
Capital	Capital of the departmental Organisation comes from annual budget appropriations of the government.	The capital is contributed by the Central Government or State Government or even by general public and financial institution.
Formation	It is formed through Executive decision taken by the concerned ministry.	It is formed through registration under Companies Act, 2013.
Privileges & Concessions	It receives highest government concessions and privileges.	It has no privileges and concessions by government.
Suitability	It is suitable for defence and public utility undertakings such as infrastructure projects, e.g. Railways, Post & Telegraph, Defence, etc.	It is suitable for industrial and commercial undertakings, e.g. BHEL, SAIL, HMT, Indian Oil Corporation, Indian Refineries, Madras Refineries, Gujarat Refineries, etc.
Staff	Employees appointed are Government servants. They are subject to the same discipline and enjoy the same privileges as meant for civil servants.	Employees can be recruited independently and it does not have to necessarily follow civil service rules.
Political Interference	It has high political interference with regards to the management.	As compared to departmental organisation it has less political interference.
Flexibility	It is rigid in operations as its managed through officers of the government.	It is more flexible in operations as managed by Board of Directors.
Motive	It is majorly concern with providing service to the people.	It is concern with giving with profit making and service to the people.
Accountability	Highly accountability to the respective the Minister in charge as they render their service.	Low accountability to the people as they render their service.
Autonomy	There is no autonomy as its owned, managed controlled, financed by government.	It has full autonomy as per provisions to Companies Act, 2013.

Question 7.
Statutory Corporation and Multinational Corporation.
Answer:

	Statutory Corporation	Multinational Corporation
Meaning	The company which is formed under a Special Act of Parliament or State Legislature is known as Statutory Corporation.	Multinational corporation is a company which is incorporated in one country and has business units in several countries.
Capital	Capital for the statutory corporation comes from Central or State government.	The capital is contributed by the shareholders or financial institutions in several countries.
Management	Statutory Corporation is managed by Board of Directors nominated by government.	Multinational Corporation is managed by parent company and it manages affairs of the subsidiary from the respective home country.
Control	Statutory Corporations are controlled by government by the Act of Parliament or State Legislature.	Multinational Corporations are controlled by respective parent companies.
Establishment	The Statutory Corporation is established by Special Act of the parliament or State Legislature.	Multinational Corporations have to seek permission from the Government and host countries.
Borrowing power	Statutory company can borrow from public by issue of shares and debentures.	Multinational Corporation use resources of different countries.
Area of Operations	Statutory corporation operates within the local boundaries of a nation. Hence, the area of operations is not large.	MNC operates in several countries, having headquarters in one country. Hence, the area of operations is large.
Motive	Statutory Corporation are service oriented and hence take interest in the social welfare activities of the country.	MNCs are profit motivated rather than service oriented. They render service in those areas where the opportunities for profit maximisation are more.
Accountability	Statutory corporation has to take its annual reports in the Parliament where its working is discussed and debated.	MNC is accountable to the taxation authorities in host countries and have to follow procedures such as Income Tax law procedure, FEMA, EXIM Policy etc. and as such will have to obey the laws of the host countries.
Currency	They have to deal with single currency.	They have to deal with multiple currencies and exchange rates.
Resource availability	Employees can be recruited independently. They are not civil servants. The corporation can have its own rule of recruitment and scale of remuneration.	MNC’s use resources of different countries and their employees are on contract basis.
Trust and Public Confidence	Statutory corporation enjoy more public confidence as they have government backing and support.	MNC’s do not have government backing and support in host countries.
Example	UTI, LIC, RBI, ONGC, Air India, etc.	Hindustan Lever Ltd., Colgate Palmolive India Ltd; Coca Cola, IBM Computers, Sony, etc.

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:

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

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

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

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

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

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

A statutory corporation is able to manage its affairs with independence and flexibility.
Management of statutory corporation is done without any government interference.
The statutory corporation is relatively free from red tapism.
There is less file work and less formality to be completed before taking decisions.
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.
Thus, there is professional management in statutory corporation.

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

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

Question 6.
MNC has worldwide existence.
Answer:

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

Question 7.
MNC has mighty economic powers.
Answer:

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

(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.

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.

(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.

(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.

(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:

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.
State Trading Corporation (STC), Steel Authority of India (SAIL), Bharat Heavy Electricals Ltd (BHEL) etc. are some of the examples of Government Companies.
These companies are registered under the Indian Companies Act, 2013 and its working is governed by the rules and regulations of the act.
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.
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.

(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.

(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.

(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.

(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.

(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.

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

(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.

(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.

Maharashtra Board OCM 11th Commerce Solutions Chapter 4 Forms of Business Organisation – I

July 6, 2024July 5, 2024 by Bhagya

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

Group A	Group B
(a) Private Company	(1) Karta
(b) Public Company	(2) Local Market
(c) Common Seal	(3) 1932
(d) Partnership Act	(4) Maximum 200 members
(e) Joint Hindu Family Firms	(5) One Man Show
(F) Subject-matter of insurance	(6) Minimum Seven members
	(7) Minimum 10 members
	(8) Signature of Company
	(9) Maximum 100 members
	(10) Manager

Answer:

Group A	Group B
(a) Private Company	(4) Maximum 200 members
(b) Public Company	(6) Minimum Seven members
(c) Common Seal	(8) Signature of Company
(d) Partnership Act	(3) 1932
(e) Joint Hindu Family Firms	(1) Karta

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)

Group A	Group B
(i) Minimum 2 and maximum 200	……………..
(ii) Minimum 10 and maximum no limit	…………….
(iii) ………………	Minimum 7 and maximum unlimited
(iv) Form of business organisation having only one member	…………………
(v) Minimum 2 and maximum 50	………………..

Answer:

Group A	Group B
(i) Minimum 2 and maximum 200	Private Limited Compmay
(ii) Minimum 10 and maximum no limit	Co-operative Society
(iii) Public company	Minimum 7 and maximum unlimited
(iv) Form of business organisation having only one member	Sole Trading Concern
(v) Minimum 2 and maximum 50	Partnership Firm

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:

It is a form of business organization which is owned, managed and controlled by one person.
It need not be registered.
It does not have a legal status i.e. It does not have a stable life.
Maximum secrecy can be maintained in Sole Trading concern.

Question 2.
Partnership Firm.
Answer:

It is a voluntary association of two or more persons with a common objective.
It is formed by an agreement called Partnership deed.
It is governed by Indian Partnership Act, 1932.
Registration of partnership firm is optional as per Partnership Act, 1932.
In Maharashtra, registration of partnership firm is made compulsory.

Question 3.
Joint Hindu Family Firm.
Answer:

It is a form of business organization which is carried from one generation to another generation.
It comes into existence by operation of Hindu Law.
This form of organization is found in India only.
The seniormost member of the family is called ‘Karta’ while other members are called ‘Co-parceners’.

Question 4.
Co-operative Society.
Answer:

It is a voluntary association of individuals which is formed for providing services to members.
Its main motto is ‘service’ rather than ‘profit’.
It runs on principle of ‘One member One Vote’.
It enjoys an independent legal status, distinct from its members.

Question 5.
Joint Stock Company.
Answer:

It is an incorporated association created by law, having an independent legal status, owned by shareholders and managed by Board of Directors.
The main motive of Joint Stock company is maximisation of profit.
It works as principle of “One share One vote”.
It has to follow Indian Companies Act, 2013.

Question 6.
Karta.
Answer:

Karta is a seniormost member of the family, who runs the Joint Hindu Family Business.
The Karta has unlimited liability in such type of business.
Karta has the right to manage the business.
Karta need not consult any body about business decisions.

Question 7.
Managing Committee.
Answer:

Managing committee is a group of members of a Co-operative society, who looks after the working of Co-operative society.
They are elected by the shareholders of Co-operative society.
All important decisions are taken by the managing committee.
In short, they look after day to day administration of the Society.

Question 8.
Nominal Partner.
Answer:

A partner who only lends his name and reputation to the partnership firm is called as nominal partner.
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.
He does not contribute to the capital of the business.
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:

	Private Limited Company	Public Limited Company
(1) Meaning	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 and prohibits the issue of prospectus.	A Public Company means a company, which is not a Private Company.
(2) Name of the Company	Name of the company must end with the word ‘Private Limited’.	Name of the company must end with the word ‘Limited’.
(3) Number of Members	There are minimum 2 members. Maximum members are 200.	There are minimum 7 members. Maximum members are unlimited.
(4) Transfer of Shares	Shares of the company are not freely transferable.	Shares of the company are freely transferable.
(5) Issue of Prospectus	The company cannot issue prospectus. Statement in lieu of prospectus is issued.	The company has to issue prospectus compulsory.
(6) Number of Directors	Minimum 2 Directors are needed in a Private Limited Company.	Minimum 3 Directors are needed in a Public Limited Company.
(7) Statutory Meeting	A Private Limited Company need not hold a Statutory Meeting.	A Public Limited Company must hold a Statutory Meeting compulsorily.
(8) Capital	Minimum paid up capital is one lakh rupees.	Minimum paid up capital is five lakh rupees.
(9) Commencement of Business	The business can be started after getting ‘Incorporation Certificate’.	The business can be started after getting ‘Commencement Certificate’.

Question 2.
Sole Trading Concern and Partnership Firm.
Answer:

	Sole Trading Concern	Partnership Firm
(1) Meaning	Sole proprietorship is owned and controlled by one person.	Partnership firm is owned and controlled by two or more persons called as ‘Partners’.
(2) Formation	Sole trading concern can be formed easily. It is started as soon as the owner decides.	Partnership firm is formed by an agreement between two or more persons.
(3) Numbers of Members	Sole trading concern is owned by a single person.	Minimum 2 members are needed for starting business. The maximum number is 50.
(4) Registration	There is no need for registration of sole trading concern.	A partnership firm may or may not be registered. However, it is always desirable for the firm to be registered. It is compulsory in Maharashtra.
(5) Secrecy	It is possible to have maximum business secrecy.	Secrecy is shared among all the partners.
(6) Liability	Liability of a sole trader is unlimited	Liability of a partner is unlimited, joint and several.
(7) Management	The sole trader looks after management of business. He is manager of the business.	All partners take part in management of the firm according to their skills.
(8) Capital	The entire capital is contributed by the sole trader, comparatively limited.	Partners contribute capital to the firm, comparatively more.
(9) Act/Law	There is no special Act governing the Sole Trading concern.	Partnerships are governed by the Indian Partnership Act, 1932.
(10) Sharing of Profit	The sole trader alone enjoys all the profits of business.	Partners share the profits of business as per the ratio given in the agreement.
(11) Risk	In this form of business organization, the risk is assumed by sole trader alone.	In partnership firm, the risk is shared by all the partners.
(12) Disputes	There is no room for disputes among owners, as there is only a single owner.	There can be disputes among partners.

Question 3.
Partnership Firm and Joint Hindu Family.
Answer:

	Partnership Firm	Joint Hindu Family
(1) Meaning	Partnership firm is controlled by two or more persons called as ‘Partners’.	In Joint Hindu Family Firm, the Joint Hindu Family conducts business according to Hindu Laws.
(2) Number of Members	Minimum two members are needed for starting business. The maximum number is fifty.	Membership of the firm depends upon the birth and death in the family. There is no limit on membership. A person adopted into the family also becomes a member.
(3) Registration	Registration is not compulsory in India, but it is compulsory in Maharashtra.	Registration is not compulsory.
(4) Liability	The liability of partners is unlimited, joint and several.	Karta has unlimited liability and Co-parceners have limited liability.
(5) Capital	Comparatively more, as it is contributed by all partners.	The whole capital comes from ancestral property.
(6) Secrecy	Secrets share by all partners.	Secrecy can be maintained within family.
(7) Management	All partners takes part in management of the firm according to their skills.	Karta looks after the management of the business. All Co-parceners follow his decision.
(8) Stability	Stability of business is affected by death, lunacy or insolvency of a partner.	Comparatively, more stable as business is not affected by death of Karta or Co-parceners.
(9) Act	Partnerships are governed by the Indian Partnership Act, 1932.	Joint Hindu Family firm follows the Hindu Succession Act, 1956.
(10) Formation	Partnership firm is formed by an agreement between two or more persons.	Joint Hindu Family Firm comes into existence by operation of Hindu Laws.
(11) Sharing of Profits/ Losses	The profits and losses are shared by partners as per the ratio given in the agreement.	The profits and losses are shared between Karta and Co-parceners.
(12) Inspection of books of Accounts	A partner has a right to inspect books of accounts of the firm.	A co-parcener has no right to inspect books of accounts of the firm.
(13) Implied	Authority Every partner has implied authority to act on behalf of the other partners.	Karta has implied authority to act on behalf of the firm.

Question 4.
Co-operative Society and Joint Stock Company.
Answer:

	Co-operative Society	Joint Stock Company
(1) Meaning	Co-operative Society is a voluntary association of individuals which is formed for providing services to members.	Joint Stock Company is an incorporated association created by law, having an independent legal status, owned by shareholders and managed by board of directors.
(2) Number of Members	Minimum ten members and maximum number of members is unlimited.	Private company- Minimum – 2 Maximum – 200 Public company- Minimum – 7 Maximum – No limit
(3) Capital	A Co-operative society has less capital as compared to Joint Stock company.	Joint Stock company has large capital.
(4) Management	Managing Committee manages Co-operative society.	Board of Directors manages Joint Stock company.
(5) Act	Co-operative Societies have to follow Co-operative Societies Act, 1912. In Maharashtra, the societies have to follow Maharashtra State Co-operative Societies Act, 1960.	Companies have to follow Indian Companies Act, 2013.
(6) Formation	Formation of a Co-operative society is comparatively cheaper and easier.	Formation of a Joint Stock Company is costly, difficult and time – consuming.
(7) Voting Right	The principle of “One member One vote” is followed.	The principle of “One share One vote” is followed.
(8) Motto	The main motto of a Co-operative society is to give services to the people.	The main motto of Joint Stock company is to make maximum profit.
(9) Transferability of Shares	Shares are not transferable. They can be surrendered to the society.	Shares of a Public Company are freely transferable.
(10) Remuneration	Members of Managing Committee work on honorary basis.	Board of Directors are paid salary and given fees for attending board meetings.
(11) Area of Business	Normally, the co-operatives have a limited area of business.	Companies have a larger area of business operation.
(12) Proxies	In a Co-operative society, proxies are not allowed in the meetings.	In a Joint Stock company, proxies are allowed to vote in the meetings.

Question 5.
Joint Hindu Family Firm and Joint Stock Company.
Answer:

	Joint Hindu Family Firm	Joint Stock Company
(1) Meaning	In Joint Hindu Family Firm, the Joint Hindu Family conducts business according to Hindu Laws.	Joint Stock Company is an incorporated association created by law, having an independent legal status, owned by shareholders and managed by Board of Directors.
(2) Number of Members	Membership of the firm depends upon the birth and death in the family. There is no limit on membership.	Private company- Minimum – 2 Maximum – 200 Public company- Minimum – 7 Maximum – No limit
(3) Registration	Registration is not required	Registration is compulsory.
(4) Liability	Karta has unlimited liability and Co-parceners have limited liability.	The liability of shareholders is limited upto the extent of unpaid amount on shares by them.
(5) Capital	The whole of ancestral property used as capital.	The company has huge capital.
(6) Secrecy	Secrecy can be maintained within the family.	Books of accounts have to be published. Business secrecy cannot be maintained.
(7) Management	Karta manages the business and he is assisted by co-parceners.	Board of Directors manages the Joint Stock company.
(8) Government Control	There is limited government interference.	There is strict government control.
(9) Act	Joint Hindu Family Firms are governed by the Hindu Succession Act, 1956.	Joint Stock Companies are governed by Indian Companies Act, 2013.
(10) Formation	It is comparatively easy to form.	Formation of a Joint Stock Company is difficult, costly and time-consuming.
(11) Legal Existence	A Joint Hindu Family firm does not have a separate legal existence independent of its members.	A Joint Stock Company has a separate legal existence. It is distinct from its members.
(12) Minor Member	Minors can become a member of the firm.	Minors cannot become a member of the company.

Question 6.
Co-operative Society and Partnership Firm.
Answer:

	Co-operative Society	Partnership Firm
(1) Meaning	Co-operative Society is a voluntary association of individuals which is formed for providing services to its members.	Partnership firm is formed by two or more persons to do business and share profits.
(2) Number of Members	Minimum ten persons and maximum no limit.	Minimum two persons and maximum fifty persons.
(3) Registration	It is compulsory.	It is not compulsory in India, but compulsory is Maharashtra.
(4) Liability	Liability of members is limited upto the extent of unpaid amount on shares held by them.	Liability of partners is unlimited, joint and several.
(5) Secrecy	It is not possible to maintain secrecy in a Co-operative Society.	It is possible to maintain secrecy to some extent in the firm.
(6) Management	Managing Committee manages the society according to its bye-laws.	All partners are involved in the management of the firm.
(7) Stability	Stability is not affected by death, insolvency or lunacy of a member.	Stability of a firm is affected by death, insolvency or lunacy of a partner.
(8) Government Control	There is a lot of government supervision and control.	There is minimum government supervision for a partnership firm.
(9) Act	Co-operative Societies have to follow Partnership firms are governed by the Indian Co-operative Societies Act, 1912. In Maharashtra, the societies have to follow Maharashtra Co-operative Societies Act, 1960.	Indian Partnership Act, 1932.
(10) Motive	The motive is to give maximum services to the people	The motive is to earn profits.
(11) Legal Status	A Co-operative Society enjoys an independent legal status, distinct from its members.	Partnership firms do not have an independent legal status. Partners and the firm are one and the same.
(12) Transfer of Shares	Members can surrender shares to the society.	Partners cannot transfer the shares without the consent of other partners.

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:

One of the main features of a sole traders is unlimited liability.
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.
There is no distinction between business property and private property in case of a sole trading concern.
Thus, liability of a sole trader is unlimited.

Question 2.
Karta is the sole manager of‘Joint Hindu Family Business’.
Answer:

The Karta is the eldest or senior most person in the family business.
Karta has unlimited liability.
He has the entire decision making power and he is not binding on the views of the co-parceners.
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:

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.
The main objective of a co-operative organization is not to make profit but to give service to its members.
The co-operative society is formed for the welfare of the people.
Co-operative societies are rightly called as service oriented organization. Maximisation of profit is not the aim.
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:

A Joint Stock Company is an incorporated association.
It has a legal status independent of its members.
A Joint Stock Company has large membership. There is no maximum limit.
Shares are available in the open market.
Large number of investors are interested in buying shares.
Shares are freely transferable and members have limited liability.
Thus, a Joint Stock Company can raise huge capital.
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:

In a Joint Hindu Family Business, there are two types of members – Karta and Co-parceners.
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.
The liability of co-parceners is limited upto the extent of their share in the Joint Hindu Family Business.
The personal property of co-parceners is not used for payment of the liability of the Joint Hindu Family business.
Thus, the liability of Co-parcerners is limited in ‘Joint Hindu Family Business’.

Question 6.
Sole proprietorship is useful for small business.
Answer:

Sole trading concern is owned by only one person.
He uses his own skill and intelligence for his business.
Sole trader brings capital from his own savings. He may borrow from friends and relatives. However, capital collected is limited.
He alone takes decisions of business. Therefore, managerial ability is also limited.
Because of limited capital and limited managerial ability, it is not possible to expand business beyond a certain limit.
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:

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.
‘One member One vote’ is the principle followed by Co-operative Societies.
All these denote that it follows democratic principles.
Thus, Co-operative society follows democratic principles.

Question 8.
There is separation of ownership and management in Joint Stock Company.
Answer:

The shareholders are the owners of the company. The company is managed by the Board of Directors who are elected representatives of the shareholders.
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.
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:

According to the Companies Act, the right to transfer shares is restricted by its articles.
Only a public limited company has right to transfer shares freely.
Thus, shares of Private Limited company are not freely transferable.

Question 10.
All partners are joint owners of Partnership firm.
Answer:

According to the Indian Partnership Act, 1932, all the partners are joint owners of the property of the partnership firm.
No partner can use the property of the firm for his personal interest.
No partner is allowed to take any decision without the consent of all the partners.
No partners can make any secret profit in the business.
Profits and losses are shared among the partners in the profit sharing ratio mentioned in the deed.
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:

Active partner is also called a working partner. He brings in capital and also takes active part in the business of the firm.
He has unlimited liability and shares the profits and losses of the firm. He is also called a managing partner.
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.

(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.

(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:
Maharashtra Board OCM 11th Commerce Solutions Chapter 4 Forms of Business Organisation – I 1
(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.

(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.

(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.

(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.

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.

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.

Maharashtra Board Class 11 Secretarial Practice Solutions Chapter 5 Members of a Company

July 6, 2024July 5, 2024 by Bhagya

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.

Group ‘A’	Group ‘B’
(a) Insane person	(1) Transfer of shares by operation of law
(b) Foreigner	(2) Cannot be a member
(c) Transmission of shares	(3) Cessation of membership
(d) Surrender of shares	(4) To get copies of Auditor’s, Directors’ Report, etc.
(e) Right of Members	(5) Can be a Member
	(6) To attend a board meeting
	(7) Duties of member
	(8) Surrendering all assets to the company
	(9) Demand or claim money from the company
	(10) Transfer of shares by order of Secretary

Answer:

Group ‘A’	Group ‘B’
(a) Insane person	(2) Cannot be a member
(b) Foreigner	(5) Can be a Member
(c) Transmission of shares	(1) Transfer of shares by operation of law
(d) Surrender of shares	(3) Cessation of membership
(e) Right of Members	(4) To get copies of Auditor’s, Directors’ Report, etc.

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.

Group ‘A’	Group ‘B’
(1) Minor	……………………..
(2) Co-operative society	………………………
(3) ……………………	Can hold shares in the name of partners

(Partnership firm, Cannot become a member of a company, Can become a member of a company)
Answer:

Group ‘A’	Group ‘B’
(1) Minor	Cannot become a member of a company
(2) Co-operative society	Can become a member of a company
(3) Partnership Firm	Can hold shares in the name of partners

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:

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.
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.
Right to appoint and remove a Director: Member of a company has the right to appoint and remove the directors.
Shareholding rights: Shareholders have the right to receive a share certificate, transfer his shares, to get right issue and bonus issue shares.
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.
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.
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.
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.
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”.

Maharashtra Board Class 11 Secretarial Practice Solutions Chapter 6 Directors and Key Managerial Personnel of a Company

July 6, 2024July 5, 2024 by Bhagya

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.

Group ‘A’	Group ‘B’
(a) Board of Directors	(1) Nominated by the Board
(b) Managing Director	(2) Assists and advises the Board
(c) Company Secretary	(3) Automatic Appointment
(d) First Directors	(4) Appointed by ROC
(e) Alternate Director	(5) Extensive Powers of management
	(6) Substantial Powers of management
	(7) Appointed by Promoter
	(8) Assist and Advises the Government
	(9) Negligible Powers of management
	(10) Nominated by Council

Answer:

Group ‘A’	Group ‘B’
(a) Board of Directors	(5) Extensive Powers of management
(b) Managing Director	(6) Substantial Powers of management
(c) Company Secretary	(2) Assists and advises the Board
(d) First Directors	(7) Appointed by Promoter
(e) Alternate Director	(1) Nominated by the Board

Question 2.

Group ‘A’	Group ‘B’
(a) Public company	(1) Arises due to death of Director
(b) Private company	(2) Collective Powers
(c) Secretarial Auditor	(3) Individual Powers to Directors
(d) Casual Vacancy of a Director	(4) Arises due to additional work
(e) Powers of the Board	(5) Appointed by Managing Director
	(6) At least 2 (two) Directors
	(7) At least 3 (three) Directors
	(8) At least 15 (fifteen) Directors
	(9) At least 1 (one) Director
	(10) Appointed by the Board

Answer:

Group ‘A’	Group ‘B’
(a) Public company	(7) At least 3 (three) Directors
(b) Private company	(6) At least 2 (two) Directors
(c) Secretarial Auditor	(10) Appointed by the Board
(d) Casual Vacancy of a Director	(1) Arises due to death of Director
(e) Powers of the Board	(2) Collective Powers

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

Question 1.
The organization with distinct features of separate ownership and management.
Answer:
Joint-stock company

Question 2.
The officer is responsible for the company’s finances.
Answer:
Chief Financial Officer

Question 3.
The body of elected representatives of the company.
Answer:
The Board of Directors

Question 4.
The officer is a statutory and administrative officer and also acts as co-ordinator of the company.
Answer:
Company Secretary

Question 5.
Qualification required to be a Company Secretary.
Answer:
Member of ICSI

Question 6.
Agents, Trustees, and Managing Partners of the company.
Answer:
The Board of Directors

Question 7.
The audit which checks compliances of different legislations.
Answer:
Secretarial audit

Question 8.
This KMP signs documents of the company requiring authentication by the company.
Answer:
Company Secretary

Question 9.
The nature of the relationship of Directors with the company.
Answer:
Fiduciary

Question 10.
Name the Secretarial Standard – 1.
Answer:
Secretarial Standards on meetings of the BOD

Question 11.
Name the Secretarial Standard – 2.
Answer:
Secretarial Standards on General Meeting

Question 12.
Name the Secretarial Standard – 3.
Answer:
Secretarial Standards on Dividend

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

Question 1.
A large number of shareholders necessitates the company to have a separate managerial body.
Answer:
True

Question 2.
The maximum number of Directors allowed to a company is 15 (fifteen).
Answer:
True

Question 3.
A public company should have a minimum of 10 (ten) directors.
Answer:
False

Question 4.
DIN is required for Secretaryship.
Answer:
False

Question 5.
Executive Director is called an outside Director.
Answer:
False

Question 6.
The promoter of a company cannot be the Independent Director.
Answer:
True

Question 7.
Only individuals can be directors.
Answer:
True

Question 8.
The casual vacancy of the Board is filled by the members.
Answer:
False

Question 9.
To function as per Articles of Association of the company is the statutory duty of the Board.
Answer:
True

Question 10.
A Director is an employee of the company.
Answer:
False

Question 11.
The Managing Director is appointed by a resolution.
Answer:
True

Question 12.
The minimum and maximum age to be a Managing Director is 21 and 70 respectively.
Answer:
True

Question 13.
A company may appoint more than one M.D.
Answer:
True

Question 14.
Indian companies prefer a Managing Director over a Manager.
Answer:
True

1E. Find the odd one.

Question 1.
Woman Director, Promoter, Executive Director.
Answer:
Promoter

Question 2.
Absent at Board Meeting, failure to disclose an interest, DIN.
Answer:
DIN

1F. Complete the sentences.

Question 1.
Separate ownership and management is a unique feature of _____________
Answer:
Company

Question 2.
Minimum number of Directors for a private company should be _____________
Answer:
Two

Question 3.
Minimum number of Directors for a public company should be _____________
Answer:
Three

Question 4.
Minimum number of Directors for an OPC should be _____________
Answer:
One

Question 5.
First Directors of a company are appointed by _____________
Answer:
Promoter

Question 6.
At least one Woman Director is required by _____________ company.
Answer:
Listed Company

Question 7.
Casual vacancy on Board is filled by _____________
Answer:
Board

Question 8.
Director is the guardian of interest of company as _____________
Answer:
Trustees

Question 9.
First Secretary is appointed by _____________
Answer:
Promoters

Question 10.
The audit which checks the compliance of Companies Act is called as _____________
Answer:
Secretarial Audit

1G. Select the correct option from the bracket.

Question 1.

Group ‘A’	Group ‘B’
(1) Rotational Director	…………………..
(2) ……………………….	Alternate Director
(3) Woman Director	…………………..
(4) ……………………….	First Director

(Every Listed Company, Appointee by Promoters, Appointed in Place of a director who is absent, Retire by Rotation)
rotation)
Answer:

Group ‘A’	Group ‘B’
(1) Rotational Director	Retire by Rotation
(2) Appointed in Place of a director who is absent	Alternate Director
(3) Woman Director	Every Listed Company
(4) Appointee by Promoters	First Director

1H. Answer in one sentence.

Question 1.
Who is the officer responsible for the company’s financial plan?
Answer:
Chief Financial Officer is responsible for the company’s financial plan.

Question 2.
What is the importance of Secretarial Standards?
Answer:
The main aim of Secretarial Standards is to standardize all diverse secretarial practices prevailing in the corporate world.

Question 3.
Who provides guidance to the Board of Directors?
Answer:
Company Secretary provides guidance to the Board of Directors.

Question 4.
What is the tenure of ‘Managing Director?
Answer:
The tenure of the Managing director is Five Years.

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

Question 1.
A public company must have a minimum of 15 directors.
Answer:
A public company must have a minimum of 03 directors.

Question 2.
First Directors are appointed by ROC.
Answer:
First Directors are appointed by Promoters.

Question 3.
Secretarial Standards are given by the Companies Act, 2013.
Answer:
Secretarial Standards are given by the Institute of Company Secretaries of India.

2. Explain the following terms/concepts.

Question 1.
Director
Answer:
Director is a person appointed to manage, direct and supervise the company. According to Sec-2(34) of the act, “Director means a director appointed to the Board of the company”.

Question 2.
Managing Director
Answer:
Managing Director is a director appointed by virtue of an agreement with the company; or by passing a resolution in the general meeting or by its Board of Directors or by virtue of Memorandum of Associations or Articles of Association. He is entrusted with substantial powers of management of the affairs of the company. He is appointed for a period of 5 years.

Question 3.
Independent Director
Answer:
As per section 149 of the Companies Act, 2013, any director other than a managing director, whole-time director, or a nominee director is termed as an independent director.

Question 4.
Executive Director
Answer:
Executive Director is also called as ‘Whole Time Director’, He is in full-time employment with the company. He plays an important role in the day-to-day management of the company.

Question 5.
Non-Executive Director
Answer:
Non-Executive Director is known as ‘Outside Director’. Non-Executive Director is not involved in the day-to-day management of the company. He is appointed to get second opinions from the board.

Question 6.
Alternate Director
Answer:
Alternate Director is a director who is nominated by the board in the place of absence director. He is appointed for a minimum of 3 months.

Question 7.
Casual vacancy of Director
Answer:
The casual vacancy is created due to the death of a director, which is filled by the board at the board meeting. It is valid till the vacating director’s incomplete term.

Question 8.
Chief Financial officer
Answer:
An officer responsible for the company’s finances is called Chief Financial Officer. He need not be a director of the company. He has to compulsory sign the audited financial statements of the company.

Question 9.
Company Secretary
Answer:
The company secretary is appointed to perform functions of the company and he is appointed by a resolution of the Board. He has to follow the terms and conditions decided by the board. He should be a member of ICSI.

Question 10.
Secretarial Standard
Answer:
It is formulated by ICSI and approved by Central Government through the Ministry of Corporate Affairs (MCA). The main purpose of setting Secretarial Standards is to standardized fine corporate government practices prevailing in companies.

Question 11.
Secretarial Audit
Answer:
It is an audit that monitors the compliance requirements of the company. The main aim of such an audit is to detect errors and mistakes in compliance with the rules and regulations of the Companies Act. It builds confidence among regulators, management, and shareholders of the company.

Question 12.
The Board of Directors
Answer:
Representatives elected by the Equity Shareholder in their Annual General Meeting are called as Board of Directors. They are allotted certain powers to control and manage the business of the firms.

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

1. Mr. A is a commerce graduate. He has vast experience in the field of finance and the financial market. He wishes to become a director of PQR Co. Ltd.

Question (a).
Is he required to obtain DIN?
Answer:
He was required to obtain DIN. It is compulsory to acquire DIN for every Director.

Question (b).
Can PQR Co. Ltd. object to his directorship on lack of specialized qualification?
Answer:
The company act has not prescribed any academic or professional qualification for directors, so he can obtain directorship.

Question (c).
If he is appointed as director of PQR Co. Ltd, is he entitled to remuneration?
Answer:
The managerial position entitles him to get managerial remuneration so if Mr. A is appointed as director of PQR Co. Ltd then he is entitled to remuneration.

2. Mr. Z is a member of the Institute of Company Secretaries of India.

Question (a).
Can Mr. Z be appointed as pro-tem Secretary of LMN Ltd. which is under formation?
Answer:
Yes, Mr. Z can be appointed as pro-tem secretary of LMN Ltd. which is under formation. The First Secretary is appointed by the promoters of the company.

Question (b).
Can Mr. Z work as Secretarial Auditor?
Answer:
Yes, Mr. Z can work as Secretarial Auditor because he is a member of ICSI.

Question (c).
Mr. Z wishes to be employed as whole time Secretary in companies ABC Ltd. and OPC Ltd. Is he allowed?
Answer:
Mr. Z, as a whole-time secretary, cannot hold office in more than one company. So, Mr. Z can be employed either in ABC Ltd or One Person Company and not in both.

3. Mr. M wishes to be the Managing director of QRS Ltd.

Question (a).
The age of Mr. M is 30 years. Can he be appointed as MD of a company?
Answer:
Yes, Mr. M is 30 years old and the age required to be completed for MD’s post is 21 years. So he can be appointed as MD of a Company.

Question (b).
Is it necessary that Mr. M should be one of the directors on the Board of QRS Ltd?
Answer:
Yes, It is necessary that Mr. M should be one of the directors on the board of QRS Ltd. He should be appointed by the board.

Question (c).
For how long a period QRS Ltd. can appoint Mr. M. as a Managing Director?
Answer:
QRS Ltd can appoint Mr. M. as a managing director for a period of 5 years.

4. Distinguish between the following.

Question 1.
Director and Managing Director
Answer:

Basis	Director	Managing Director
1. Meaning	Director is the elected representative of the shareholders of the company.	The managing director represents the board in the day-to-day activities of the business.
2. Appointment	He is elected at the Annual General Meeting by the members of the company.	He is appointed by the board of directors.
3. Tenure	Directors of public companies retire by rotation. Maximum tenure is of 3 years, 1/3 of Independent Director is not liable to retire by rotation.	The tenure of managing director is for a term of five years.
4. Remuneration	Remuneration for services is given as per specific provisions. The director is given sitting fees to attend the board meeting which may extend up to ₹ 1 lakh plus remuneration.	M.D is entitled to either a monthly salary or 5 % of the net profit. If more than one M.D. is appointed then maximum remuneration cannot be more than 10% of the net profit.
5. Status	Directors are elected representatives of the shareholders managing company in absence of shareholders. They can be agents of the company but not employees of the company.	Managing Director has dual status i.e. a director and a manager (employee).
6. Positions held	Director is the only member or person on the board.	The managing director is the director on the Board. M.D. is the whole time manager in the company.
7. Number of companies	Director can work in 20 companies at a time wherein a maximum of 10 public companies at a time.	A person can be an M.D. of a maximum of 2 companies at a time.

Question 2.
Managing Director and Manager
Answer:

Basis	Managing Director	Manager
1. Meaning	The Managing Director is appointed by the Board to look after the day-to-day administration of the company.	The manager is in charge of the whole management affairs of the company.
2. Appointment	The managing director is appointed by an agreement with the company or by resolution passed by the company in a Board meeting or by virtue of its Articles of Associations of the company.	The manager is appointed under a contract of service.
3. Remuneration	MD is entitled to either a monthly salary or 5% of net profit. If there is more than one managing director, the maximum remuneration payable is 10% of the net profit.	Maximum remuneration to a manager cannot be more than 5% of the net profit.
4. Number of posts	A company may have more than one Managing Director. He can be M.D. in maximum of 2 companies.	The company can have only one post of manager.
5. Power	He is given substantial powers of management.	He is entrusted with whole powers of management.
6. Position held	The managing director must be the director of the company.	The manager need not be a director of the company.

Question 3.
Managing Director and Whole Time Director
Answer:

Basis	Managing Director	Whole Time Director
1. Meaning	The managing director represents the board in the day-to-day management of the company.	The whole time director devotes whole time to the working of the company.
2. Powers	The Managing Director is given substantial powers of management.	A whole-time director does not have the power to take decisions on policy matters.
3. Number of posts	A person can be an M.D. of a maximum of 2 companies at a time.	More than one whole-time directorship is not possible at a time.
4. Performance	He manages the affairs and business of the company.	He performs important administrative functions of the company.

5. Answer in brief.

Question 1.
What is DIN?
Answer:

It means Director Identification Number.
DIN is a Unique Identification Number for an existing director or person intending to be the director of a company.
It is compulsory to acquire DIN by Director.
It helps in the detection and handling of offenses committed by a director.
It is obtained through an online process by filing an application.

Question 2.
State any four powers of the Board of Directors.
Answer:

Director is a person appointed to manage, direct and supervise the affairs of the company.
The power of the Board of Directors are as follows:
To appoint or remove key managerial personnel: The Board of Directors has the power to appoint and remove key managerial personnel.
To recommend dividend: The board of directors recommends the dividend to the shareholders.
To fill a casual vacancy in the Board: Casual vacancy in the board arises due to different reasons such as the death of a director who is filled by the Board at the Board meeting.
To issue securities whether in India or abroad: Board of Director’s issue securities means shares, debentures, bonds) in India and abroad also.

Question 3.
Mention any four ways in which the office of a director becomes vacant.
Answer:
The office of a Director shall automatically become vacant in the following ways:

Any disqualification: A person cannot be appointed as a director if he is of unsound mind or insolvent or convicted by the court.
Absentee at Board meeting: Director who has been absent in the meeting of the board of directors held during the period of 12 months with or without taking leave of absence of the Board.
Disqualification by Court or Tribunal: Director has to vacate office if he has been disqualified by an order of a court or the Tribunal.
Provision of the Act: Director has to vacate office if he is removed under the provisions of the Companies Act.

Question 4.
State the powers of a Managing Director.
Answer:
As it is stated in the definition itself the Managing Director is entrusted with the substantial powers of management, which clearly indicates that he has been given certain important powers of routine business matters of a company.
The powers exercised by him are fellows:

To act as a link between the Board of Directors and the managerial staff.
To look after the management and administration of a company.
To appoint the company employees.
To participate in policymaking as well as policy execution.
To sign contracts on behalf of a company.
To decide about the investment of funds of a company.
To receive remuneration from a company.

Question 5.
State the statutory duties of a company secretary.
Answer:
Secretary is an employee of the company. He enjoys the power and advises the management.
Statutory duties of a company secretary are as follows:

To organize meetings and be present at all the meetings of the company.
To maintain the minutes of all meetings.
To issue notices and circulars to the members of the company.
To maintain and update the Register of members and debenture holders and other books of the company.
To file all necessary returns with the Registrar of Companies.
To communicate with the shareholders on various matters.

6. Justify the following statements.

Question 1.
Directors are managing partners.
Answer:

Directors have to work as a team as Board of Directors, not as an individual.
The powers by Board are subject to provisions of the Companies Act and Memorandum and Articles of Associations.
Director is required to perform his functions.
He represents shareholders to conduct and manage the business of the company on their behalf.
They are entrusted with vast powers of management and perform several functions which are proprietary in nature like allotment of shares, raising of loans, investing funds of the company.
This is because they themselves are significant shareholders of the company.
In fact, they are the most active shareholders of the company.
Thus, Directors are the managing partners of the company.

Question 2.
A Director is an agent of the company.
Answer:

Since the company is an artificial person, it needs to be represented by the Director.
They deal on behalf of the company.
Directors should deal skillfully, carefully, and diligently.
Directors are held liable as an, while company is held liable as the principal.
A Director is an agent as he acts between the company and shareholders.
Thus, a director is an agent of the company.

Question 3.
The company has a distinct feature of separate ownership and management.
Answer:

The company has a unique feature of separate ownership and management.
Shareholders are its owner and Directors are its managers.
Being an artificial person, it needs a human agent to manage and control the working of the company.
Shareholders are scattered all over therefore management of the company by them is not possible.
Also, the shareholders are not interested in the management of such a big organization.
The company as an artificial person having no physical existence needs humans to control its affair.
Thus, the company has a distinct feature of separate ownership and management.

Question 4.
DIN helps investors of the company.
Answer:

DIN is a unique identification number for an existing director or person intending to be the director of the company.
It is compulsory to acquire DIN by every Director.
Din is Pre-require for e-filling of company’s documents.
It helps the investors of the company to make a more accurate and informed decisions because they get to known the composition of the top management of the company.
It also helps to handle the problems created due to a company after collecting or raising money from the public.
Thus, I agree with the given statement.

Question 5.
Directors have to work as a team.
Answer:

Directors have to work as a team of “Board of Directors” and not individually.
He exercises the power as a Board which is subject to provision of the Act.
Director is a representative of shareholders so he has to work collectively in the best interest of the company and its shareholders.
He cannot take decisions alone on behalf of the company.
Thus, directors have to work as a team.

Question 6.
Directors play a triple role.
Answer:

Directors play a triple role i.e. in the form of an agent, as a managing partner, and as a trustee.
As an agent, the director deals skillfully, carefully, and elegantly while representing the company with outsiders.
As a managing partner, the director acts as a representative of the shareholder and manages the company on their behalf.
As a trustee, the director acts as a guardian of the interest of shareholders and a company.
They use the company’s funds in the most appropriate manner and cautiously.
They are also the trustee of all the assets of the company.
Thus, directors play a triple role.

Question 7.
Company Secretary plays a triple role.
Answer:

Company Secretary plays a three-fold role in the form of – as a statutory officer, as a coordinator, and as an administration officer.
As a statutory officer, the secretary signs the document for authentication, files annual returns to ROC, maintains various statutory registers and ensures compliance with the law.
As a coordinator, the secretary acts as a network between the Board of Directors and other executive officers at different levels. He acts as an internal as well as external coordinator for the company.
As an administrative officer, the secretary ensures the implementation of various policies of the company and also supervises and controls the functioning of various departments of the company.
Thus, Company Secretary plays a triple role.

Question 8.
A director cannot be called an employee of the company.
Answer:

Directors are elected representatives of the company’s shareholders.
The status of an employee is within the limits of his contract and service.
His employer holds the ultimate control to guide his activities and functions.
These limits of an employee cannot be applied to a director.
So a director cannot be called an employee of the company.
Thus, a director cannot be called an employee of the company.

Question 9.
The managing Director has substantial powers of management.
Answer:
As it is stated in the definition itself the Managing Director is entrusted with the substantial powers of management, which clearly indicates that he has been given certain important powers of routine business matters of a company.
The powers exercised by him are as follows:

To act as a link between the Board of Directors and the managerial staff.
To look after the management and administration of a company.
To appoint the company employees.
To participate in policymaking as well as policy execution.
To sign contracts on behalf of a company.
To decide about the investment of funds of a company.
To receive remuneration from a company.

Question 10.
Indian companies prefer to appoint a Managing Director than a Manager.
Answer:

Indian company prefers to appoint managing director rather than manager because Managing Directors holds dual authorities and he is able to influence the board of director in a better way.
Manager need not be a director of a company while the managing director has to be director of a company,
The company cannot have more than one manager, while it can have more than one managing director.
Thus, Indian companies prefer to appoint a managing director than a manager.

Question 11.
Pro-tem secretary is helpful to the company.
Answer:

The first secretary of the company is appointed by the promoters of the company.
The first secretary is called as ‘pro-tem’ secretary.
Pro-tem secretary appointed by promoters may or may not be appointed as full-time or regular Secretary.
Pro-tem secretary helps in fulfilling different formalities during the formation of the company.
Thus, the Pro-tem secretary is helpful to the company.

Question 12.
Secretarial Standards should be in conformity with the Act.
Answer:

The Secretarial Standards are formulated by the Institute of Company Secretaries of India and approved by the Central Government through the Ministry of Corporate Affairs.
The Companies Act, 2013, makes compliance with the Secretarial Standard mandatory.
It leads to provide better monitoring of compliances of law, strengthening the process of the Board, and create confidence in investors.
The Secretarial Standards aim at achieving integrating, harmonizing, and standardizing fine corporate governance practices across all companies.
Thus, Secretarial Standards should be in conformity with the Act.

Question 13.
Secretarial Standards lead to better legal compliance.
Answer:

Companies follow diverse practices based on differing business cultures and varied usages over a period of time.
The Secretarial Standards aim at achieving integrating, harmonizing, and standardizing fine, corporate governance across all companies
It leads to provide better monitoring of compliance of the law, strengthening the process of the Board, and create confidence in investors.
Secretarial Standards are reviewed by Secretarial Standard Board (SSB) once a year or whenever changes are made in the law.
Thus, Secretarial Standards lead to better legal compliance

Question 14.
A secretarial Audit is required under the laws.
Answer:

It is an audit that checks the compliance of various legislation including the Companies Act, other Corporate Acts, and economic laws.
It aims at detecting errors and mistakes in the compliance mechanisms.
It gives confidence to regulators, management authorities, and shareholders that the company is following a disciplined approach of evaluation and improve effectiveness and risk management.
Thus, Secretarial Audit is required under the laws.

7. Answer the following questions.

Question 1.
Explain the Role of Directors.
Answer:
Director is a person appointed to manage, direct and supervise the affairs of the company.
The elected representatives of the shareholders are called Directors.

Role of the Directors:

He helps the investors to take accurate decision.
He has to fill casual vacancies on the board.
He has to recommend dividends.
He has to issue securities in India or abroad.
He manages a company on behalf of the shareholder.
He appoints the first auditor of the company.
He can appoint or remove Key Managerial Personnel.
He can borrow the money on behalf of the company.
His role is full of trust, loyalty, care, and good faith.
Directors act as a trustee, agent and managing partner for the company.

Question 2.
Explain the duties of a Director.
Answer:
A director’s relationship with a company is regarded as fiduciary in nature. It means his duty is full of trust, care, and good faith.
The duties of directors can be categorized into two heads:

Statutory Duties:
- To file a return of Allotment.
- To act in accordance with the Articles of the company.
- To disclose an interest in a transaction.
- To attend Board meetings.
- To appoint first Auditors of the company.
General Duties:
- Duty of good faith i.e. he must act in the best interest of the company.
- Duty of care i.e. he must take utmost care in the performance of work assigned.
- Duty not to delegate i.e. he is required to perform his function personally. He may delegate in case of emergency.

Question 3.
Explain the Managing Director.
Answer:
Definition: The Companies Act, has defined a Managing Director as “A Director who by virtue of an agreement with the company or of a resolution passed by a company in the general meeting or by its Board of Directors or by virtue of its Memorandum or Articles of Association, is entrusted with substantial powers of management of the company”.

Disqualification:

Any person less than 21 years of age and more than 70 years of age.
A person who is an undischarged insolvent person or has at any time been adjudged as an insolvent.
A person who has suspended payment to his creditors or made a composition with them.
A person who is, or has been convicted by a court of an offense with a sentence of more than 6 months period.

Appointment:
A Managing Director may be appointed by any one of the following ways:

by an agreement with a company.
by the resolution passed at the general meeting.
by the Board of Directors.

Term of office:
The term of office of the Managing Director cannot exceed 5 years at a time, but he can be reappointed as such for a further period of five years.

The number of Managing Directorship:
A Managing Director can not act as such for more than two companies at the same time.

Remuneration:
The remuneration paid to the Managing Director is subject to the maximum limit of 5% of the net profit of a company or a monthly salary. If a company has more than one Managing Director then total remuneration paid to them (all) shall not exceed 10% of the net profit.

Powers of a Managing Director:

To act as a link between the Board of Directors and the managerial staff.
To look after the management and administration of a company.
To appoint the company employees.
To participate in policymaking as well as policy execution.
To sign contracts on behalf of a company.
To decide about the investment of funds of a company.
To receive remuneration from a company.

Duties of a Managing Director:

To act on behalf (agent) of the Board of Directors.
To implement the decision of the Board.
To supervise, direct, control, and guide the day-to-day affairs of the business.
To guide the senior executives in their administrative work.
To report to the Board about programmes made or any problem faced by a company.
To chair the Board meetings and general meetings, if necessary.
To manage routine work of a company.
To sign all the contracts and documents on behalf of the company.

Question 4.
Explain the Company Secretary.
Answer:
Meaning:

Secretary is an employee of the company and he is appointed to perform functions of a company secretary,
He should be a member of the Institute of Company Secretaries of India (ICSI).
The first secretary is appointed by the promoter of the company and he is called a ‘pro-tem’ secretary.
He holds liable for non-compliance with the provisions of the Act.

Duties of a Company Secretary:
It is categorized as (A) Statutory Duties and (B) General Duties.

(A) Statutory Duties:

To organize and attend meetings of the company.
To prepare minutes of meetings.
To communicate with shareholders on various matters.
To issue notices and circulars to the members of the company.
To maintain various Registers and books of the company
To file returns with the ROC.

(B) General Duties:

To provide guidance to the Board of Directors as needed.
To discharge duties towards regulators and authorities of the company.
To assist the Board of Directors in conducting the business of the company.
To perform duties allotted by the Board.

Rights of a Secretary:

To control and supervise the working of departments of the company.
To get indemnified by the company, if any loss is suffered by the secretary.
To sign documents requiring authentication.
To get remuneration from the company.

Question 5.
Explain the role of the Company Secretary.
Answer:
The company secretary plays a crucial and important role in the administration of the company.
The emphasis on good governance has increased the role of the secretary in protecting the interest of investors.

Role of Company Secretary:

Secretary as a Statutory officer:
To sign documents for authentication.
To sign and deliver Annual Returns and other documents and to the Registrar of Companies.
To maintain different statutory registers like
- Minutes of General and Board meetings of the company.
- Registers of Members and Debenture holders Register of Directors and KMP and their shareholdings.
To ensure compliance with the law

(ii) Secretary as a Co- ordinator:

To implement policies framed by the Board.
To act as a link between the Board and other executives at different levels.
To act as a mouthpiece or spokesperson of the Board.
To act as an internal and external coordinator.

(iii) Secretary as an Administration officer:

To ensure implementation of the policies of the company.
To supervise and control the functioning of different departments of the company.
To take an overall view of different aspects of the company’s administration and develop a strong and efficient organizational setup.
To contribute to the administration of the company.

Maharashtra Board Class 11 Biology Solutions Chapter 1 Living world

July 5, 2024July 4, 2024 by Bhagya

Balbharti Maharashtra State Board 11th Biology Textbook Solutions Chapter 1 Living world Textbook Exercise Questions and Answers.

Maharashtra State Board 11th Biology Solutions Chapter 1 Living world

1. Choose correct option.

Question (A)
Which is not a property of living beings?
(a) Metabolism
(b) Decay
(c) Growth
(d) Reproduction
Answer:
(b) Decay

Question (B)
A particular plant is strictly seasonal plant. Which one of the following is best suited if it is to be studied in the laboratory?
(a) Herbarium
(b) Museum
(c) Botanical garden
(d) Flower exhibition
Answer:
(a) Herbarium

Question (C)
A group of students found two cockroaches in the classroom. They had a debate whether they are alive or dead. Which life property will help them to do so?
(a) Metabolism
(b) Growth
(c) Irritability
(d) Reproduction
Answer:
(c) Irritability

Question 2.
Distinguish between botanical gardens, zoological parks and biodiversity parks with reference to characteristics.
Answer:

Botanical Gardens	Zoological Parks	Biodiversity Parks
1. Plants of different varieties collected from different parts of the world are grown in vivo in a scientific and systematic manner in a botanical garden.	Zoological parks are places where wild animals are kept in captivity.	It is an assemblage of species that form self-sustaining communities on degraded/ barren landscape.
2. It is a type of ex situ conservation.	It is a type of ex situ conservation.	It is a type of in situ conservation.
3. It is related to conservation of various flora.	It is related to conservation of various fauna.	It is related to conservation of all biodiversity.

3. Answer the following questions

Question (A)
Jijamata Udyan, the famous zoo in Mumbai has acclimatised Humboldt penguins. Why should penguins be acclimatised when kept at a place away from their natural habitat?
Answer:

Zoological park (zoo) is a type of ex-situ conservation in which wild animals are kept in captivity.
Humboldt penguins are native to South America and the surrounding environment differs significantly at Jijamata Udyan (zoo) in Mumbai.
In order to ensure that these penguins survive longer and are healthy they need to be acclimatised (adjust) to their new environment slowly.
If they are not acclimatised or the facilities in the zoo where the penguins are kept are not optimal/ suitable, they may develop abnormal stress and exhibit unusual behaviours due to it.
These penguins may also be more prone to contracting certain diseases, since they are suited to living in a particular climatic condition.
The enclosure of these penguins consists of water pool, air handling units and a chiller system to maintain temperatures between 12 – 14°C, where the penguins were kept for around 8 to 10 days to get acclimatised to their new environment before allowing any visitors inside the zoo.

Hence, Humboldt penguins need to be acclimatised to their new surroundings, when kept at a place away from their natural habitat.

Question (B)
Riya found a peculiar plant on her visit to Himachal Pradesh. What are the ways she can show it to her biology teacher and get information about it?
Answer:

Riya can press and mount the plant specimen on a herbarium sheet and preserve the dried plant material, until she returns back from her visit.
She can also write any available information regarding the collected specimen on the herbarium sheet, which can be useful for further studies with her biology teacher.
Various taxonomical aids can be useful to get information about this peculiar plant.

[Note: In order to conserve the local flora, Riya can collect photographs ofplant and describe it’s structure to her teacher.]

Question (c)
At Andaman, authorities do not allow tourists to collect shells from beaches. Why must it be so?
Answer:

Seashells are an important part of the coastal ecosystem and are crucial for the survival of various marine creatures.
They provide material for building nests of birds and also act as a substratum for attachment of algae, sea grass, sponges and various microbes.
Fishes use shells for hiding from predators, whereas hermit crabs use shells as temporary shelters.
Removal of seashells from seashores may also indirectly affect the rate of shoreline erosion.

Hence, in an attempt to protect the ecosystem, authorities in Andaman do not allow tourists to collect shells from beaches.

Question (D)
Why do we have greenhouse in botanical gardens?
Answer:

Greenhouse is a structure with suitable walls and a roof in which plants are grown under regulated climatic conditions.
Most botanical gardens exhibit ornamental plants which require stringent/ optimum climatic conditions for their growth and/or flowering.
The greenhouse associated with botanical gardens are also used to grow and propagate those plants that may not survive seasonal changes.

Question (E)
What do you understand from terms like in situ and ex situ conservation?
Answer:
1. In situ conservation: It includes conservation of species in their natural habitats. Grazing, cultivation and collection of products from the forests is banned in such areas. Legally protected areas include national parks, wildlife sanctuaries and biosphere reserves.
2. Ex situ conservation: It includes conservation of species outside their natural habitats. Species are conserved in botanical gardens, culture collections and zoological parks.

4. Write short notes

Question (A)
Write a short note on role of human being in biodiversity conservation.
Answer:

Due to rapid increase in human population and industrialization, humans have over-utilized natural resources; leading to degradation of the environment and hence only humans can help conserve the ecosystem.
Humans are capable of conserving and improving the quality of nature and thus, can play a major role in biodiversity conservation.
In order to conserve biodiversity and its environmental resources, humans must use the resources rationally and avoid excessive degradation of environment.
Human beings are stakeholders of the environment and need to come together to overcome pollution and improve the environment quality in order to conserve biodiversity. E.g. Ban or limit on use of harmful products (plastic, chemicals, etc.) that are toxic to various birds, animals, etc.
Human beings also play a role in conservation of biodiversity by establishment of various sites for in situ (national parks, wildlife sanctuaries and biosphere reserves) and ex situ (botanical gardens, culture collections and zoological parks) conservation.

Question (B)
Importance of botanical garden
Answer:
The importance of botanical gardens is as follows:

It is a place where there is an assemblage of living plants maintained for botanical teaching and research purpose.
Botanical gardens are important for their records of local flora.
Botanical gardens provide facilities for the collection of living plant materials for botanical studies.
Botanical gardens also supply seeds and material for botanical investigations.
The development of botanical gardens in any country is associated with its history of civilization, culture, heritage, science, art, literature and various other social and religious expressions.
Botanical gardens besides possessing an outdoor garden may contain herbaria, research laboratory, greenhouses and library.
Botanical gardens are not only important for botanical studies, but also to develop tourism in the country.

Question 5.
How can you, as an individual, prevent the loss of biodiversity?
Answer:
As individuals, we can prevent loss of biodiversity in the following ways:

Increasing awareness about environmental issues. Making posters that provide more information about biodiversity conservation, to raise public awareness.
Increased support and/ or active participation in government policies and actions laid down for conservation of biodiversity.
Protect various plant and animal species in our surrounding.
Set up bird and bat houses wherever possible.
Prevent felling of trees especially native plants or trees in a particular area.
Reduce, recycle and reuse resources. Especially, reduce pollution and use of plastic bags and other materials that are potential threats for the environment.
Use environment friendly products, segregate and dispose garbage correctly.
Convince people about the importance of trees and the need to participate in tree plantation campaign.
Obey the rules that fall under Biodiversity Act.

[Students can use the given points as reference and mention additional preventive measures on their own.]

Practical / Project:

Question 1.
Make a herbarium under the guidance of your teacher.
[Students are expected to perform the given activity by themselves under the guidance of their teacher.]

Question 2.
Find out information about any one sacred grove (Devrai) in Maharashtra.
Answer:
Sacred groves in Maharashtra are located in districts like Ahmednagar, Bhandara, Chandrapur, Jalgaon, Kolhapur, Nashik, Pune, Raigad, Ratnagiri, Sangli, Satara, Sindhudurg, Thane, Yavatmal.
[Source: Data as per C.P.R. Environment Education Centre, Chennai.]
e. g. Sacred grove of Parinche valley, Pune district of Maharashtra:

The Parinche valley region is comprised of the inaccessible rear part of the Purandhar fort and its surrounding valley region and is situated about 63 km to the southeast of Pune city and 18 km from Saswad town. The total area of the valley region is about 132 sq. km. Parinche is the biggest village and a nodal place in the valley. The majority (12) of the documented groves are located in the Kaldari and Pangare zones. The size of the sacred groves has however reduced due to various human related activities that have taken place in recent years.

The biggest sacred grove in the Parinche valley belongs to Buvasaheb of Tonapewadi and spreads over an area of 4.80 hectares. The forest types are unique to the groves. Presence of key species in the sacred groves varies from region to region. Two key tree species, i.e. Terminalia bellerica and Ficus spp., are present in these sacred groves which have almost disappeared from the surrounding areas.

Large buttressed trees are another important feature of well-preserved sacred groves. The presence of these tree species indicates the vegetation of the past and also the type of potential vegetation that can be regenerated in these regions.
[Source: Waghchaure, C. K., Tetali, P., Gunale, V. R., Antia, N. H., & Birdi, T. J. (2006). Sacred Groves of Parinche Valley of Pune District of Maharashtra, India and their Importance. Anthropology & Medicine, 13(1), 55-761
[Students can refer the given answer and search for more information about other sacred groves on their own.]

11th Biology Digest Chapter 1 Living world Intext Questions and Answers

Can you recall? (Textbook Page No. 01)

Whether all organism are similar? Justify your answer.
Answer:
No, all organisms are not similar.

Organisms on the earth exhibit great diversity.
Organisms are grouped as microbes, plants (autotrophs), animals (heterotrophs) and decomposers.
Different microbes and decomposers have various shapes and sizes.
Plants can be further classified on their shape, size, structure, mode of reproduction, etc. Plants also differ greatly based on the locations in which they are found, e.g. Snowy, desert, forest, aquatic, etc.
Even animals show a high degree of variation. They are classified as unicellular, multicellular, invertebrates, vertebrates, etc. Also, based on the environment in which they live, they are classified as terrestrial, aerial, aquatic and amphibians.

Can you tell? (Textbook Page No. 01)

Whether all organisms prepare their own food?
Answer:
No, all organisms do not prepare their own food. Organisms that prepare their own food are known as autotrophs (e.g. Green plants, certain microbes). These organisms prepare their own food in the presence of sunlight, water and carbon dioxide.

Can you recall? (Textbook Page No.01)

what is the difference between living and non-living things?
Answer:

Living Things	Non-living Things
(a) Living things show growth from within.	Non-living things show growth by accumulation of materials on their surface.
(b) They reproduce asexually or sexually, except mules, sterile worker bees, infertile males.	They do not reproduce.
(c) They perform metabolism in order to obtain energy.	No metabolic changes occur in non-living things.
(d) They show irritability and respond to changes in their surroundings.	They do not show irritability.
(e) They undergo ageing and eventually die.	Non-living things do not have a finite life span.

Can we call? (Textbook Page No. 01)

Can we call reproduction as inclusive character of life?
Answer:
No, we cannot call reproduction as an inclusive character of life. Certain organisms like mules and worker bees do not reproduce and are still living. Thus, reproduction cannot be considered as an all inclusive defining characteristic of living organisms.

Can you tell? (Textbook Page No. 01)

Which feature can be considered as all-inclusive characteristic of life? Why?
Answer:
Metabolism can be considered as an all-inclusive (defining) feature of life since it is exhibited by all living organisms and does not take place in non-living things. Another all-inclusive characteristic of life is responsiveness or irritability. This is a unique property of living beings since all living beings are conscious of their surroundings.

Think about it. (Textbook Page No. 01)

(i) Can metabolic reactions demonstrated in a test tube (called ‘in vitro’ tests) be called living?
Answer:
(a) The sum total of all the chemical reactions occurring in the body is known as metabolism and no non-living object exhibits metabolism.
(b) However, metabolic reactions can be demonstrated outside the body in a test tube (cell-free medium).
(c) Thus, isolated metabolic reaction (s) outside the body of an organism, performed in a test tube is neither living nor non-living.
(d) Metabolic reactions occurring in vitro are living reactions but not living things.

(ii) Now a days patients are declared ‘brain dead’ and are on life support. They do not show any sign of self-consciousness. Are they living or non-living?
Answer:
The brain controls all life processes. Hence, when a patient is declared as ‘brain dead’, he does not carry out any of the inclusive defining characters of living things (e.g. metabolism, consciousness, etc.) and is completely dependent on machines. Since, such patients do not show any sign of self-consciousness, these patients cannot exactly be called as living.

Can you tell? (Textbook Page No. 01)

How can we study large number of organisms at a glance?
Answer:
Systematic study of organisms with the help of taxonomical aids can be used to study a large number of organisms at a glance.

Can you tell? (Textbook Page No. 03)

What are the essentials of a good herbarium?
Answer:
The essentials of a good herbarium are as follows:

It is essential to identify and label the collected specimen correctly.
Specimens should be stored in a dry place.
The plants are usually pressed and mounted on the sheet of paper known as herbarium sheets. Some plants are not suitable for pressing or mounting, like succulents, seeds, cones, etc. They need to be preserved in suitable liquid like formaldehyde, acetic alcohol, etc.
In order to preserve the specimen for longer durations, acid-free paper, special glues and inks must be used to mount the specimen so that the specimen does not deteriorate.
The specimens should be dried well before preparing a herbarium in order to prevent rotting of specimen.
It is also essential to record the date, place of collection along with detailed classification and highlighting with its ecological peculiarities, characters of the plant on a sheet.

Local names of plant specimens and name of the collector may be added. This information is given at lower right comer of sheet and is called ‘label’.

Why does the loss of biodiversity matter? (Textbook page no. 03)
Answer:

The loss of biodiversity is an moral and ethical issue.
Biodiversity helps to maintain stability in an ecosystem.
Humans share the environment with various other organisms and harm to these species can result in loss of biodiversity.
The loss of even one variety of organisms can affect the entire ecosystem. Hence, due to all these reasons, loss of biodiversity matters.

Find out. (Textbook Page No. 04)

Human being is at key position in maintaining biodiversity of earth. Find out more information about the following.

(i) Laws to protect and conserve biodiversity in India.
Answer:
a. Forest (Conservation) Act, 1980
b. Biological Diversity Act, 2002
c. Wildlife (Protection) Act, 1972
d. Environment Protection Act, 1986
[Students can find out more laws to protect and conserve Biodiversity in India]

(ii) Environmental effects of ambitious projects like connecting rivers or connecting cities by constructing roads.
Answer:
Connecting rivers or connecting cities by constructing roads have the following environmental effects:
(a) They form barriers to animals.
(b) Construction of roads requires cutting down of trees and results in large scale deforestation.
(c) They occupy large land resources resulting in loss of habitat of various species.
(d) It can alter the water flow pattern and damage many ecosystems.
(e) Increase in air, water, soil and noise pollution can disturb various animals and birds, thus affecting their behavioural pattern.

(iii) Did bauxite mining in Western Ghats affect critically endangered species like – Black panther, different Ceropegia spp., Eriocaulon spp. ?
Answer:
(a) The Western Ghats, is one of the global biodiversity hotspots and retains more than 30% of all plant, aquatic, reptile, amphibian and mammal species found in India.
(b) Recently, this ecologically sensitive region has been subjected to various developmental activities that have adversely affected the flora and fauna of the region.
(c) Bauxite mining is one such activity which has had significant negative impact on the local environment. To access bauxite ore deposits, the above-ground vegetation needs to be completely removed, causing large scale deforestation. The vegetation in the adjoining area is also affected due to dumping.
(d) The major threats of this activity include vegetation loss, forest fragmentation and biodiversity loss.
(e) Since most mines fall in Eco-Sensitive Zones (ESZ), it has seriously affected the flora and fauna of the Western Ghats.
(f) Black panthers have frequently been spotted at various locations in the Western Ghats and mining in these areas can seriously affect their health and numbers.
(g) Certain species of Ceropegia and Eriocaulon that are endemic in the area have been reported to be critically endangered.
[Source: Chandore A. (2015) Endemic and threatened flowering plants of Western Ghats with special reference to Konkan region of Maharashtra. Journal of Basic Sciences. 2 (21-25)]
Hence it is most likely that bauxite mining in Western Ghats has adversely affected the critically endangered species like – Black panther, different Ceropegia spp., Eriocaulon spp.

Internet my friend. (Textbook Page No. 02)

Collect information about Prof. Almeida, Prof. V. N. Naik, Dr. A. V. Sathe, Dr. P. G. Patwardhan with reference to their taxonomic work and biodiversity conservation.
Answer:
1. Prof. Almeida:
Prof. (Dr.) Marselin R. Almeida was a renowned Plant Taxonomist and Medicinal Plant Consultant of India. He was a curator at the Blatter Herbarium (Mumbai). He discovered four new species of pteridophytes from Bombay presidency. His work includes – Pteridophytes of Maharashtra and Flora of Mahabaleshwar. He has contributed to the Flora of Maharashtra, Sawantwadi and its adjoining areas along with Dr. S. M. Almeida.

2. Prof. V. N. Naik:
Prof. V. N. Naik is a renowned ‘Angiosperms Taxonomist’ of India. He completed the Flora of Marathwada. He has produced 15 Ph.D., 110 research articles and 6 books. His book on ‘Taxonomy of Angiosperms’ (Tata McGraw-Hill Education, 1984) is widely used throughout the world. He is currently a faculty of Dr. Babasaheb Ambedkar Marathwada University, Aurangabad.

3. Dr. A. V. Sathe:
Collection and taxonomic studies of mushrooms in Maharashtra started around 1974. Prof. A.V. Sathe and his team were amongst the first to begin these studies. They recorded 75 species distributed in 43 genera. These species were collected from Maharashtra, Karnataka and Kerala. The collection of these species was documented in the form of a Monograph on Agaricales.
[Source: Borkar P., Doshi A., Navathe D. (2015) Mushroom diversity of Konkan region of Maharashtra, India. Journal of Threatened Taxa. 7(10): 7625-7640]

4. Dr. P. G. Patwardhan:
Dr. Patwardhan and his associates at the M.A.C.S. Research Institute, Pune-renamed as Agharkar Research Institute (ARI), Pune have performed detailed studies on lichens. His school is in possession of over 600 species of crustose lichens, obtained after intensive collection programmes. These specimens have been deposited in the Ajarekar Mycological Herbarium in the Department of Mycology and Plant Pathology at the M.A.C.S. Research Institute, Pune.
[Source:
http://lib.unipune.ac.in:8080/xmlui/bitstreamfhandle/l23456789/7451/07_introduction.pdf? sequence=7&is Allowedly]
[Students are expected to find more information on their own.]

Can you tell? (Textbook Page No. 03)

Why should we visit botanical gardens, museums and zoo?
Answer:

Botanical gardens, museums and zoos are taxonomical aids which can be used to study biodiversity.
Botanical gardens have a wide range of plant species that are protected and preserved which can be observed and studied.
Museums help gain information about various plants and animals that are preserved and may even be extinct. They act as reference hubs for biodiversity studies.
Zoos provide information about various animals.

They also harbour certain endangered animals and help us understand the role of biodiversity conservation. They can also be visited to study the food habits and behaviour of animals. Hence, we should visit botanical gardens, museums and zoos.

Can you tell? (Textbook Page No. 03)

What is ‘ex-situ’and ‘in-situ’ conservation?
Answer:
1. In situ conservation: It includes conservation of species in their natural habitats. Grazing, cultivation and collection of products from the forests is banned in such areas. Legally protected areas include national parks, wildlife sanctuaries and biosphere reserves.
2. Ex situ conservation: It includes conservation of species outside their natural habitats. Species are conserved in botanical gardens, culture collections and zoological parks.

Internet my friend. (Textbook Page No. 04)

(a) Collect information about botanical gardens, zoological parks and biodiversity hotspots in India.
Answer:
a. Botanical gardens in India:

1. Acharya Jagadish Chandra Bose Indian Botanic Garden	Kolkata
2. Lloyd Botanical Garden	Darjeeling
3. National Botanical Research Institute	Lucknow
4. Botanical Garden of the Forest Research Institute	Dehradun
5. The State Botanical Garden	Odisha
6. Botanical Garden	Saharanpur
7. Government Botanical Garden	Ootacamund

b. Zoological Parks in India:

Zoological parks	Location	Type of animals
1. Rajiv Gandhi Zoological Park	Pune [Katraj]	Reptiles, mammals, birds. They have a snake park.
2. Jijamata Udyan	Mumbai	Endangered species of animals and birds.
3. Nehru Zoological Park	Hyderabad	3500 species of birds, animals and reptiles.
4. Indira Gandhi Zoological Park	Vishakhapatnam	Primates, carnivores, small mammals, reptiles and birds.
5. Padmja Naidu Himalayan Zoological Park	Darjeeling	Endangered animals like snow leopards, red pandas, gorals (mountain goat), Siberian tigers and a variety of endangered bird species.
6. Allen Forest Zoo	Kanpur	Hyena, Bear, Rhinoceros, Hippopotamus, Langoor, Musk deer. Ostrich, Emu, Crane etc.
7. Lucknow Zoo	Lucknow	Royal Bengal Tiger, White Tiger, Gibbon, Black Bear, Asiatic Elephant, Great pied, Horn Bill etc.
8. Alipore Zoological Gardens	Kolkata	Royal Bengal Tiger, African Lion, Hippopotamus, Great Indian One-homed Rhinoceros.
9. The Madras Crocodile Bank Trust	Chennai	Crocodiles and many species of turtles, snakes and lizards.
10. Parassinikkadavu Snake Park	Kannur	Spectacled Cobra, King Cobra, Russell’s Viper, Krait and Pit Viper.

c. Biodiversity hotspots in India:

Biodiversity Hotspots

1. The Eastern Himalayas (Arunachal Pradesh, Bhutan, Eastern Nepal)

2. Indo – Burma (Purvanchal Hills, Arakan Yoma, Eastern Bangladesh)

3. The Western Ghats and Srilanka

[Students are expected to use the given table as reference and collect more information on their own.]

(ii) Collect information of endemic flora and fauna of India.
Answer:
(a) Endemic flora:
Albizia sikharamensis (Mimosaceae), Argvreia arakuensis (Convolvulaceae), Arundinella setosa (Poaceae), Acacia diadenia (Mimosaceae), Citrus assamensis (Rutaceae), Magnolia bailloni (Magnoliaceae), etc.

(b) Endemic fauna:
Bare Bellied Hedgehog (Paraechinus nudiventris), Andaman Shrew (Crocidura andamanensis), Aruanchal Macaque (Macaca munzala), Car Nicobar Rat (Rattus palmarum), Peter’s Tube-nosed Bat (Harpiola grisea) etc.
[Source: http://faunaofindia.nic.in/PDFVolumes/spb/056/index.pdf]
[Students are expected to use the given sources and find more information on their own.

Maharashtra Board Class 11 Secretarial Practice Solutions Chapter 3 Formation of a Company

July 5, 2024July 4, 2024 by Bhagya

Balbharti Maharashtra State Board Class 11 Secretarial Practice Solutions Chapter 3 Formation of a Company Textbook Exercise Questions and Answers.

Maharashtra State Board Class 11 Secretarial Practice Solutions Chapter 3 Formation of a Company

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

Question 1.
A company is ____________
(a) a human being
(b) an artificial person created by law
(c) a natural individual
Answer:
(b) an artificial person created by law

Question 2.
____________ are the persons who undertake the process of formation of a company.
(a) Promoters
(b) Directors
(c) Registrar of companies
Answer:
(a) Promoters

Question 3.
A ____________ company needs minimum two or more members.
(a) Public
(b) Private
(c) One person Company
Answer:
(b) Private

Question 4.
In a public company there must be minimum ____________ or more members.
(a) one
(b) two
(c) seven
Answer:
(c) seven

Question 5.
____________ refers to contracts entered into by the promoters on behalf of a proposed company.
(a) Pre-incorporation/Prehminary contracts
(b) Fiduciary contracts
(c) Memorandum of Association
Answer:
(a) Pre-incorporation/Preliminary contracts

Question 6.
A Director must have a ____________ to be appointed as a Director of a company.
(a) PAN
(b) DIN
(c) CIN
Answer:
(b) DIN

Question 7.
____________ has 21 digit alpha-numeric code which is a unique number assigned to every company at the time of
Incorporation.
(a) DIN
(b) PIN
(c) CIN
Answer:
(c) CIN

Question 8.
____________ is a document that invites the public to buy the shares of a company.
(a) Articles of Association
(b) Prospectus
(c) Certificate of Incorporation
Answer:
(b) Prospectus

1B. Match the pairs.

Question 1.

Group ‘A’	Group ‘B’
(a) Minimum 7 members	(1) Persons who conceive the idea of setting up a company
(b) DIN	(2) Public company
(c) Preliminary contracts	(3) Promoters
(d) Fiduciary duties towards the company	(4) Eight Digit alpha-numeric number
(e) CIN	(5) Private company
	(6) Unique number assigned to each Director
	(7) ROC
	(8) 21 digit alpha-numeric code number
	(9) One Person Company
	(10) Contracts entered by Promoters with third parties

Answer:

Group ‘A’	Group ‘B’
(a) Minimum 7 members	(2) Public company
(b) DIN	(6) Unique number assigned to each Director
(c) Preliminary contracts	(10) Contracts entered by Promoters with third parties
(d) Fiduciary duties towards the company	(3) Promoters
(e) CIN	(8) 21 digit alpha-numeric code number

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

Question 1.
A term which means registering a company as per provisions of Companies Act, 2013.
Answer:
Incorporation

Question 2.
Persons who undertake the necessary steps to set up a company.
Answer:
Promoters

Question 3.
The term refers to contracts entered into by Promoters with third parties on behalf of the proposed company.
Answer:
Preliminary contracts

Question 4.
The Birth Certificate of a company.
Answer:
Certificate of Incorporation

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

Question 1.
A company is an artificial person.
Answer:
True

Question 2.
To form a Public company, there must be minimum of 2 persons/promoters.
Answer:
False

Question 3.
Promoters are persons who take the necessary steps to set up a company.
Answer:
True

Question 4.
Promoters can make secret profits while setting up a company.
Answer:
False

Question 5.
In India, companies have to be incorporated as per the provisions of the Companies Act, 2013.
Answer:
True

Question 6.
DSC is needed by Directors when they have to sign documents for e-filing.
Answer:
True

Question 7.
A company can be registered even without submitting a Memorandum of Association and Articles of Association.
Answer:
False

Question 8.
Every Director has to quote his DIN while giving his consent to be a Director of a company.
Answer:
True

Question 9.
ROC issues CIN only to certain companies.
Answer:
False

Question 10.
All companies need a Certificate of Incorporation.
Answer:
True

Question 11.
All companies need a Certificate of Commencement of business.
Answer:
False

1E. Find the odd one.

Question 1.
CIN, DIN, PAN
Answer:
PAN

Question 2.
Promoter, Prospectus, Incorporation of a company
Answer:
Prospectus

1F. Complete the sentences.

Question 1.
Promoters are the persons who undertake the process of ____________
Answer:
Formation of a company

Question 2.
The document issued by the Registrar of Companies when a company is incorporated is called as ____________
Answer:
Certificate of Incorporation

Question 3.
On incorporation of a company the ROC allows a unique identity number called as ____________
Answer:
Corporate Identity Number (CIN)

Question 4.
On behalf of a proposed company, preliminary contracts with third parties are entered by ____________
Answer:
Promoters

1G. Select the correct option from the bracket.

Question 1.

Group ‘A’	Group ‘B’
(1) Promoter	……………………
(2) …………………….	Certificate of Incorporation
(3) CIN	……………………
(4) RUN is used for	…………………..

(Corporate Identity Number, Reserving name of a company, Formation of a company, Birth certificate of a company)
Answer:

Group ‘A’	Group ‘B’
(1) Promoter	Formation of a company
(2) Birth Certificate of a company	Certificate of Incorporation
(3) CIN	Corporate Identity Number
(4) RUN is used for	Reserving name of a company

1H. Answer in one sentence.

Question 1.
Who is a Promoter?
Answer:
A person/a group of persons who take initiative efforts for a formation of a company is/are called as ‘Promoter/s’.

Question 2.
What is CIN?
Answer:
It is the Corporate Identity Number, issued by ROC at the time of incorporation of the Company.

Question 3.
Which company needs a Certificate of Commencement of Business?
Answer:
Public and Private companies having share capital and which are incorporated after 2nd November 2018 need a Certificate of Commencement of Business.

Question 4.
What are Preliminary Contracts?
Answer:
Promoter entering into a contract with third parties on behalf of the company before incorporation is called as Preliminary Contracts.

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

Question 1.
ROC prepares draft Memorandum and Articles of Association.
Answer:
Promoter prepares draft Memorandum and Articles of Association.

Question 2.
Certificate of Commencement of Business is like a birth certificate of a company.
Answer:
Certificate of Incorporation is like a birth certificate of a company.

1J. Arrange in proper order.

Question 1.
(a) Appoint First Directors
(b) Prepare Draft Memorandum of Association and Articles of Association.
(c) Come up with the business idea
Answer:
(a) Come up with the business idea
(b) Appoint first Directors
(c) Prepare draft Memorandum of Association and Article of Association.

Question 2.
(a) Incorporation of a company
(b) Commencement of a company
(c) Promotion
Answer:
(a) Promotion
(b) Incorporation of a company
(c) Commencement of Business

2. Explain the following terms/concepts.

Question 1.
Promoters
Answer:
A person who take lead to form the company is called a “Promoter”. As per Companies Act, 2013; Section 2(69) Promoter is defined as,

A person, who has been named in the prospectus or identified by the company in Annual Return or
Who has control on company’s affairs directly or indirectly whether as a shareholder, director or otherwise or
In accordance with whose advice, directions, or instructions, the Board of Directors is accustomed to act.

Question 2.
Promotion
Answer:
It is the first stage of Company formation. It means taking necessary steps to incorporate a company as per the provisions of the Companies Act, 2013.

Question 3.
Certificate of Incorporation
Answer:
It is a certificate issued by the ROC, after verifying all the documents and information provided by the promotors. It is like the Birth Certificate of the company. The company becomes a legal person or a body corporate having perpetual succession on getting incorporation certificate.

Question 4.
Simplified Proforma for Incorporating Company Electronically (SPICe)
Answer:
As per new rule 38 of Companies (Incorporation) (Fourth Amendment) Rules, only one form like FORM INC-32 (SPICe) needs to be submitted at the time of incorporation.
SPICe is to be filed for applying for:

Reservation of Name of Company
Incorporation of the new company
DIN for Directors
PAN and TAN for a new company.

Question 5.
Corporate Identity Number (CIN)
Answer:
The company needs to incorporate with the Registrar of Companies. Such ROC gives CIN to the company. It is a unique identity number. CIN is a 21 digit alphanumeric code. It is to be quoted in every form and correspondence. CIN includes details of the company like listed or unlisted, industry code, state of the location, year of registration, type of ownership, and registration number.
E.g. CIN of Air India Ltd. – U62100DL1992GOI048581

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

1. Mr. Ram, Mr. Sam, and Mr. Tom who are partners have come together to convert their business into a company. They have finalized all the details about the business they want to do, the capital needed, etc. However, they do not know how to proceed with the legal formalities. Hence they appoint Mr. Shah who is a Practicing Company Secretary to help them prepare documents needed for incorporating the proposed company.

Question (a).
Can Mr. Ram, Mr. Sam, and Mr. Tom convert their partnership firm into a company?
Answer:
Mr. Ram, Mr. Sam, and Mr. Tom can convert their partnership firm into a company easily.

Question (b).
Name 2 most important documents needed to incorporate a company.
Answer:
Memorandum of Association and Articles of Association are the two most important documents for the Incorporation of the Company.

Question (c).
Will Mr. Shah be considered a Promoter of the Company? Why?
Answer:
Mr. Shah will not be considered a Promoter. Mr. Shah is an advising company secretary and will help to prepare documents needed for incorporation. Promoter means a person or group of persons who take initiative efforts for the formation of the company. Here Mr. Ram, Mr. Sam, and Mr. Tom are in the role of Promoter.

2. Mr. T along with his 5 friends have submitted all the necessary documents for incorporation of TRIM private limited company.

Question (a).
How many minimum promoters are needed to incorporate a private company?
Answer:
Minimum 2 promoters/persons are needed to incorporate a private company.

Question (b).
When can TRIM Private limited company be said to have come into existence?
Answer:
After getting Incorporating Certificate, TRIM Private limited company be said to have come into existence.

Question (c).
Name the two most important documents that must be submitted at the time of Incorporation of a company.
Answer:
There are various documents, which are needed for the Incorporation of a company like Memorandum of Association, Articles of Association, Director’s consent, etc.

3. Sagar company limited got its Certificate of Incorporation on 1st September 2018. The application for Incorporation was submitted on 16th August 2018. There were 10 promoters who took the steps to incorporate the company.

Question (a).
State the date on which Sagar company limited came into existence legally?
Answer:
Sagar Company Limited came into existence legally after receiving an incorporation certificate on 1st September 2018.

Question (b).
On which date will the company get its Corporate Identity Number?
Answer:
At the time of issuing the Incorporation Certificate, ROC allows a CIN to the company, which is 1st September 2018.

Question (c).
How many minimum promoters are needed for incorporating a public company?
Answer:
There are three types of companies like Public Company, Private Company and One Person Company, in which Public Company needs minimum 7 Promoters/Persons for incorporating.

4. Answer in brief.

Question 1.
State the contents of the Certificate of Incorporation.
Answer:
Contents of Certificate of Incorporation:

The name of the company.
Date of issue of Certificate of Incorporation.
Corporate Identity Number (CIN).
Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) of the company.
Signature of Registrar with the date and his seal.

Question 2.
State the importance of the Certificate of Incorporation.
Answer:
Importance of Certificate of Incorporation:

Certificate of Incorporation is like a Birth Certificate of a Company.
It is proof by which company comes into existence.
After getting an Incorporation Certificate, the company becomes a legal person distinct from its members.
It is a document that gives status to the company about its perpetual succession from its date of Incorporation.
After getting such a certificate, the company can sue and be sued by others.

Question 3.
Write a note on – Role of the Promoter.
Answer:
Role of Promoter:

To conceive (discover) the idea of forming a business.
To decide aims and objects of business, amount of capital, scale/size of business, etc.
Drafting the ‘Memorandum of Association’ and ‘Articles of Association’.
Drafting Prospectus to invite investors.
To appoint first directors and first subscribers to Memorandum of Association and Articles of Association.
To enter into ‘Preliminary Contract’ like hiring office premises, preparing and drafting Memorandum of Association and Articles of Association.

Question 4.
Draw the flow chart of steps in the promotion of a company.
Answer:
Steps in promotion of a company:
Maharashtra Board Class 11 Secretarial Practice Solutions Chapter 3 Formation of a Company 4 Q4

5. Justify the following statements.

Question 1.
Certificate of Incorporation is like a Birth Certificate of a company.
Answer:

Certificate of Incorporation is issued by ‘Registrar of Companies, after successful completion of the Incorporation step of formation.
It is proof by which company comes into existence.
An incorporation Certificate brings legal status to the company.
After getting the Incorporation Certificate company achieves the status of ‘Perpetual Succession’.
The company can sue and can be sued after getting an Incorporation Certificate.
The company can enter into various contracts.
After getting an Incorporation Certificate, the company is considered an artificial person.
Thus, a Certificate of incorporation is like a Birth Certificate of a company.

Question 2.
Every Company on incorporation gets a CIN.
Answer:

CIN means Corporate Identity Number.
ROC allots CIN to every company at the time of issue of Incorporation Certificate after completion of all formalities.
It is a unique identification number that is given to every company.
It shows details like whether a company is listed or unlisted, industrial code, state-wise location, year of incorporation, type of ownership, and registration number.
All correspondence with ROC is conducted on basis of such CIN.
It is compulsory given to all types of companies.
Thus, every company gets CIN on incorporation.

Question 3.
Promoters play important role information of a company.
Answer:

Promoter discovers the idea of business formation.
Promoter decides aims and objects of business, amount of capital, scale/size of business.
Drafting the ‘Memorandum of Association’ and ‘Articles of Association’.
Drafting prospectus to invite investors.
To appoint first directors and first subscribers of Memorandum of Association and Articles of Association,
To enter into ‘Preliminary Contracts’ like hiring office premises, etc.
To protect and promote the interest of the proposed company.
Thus, promoters play important role in theformation of a company.

6. Answer the following questions.

Question 1.
Explain briefly the steps involved in the incorporation of a company.
Answer:
(i) Obtaining Digital Signature Certificate (DSC): Promoters and the proposed first directors has to obtain a DSC for e-filing.

(ii) Register DSC in the name of the Director with MCA: DSC has to be registered with MCA (Ministry of Corporate Affairs). MCA maintains details of every Director including their DIN, personal details, etc.

(iii) Obtain Director Identification Number (DIN): Proposed first Directors must apply for DIN in electronic form SPICe-32 at the time of incorporation. Every director must have DIN.

(iv) Apply for Reservation of Name: Promoter has to get the name of company approved from Central Registration Centre (CRC) by filling form RUN (Reserve Unique Name) along with prescribed fees on MCA portal. Promoters have to suggest more than one name in order of their preference. CRC will approve the name within 20 days from the date of application.

(v) Finalize Memorandum of Association and Articles of Association: It states the aims and objectives of the business. It contains legal and technical information. The promoter should finalize it. The promoters finalize both the documents with the help of the Company Secretary, legal experts, etc.

(vi) Signing, Stamping, and Dating of Memorandum and Articles of Association: Both documents must be signed by each subscriber and shall add his name, detailed address, occupation, etc. The signature of at least one witness is needed. Due stamp duty as per the Indian Stamp Duty Act, 1899 is required to be paid at the time of incorporation.

(vii) Preparation of other necessary documents for incorporation:

Consent of Directors: Directors should give written consent in the prescribed format, about their approval to act as a director.
Details of manager, secretary, etc Articles of Association include the names of the manager, secretary, etc.
Declaration by subscribers to the Memorandum and First Directors: A declaration by first Directors should be taken who has subscribed to Memorandum of Association stating that he is not convicted of any offense in connection with the promotion, formation of company and has not found guilty of any fraud, etc.

(viii) Address for communication and notice of Registered office address: A company is required to have a Registered office within 30 days of incorporation. The promoter has to provide an address for communication at the time of incorporation.

(ix) Obtain a statutory declaration from Declaration by Company Secretary, Chartered Accountant, advocates, etc. is also necessary to be obtained along with Director, manager, etc. declaration status that all necessary requirements are fulfilled related to incorporation.

(x) Filing of application and document for incorporation of a company: Finally, after preparation of all documents, it has to be submitted to ROC in the prescribed form along with necessary prescribed fees for incorporation.

Question 2.
Promoters play an important role in the formation of a company. Explain.
Answer:
Promoters:
A person who take lead to form the company is called a “Promoter”.
As per Companies Act, 2013; Section 2(69) Promoter is defined as.

A person who has been named in the prospectus or identified by the company in Annual Return or
Who has control on company’s affairs directly or indirectly whether as a shareholder, director or otherwise or
In accordance with whose advice, directions, or instructions, the Board of Directors is accustomed to act.

Role of Promoters:

To conceive (discover) the idea of forming a business.
To decide aims and objects of business, amount of capital, scale/size of business, etc.
Drafting the ‘Memorandum of Association’ and ‘Articles of Association’.
Drafting Prospectus to invite investors.
To appoint first directors and first subscribers to Memorandum of Association and Articles of Association.
To enter into ‘Preliminary Contract’ like hiring office premises, preparing and drafting Memorandum of Association and Articles of Association.

Activity (Text Book Page No. 42)

From the following CIN, identify the type of companies:

Question 1.
U74999TN20140PC098340
Answer:
Maharashtra Board Class 11 Secretarial Practice Solutions Chapter 3 Formation of a Company Activity 1

Question 2.
L28920MH1945PLC004520
Answer:
Maharashtra Board Class 11 Secretarial Practice Solutions Chapter 3 Formation of a Company Activity 1.1

Question 3.
U72900KA2003PTC033028
Answer:
Maharashtra Board Class 11 Secretarial Practice Solutions Chapter 3 Formation of a Company Activity 1.2

Maharashtra Board Class 11 Secretarial Practice Solutions Chapter 4 Documents Related to Formation of a Company

July 5, 2024July 4, 2024 by Bhagya

Balbharti Maharashtra State Board Class 11 Secretarial Practice Solutions Chapter 4 Documents Related to Formation of a Company Textbook Exercise Questions and Answers.

Maharashtra State Board Class 11 Secretarial Practice Solutions Chapter 4 Documents Related to Formation of a Company

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

Question 1.
___________ is a primary document of the company which contains the aims and objectives of the company.
(a) Memorandum of Association
(b) Articles of Association
(c) Prospectus
Answer:
(a) Memorandum of Association

Question 2.
___________ describes the relationship between company and outsiders.
(a) Memorandum of Association
(b) Articles of Association
(c) Prospectus
Answer:
(a) Memorandum of Association

Question 3.
The ___________ clause describes the range of activities a company can undertake.
(a) Name
(b) Capital
(c) Object
Answer:
(c) Object

Question 4.
Any act done by the company beyond the Powers of Memorandum is called as ___________
(a) Doctrine of indoor management
(b) Ultra-Vires
(c) Mis-statement
Answer:
(b) Ultra-Vires

Question 5.
___________ acts are void or legally ineffective.
(a) Object clause
(b) Main object
(c) Ultra Vires
Answer:
(c) Ultra Vires

Question 6.
___________ clause contains the details of liability of the members.
(a) Name
(b) Liability
(c) Object
Answer:
(b) Liability

Question 7.
___________ clause states the amount of Authorised capital with which the company is registered.
(a) Liability
(b) Object
(c) Capital
Answer:
(c) Capital

Question 8.
___________ contains rules and regulations for internal management of the company.
(a) Articles of Association
(b) Prospectus
(c) Memorandum of Association
Answer:
(a) Articles of Association

Question 9.
Articles establishes relationship between company and ___________
(a) members
(b) outsiders
(c) ROC
Answer:
(a) members

Question 10.
___________ is an invitation to the public to subscribe for shares of the company.
(a) Memorandum
(b) Prospectus
(c) Articles of Association
Answer:
(b) Prospectus

Question 11.
For making multiple issue of shares within a year, a company can prepare a ___________ Prospectus.
(a) Abridged
(b) Shelf
(c) Red Herring
Answer:
(b) Shelf

Question 12.
___________ is an incomplete prospectus.
(a) Red Herring Prospectus
(b) Shelf Prospectus
(c) Abridged Prospectus
Answer:
(a) Red Herring Prospectus

1B. Match the pairs.

Question 1.

Group ‘A’	Group ‘B’
(a) Capital clause	(1) Details of capital structure of a company
(b) Liability clause	(2) Used for multiple issues of shares
(c) Acts beyond the Powers of Memorandum	(3) Abridged Prospectus
(d) Red Herring Prospectus	(4) Describes main objectives
(e) Shelf Prospectus	(5) Used for Right Issue
	(6) Incomplete Prospectus
	(7) Ultra-Vires
	(8) Doctrine of Indoor management
	(9) Extent of liability of members
	(10) Articles of Association

Answer:

Group ‘A’	Group ‘B’
(a) Capital clause	(1) Details of capital structure of a company
(b) Liability clause	(9) Extent of liability of members
(c) Acts beyond the Powers of Memorandum	(7) Ultra-Vires
(d) Red Herring Prospectus	(6) Incomplete Prospectus
(e) Shelf Prospectus	(2) Used for multiple issues of shares

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

Question 1.
The primary document of a company states the aims and objectives of a company.
Answer:
Memorandum of Association

Question 2.
The document establishes the company’s relationship with outsiders.
Answer:
Memorandum of Association

Question 3.
The document states the limits within which a company has to operate.
Answer:
Memorandum of Association

Question 4.
The document contains Name Clause, Registered Office Clause, Capital Clause, etc.
Answer:
Memorandum of Association

Question 5.
The document is subordinate to the Memorandum of Association.
Answer:
Articles of Association

Question 6.
The document contains rules and regulations for internal management.
Answer:
Articles of Association

Question 7.
A term used for acts beyond the scope of the Memorandum of Association.
Answer:
Ultra-Vires

Question 8.
The clause describes the main activities a company can undertake.
Answer:
Object Clause

Question 9.
The clause gives details of Authorized Capital or Registered Capital.
Answer:
Capital Clause

Question 10.
The clause describes the extent of liability of members.
Answer:
Liability Clause

Question 11.
The last clause of the Memorandum contains the name, signature, and other details of all the subscribers of the Memorandum.
Answer:
Association or Subscription Clause

Question 12.
The document establishes a relationship between a company and its members.
Answer:
Articles of Association

Question 13.
Document issued by public company inviting the public to subscribe to its shares.
Answer:
Prospectus

Question 14.
Prospectus attached with every share application form.
Answer:
Abridged Prospectus

Question 15.
Prospectus used for multiple issues of shares within a year.
Answer:
Shelf Prospectus

Question 16.
It is an incomplete prospectus.
Answer:
Red Herring Prospectus

Question 17.
This prospectus does not contain information about the quantum of shares to be issued or the price at which shares will be issued.
Answer:
Red Herring Prospectus

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

Question 1.
A Memorandum of Association and Articles of Association are prepared at the time of incorporation of a company.
Answer:
True

Question 2.
Memorandum of Association describes the nature and character of the company.
Answer:
True

Question 3.
Memorandum establishes the relationship between Company and Members.
Answer:
False

Question 4.
Any act done by the company beyond the Powers of Memorandum is Ultra-Vires.
Answer:
True

Question 5.
Articles of Association can have provisions that contradict the Memorandum.
Answer:
False

Question 6.
Memorandum need not have a Liability Clause.
Answer:
False

Question 7.
Articles of Association are subordinate to Memorandum.
Answer:
True

Question 8.
A memorandum contains rules and regulations for the internal management of a company.
Answer:
False

Question 9.
Every subscriber who signs the Memorandum must also sign the Articles.
Answer:
True

Question 10.
Entrenched Articles cannot be easily altered.
Answer:
True

Question 11.
Prospectus can be issued by a private company.
Answer:
False

Question 12.
Only public companies can issue Prospectus.
Answer:
True

Question 13.
The prospectus must be issued within 1 year from the date of filing it with the ROC.
Answer:
False

Question 14.
Actions can be taken against a company or its officers for misstatements in the prospectus.
Answer:
True

Question 15.
Every company has to issue a shelf prospectus every time it offers shares to the public.
Answer:
False

Question 16.
Red Herring prospectus does not contain details of the price at which shares will be sold by the company.
Answer:
True

Question 17.
Letter of the offer is issued at the time of Rights Issue.
Answer:
True

1E. Find the odd one.

Question 1.
Name Clause, Rights of Board of Directors, Object Clause.
Answer:
Rights of Board of Directors

Question 2.
Rights of shareholders, Appointment and remuneration of Directors, Liability clause.
Answer:
Liability Clause

Question 3.
Shelf prospectus, Abridged Prospectus, Articles of Association.
Answer:
Articles of Association

1F. Complete the sentences.

Question 1.
The documents which state the aims and objectives of a company is called as ___________
Answer:
Memorandum of Association

Question 2.
Any act done by the company which goes beyond the powers of Memorandum of Association will be called as ___________
Answer:
Ultra-Vires

Question 3.
The document which is subordinate to the Memorandum of Association is called ___________
Answer:
Articles of Association

Question 4.
The document which contains the rules and regulations governing the internal management of a company is called ___________
Answer:
Articles of Association

Question 5.
The document issued by a company to invite investors to buy its securities is called as ___________
Answer:
Prospectus

1G. Select the correct option from the bracket.

Question 1.

Group ‘A’	Group ‘B’
(1) …………………….	Memorandum of Association
(2) Liability clause	………………………….
(3) Incomplete Prospectus	………………………….
(4) ………………………	Establishes relationship between the company and its members

(Articles of Association, Red Herring Prospectus, Primary document, Details of liability of members)
Answer:

Group ‘A’	Group ‘B’
(1) Primary Document	Memorandum of Association
(2) Liability clause	Details of liability of members
(3) Incomplete Prospectus	Red Herring Prospectus
(4) Articles of Association	Establishes relationship between the company and its members

1H. Answer in one sentence.

Question 1.
Which document contains the aims and objectives of the company?
Answer:
Memorandum of Association contains the aims and objectives of the company.

Question 2.
What does the capital clause describe?
Answer:
The capital clause states the amount of capital with which the company is registered and the division of it into shares of a fixed amount.

Question 3.
When is Abridged Prospectus issued?
Answer:
Abridged Prospectus is issued only in case of a public offer made by a company.

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

Question 1.
Articles of Association states the aims and objectives of the company.
Answer:
Memorandum of Association states the aims and objectives of the company.

Question 2.
The prospectus is subordinate to the Memorandum of Association.
Answer:
Articles of Association are subordinate to Memorandum of Association.

Question 3.
The prospectus contains a liability clause.
Answer:
Memorandum of Association contains a liability clause.

1J. Arrange in proper order.

Question 1.
(a) Subscription clause
(b) Name clause
(c) Object clause
Answer:
(a) Name clause
(b) Object clause
(c) Subscription clause

2. Explain the following terms/concepts.

Question 1.
Memorandum of Association
Answer:

It is a secondary document.
A Memorandum of Association is a primary document of a company.
It states the objects for which the company is formed.
A Memorandum of Association of a company is a charter or constitution of a company.
It describes the range of activities a company can undertake.
No company can be registered without a Memorandum of Association.
Memorandum establishes a relationship between the company and an outsider.

Question 2.
Articles of Association
Answer:

Articles of Association is a secondary document.
It contains rules and regulations that govern the internal management of the company.
Articles of Association is also known as Bye-laws of a company.
It defines the powers, duties, and rights of managers officers, and board of directors.
It establishes a relationship between the company and its members.
This document is subordinate to Memorandum.

Question 3.
Name Clause
Answer:

This clause contains the name of the company.
The name of the company should not be identical to any existing company.
If it is a private company, then it should have the word Private Limited at the end.
And in the case of a public company, then it should add the word limit at the end of its name.
For eg ABC Private Limited in the case of the private and ABC Ltd for a public company.

Question 4.
Object Clause
Answer:

This clause states the objective with which the company is formed.
It is the most important clause of the Memorandum of Association.
The clause defines the scope and limitations of the activities of the company.
The objects must be clearly defined keeping in mind the following conditions.
- The objects of the company must be legal.
- The objects should not be against the provisions of any law.
- The objects must not be immoral.

Question 5.
Liability Clause
Answer:

This clause defines the liability of the members of the company.
In the case of companies limited by shares, the liability of the members is limited to the extent of unpaid shares.
In the case of a company limited by guarantee, the liability is limited to the amount of guarantee given by each member.
In the case of an unlimited liability company with or without share capital, this clause states that the liability of its members is unlimited.

Question 6.
Capital Clause
Answer:

This clause states the amount of capital with which the company is registered.
The capital with which the company is registered is called registered capital or authorized capital.
A company can issue only that number of shares that are authorized by its memorandum.
The company has to alter the capital clause if the company wants to issue more shares than authorized capital.

Question 7.
Registered Office Clause
Answer:

This clause contains the name of the state in which the registered office of the company is to be situated.
Every company must have a registered office within 30 days of its incorporation.
A registered office is a place where all the important documents of the company are kept.
The registered office clause determines the jurisdiction of the Registrar of Companies and of the court.

Question 8.
Ultra Vires act
Answer:

The word Ultra means beyond and the word Vires means the powers.
Thus Ultra-Vires means beyond the powers of Memorandum.
The doctrine of ultra-vires states that any activity done by a company that is beyond the powers of the company will be null and void.
The purpose of the Doctrine of Ultra-Vires is to protect all the stakeholders.
The stakeholders have the right to see that the company uses their money for the objects mentioned in Memorandum.

Question 9.
The doctrine of Indoor Management
Answer:

The doctrine of Indoor Management states that persons entering into a contract with the company need not inquire whether the company or its officers have properly followed the internal proceedings.
It is assumed that the company acts as per its Memorandum and Articles of Association.
The doctrine of Indoor Management protects the interest of outsiders when they act based on the Memorandum of Association and Articles of Association.

Question 10.
Prospectus
Answer:

A prospectus is any document that invites deposits or offers from the public for the purchase of any shares or debentures of a company.
When a public company is collecting capital by issuing shares to the public has to issue a prospectus.
The prospectus must be true and factual as investors decide to invest based on the information given in the prospectus.
The types of the prospectus issued by a company are:
- Abridged Prospectus
- Shelf Prospectus
- Red Herring Prospectus
- Letter of offer
- Offer Letter

Question 11.
Mis-statements in Prospectus
Answer:

Mis-statements means:
- The statement is misleading in form or content.
- Where any inclusion of statement or omission is likely to mislead the reader.
If the investor has purchased shares based on the misleading information in the prospectus he can take action against the company.
The company and persons will be responsible for issuing mis-statement prospectus and have to face liability.

Question 12.
Abridged Prospectus
Answer:

Abridged Prospectus contains the main contents of a prospectus in brief.
It is attached with the application form issued by the company while offering securities.
The abridged prospectus is issued only in case of a public offer made by a company.
It contains all the salient features of a prospectus.

Question 13.
Shelf Prospectus
Answer:

The company instead of preparing a fresh prospectus for every issue prepares a shelf prospectus.
Shelf Prospectus can be used for all issues made by the company for up to one year.
An Information Memorandum has to be filed with ROC every time during the validity period of one year of the shelf prospectus.
Information Memorandum contains latest material facts such as new charges, changes in financial position, etc.

Question 14.
Red Herring Prospectus
Answer:

A red herring prospectus is a kind of incomplete prospectus as it does not include complete particulars of the quantity/price of the securities.
It is usually issued at the time of IPO (Initial Public Offer).
A red herring prospectus shall have the same obligations that are applicable to the prospectus.
A company must file a Red Herring Prospectus with ROC at least 3 days prior to the opening of the subscription list and the offer.

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

1. The Articles of a company stated that while borrowing any money from outsiders, the document must have the signatures of the Managing Director (MD) and any one of the Director. The Articles of Association clearly stated the procedure to be followed while borrowing money. The Managing Director did not follow all the procedures but still borrowed money from Mr. X. Mr. X assumed that the MD has followed the required procedures.

Question (a).
Can the MD be held punishable for his act?
Answer:
He can be held liable for his actions and can be insisted to pay back the loan amount.

Question (b).
Under which Doctrine can Mr. X take action against the company?
Answer:
Under Doctrine of Indoor Management.

Question (c).
Explain the Doctrine.
Answer:

According to this doctrine, persons dealing with the company need not inquire whether internal proceedings relating to the contract are correctly followed.
They are satisfied that the transactions are in accordance with the memorandum and articles of association.
If there are any internal irregularities then the company will be liable as the person has acted in good faith and he did not know about the internal arrangement of the company.
Similarly with X as he has acted in good faith and lent money to the managing director, but the managing director did not follow the procedure. So there is an irregularity that can make the director liable for his actions.

2. Mr. A entered into a contract with Star Limited Company and as advance payment gave a cheque of ₹ 1 lac to a Director Mr. Sam. Mr. Sam is not the Managing Director. Articles state that only the MD is authorized to sign any contracts or receive any payments on behalf of the company.

Question (a).
Did Mr. Sam have the authority to accept the cheque? Why?
Answer:
Sam did not have the authority to accept the cheque because usually, individual directors do not have the authority to act on the company’s behaviour unless expressly authorized.

Question (b).
Can Mr. Sam’s action be called as Ultra-Vires? Why?
Answer:
Mr. Sam’s action cannot be called ultra-vires because any act done by him beyond the powers of the memorandum is called Ultra-Vires.

3. The Object clause of Memorandum of a Company stated the main object as manufacturing of plastic chairs and tables and any other activity in furtherance of achievement of its main activity. The Board of Directors wants also to produce T.V. Serials and feels that the shareholders may give their permission.

Question (a).
Can the company with immediate effect start producing T.V. serials? Why?
Answer:
No, a company cannot start producing T.V. serials with immediate effect. A company cannot indulge in activities other than those provided in the object clause. The activities carried outside the scope drawn by the Memorandum of Association are called Ultra-Vires activities.

Question (b).
How can the object clause of the company be altered?
Answer:
A special resolution must be passed in the General Meeting for altering the object clause.

4. A public limited company has issued all the shares mentioned in its Memorandum as Authorised Capital. Now the company wants to make a public issue of 10,000 shares at a face value of ₹ 100 per share, to raise more funds for its expansion activities.

Question (a).
Which clause of Memorandum needs to be altered?
Answer:
The capital clause of the memorandum needs to be altered.

Question (b).
In which meeting the alteration can be approved?
Answer:
A capital clause is altered by passing an ordinary resolution in a general meeting of the company.

Question (c).
Which document should the company issue to invite the public to buy its shares?
Answer:
The prospectus is the document issued to invite the public to buy its shares.

5. A Company stated in its prospectus that it has been making profits for the last 5 years. However, Mr. X., an investor found out that two years back the company had not made any profit. The prospectus was filed with ROC on 1st January 2017 and was issued to the public on 10th February 2018.

Question (a).
Can Mr. X state that there was mis-statement in the prospectus?
Answer:
Yes, Mr. X can state mis-statement in the prospectus.

Question (b).
If found guilty which two types of liability will the company and its officers face?
Answer:

Civil liability (Pay compensation for loss suffered by the investor)
Criminal liability companies or their officers will be fined or imprisoned or both.

Question (c).
Can the prospectus be valid for the issue to the public on 10th February 2018?
Answer:
No, the prospectus will not be valid for the issue to the public on 10th February 2018.

6. A Company plans to offer Rights Issues.

Question (a).
Which document must it send to its shareholders for offering the rights issue?
Answer:
Letter of the offer must be sent to its shareholders for offering the rights issue.

Question (b).
Instead of the rights issue, if the company wants to issue shares to the public which document must it issue for inviting the public to subscribe to it.
Answer:
The prospectus is the document to be issued by the company if it wants to issue shares to the public instead of rights issues.

Question (c).
Name the document which is called an incomplete prospectus.
Answer:
Red Herring prospectus is called an incomplete prospectus.

4. Distinguish between the following.

Question 1.
Memorandum of Association and Articles of Association.
Answer:

Basis	Memorandum of Association	Articles of Association
1. Meaning	Memorandum of Association is a document that contains all the fundamental information which are required for the incorporator of the company.	Articles of Association is a document containing all the rules and regulations that govern the company.
2. Defined in	Section 2(56)	Section 2(5)
3. Types of information contained	Powers and objects of the company.	Rules for internal management of a company.
4. Status	It is subordinate to companies Act.	It is subordinate to Memorandum.
5. Retrospective effect	The memorandum of the company cannot be amended retrospectively.	The Articles of Association can be amended retrospectively.
6. Major contents	A memorandum must contain 6 clauses.	The Articles can be drafted as per the choice of the company.
7. Filing with registrar	Memorandum of Association must be filed with Registrar of Company by all types of companies.	Filing of Articles of Association is optional for a public company as it may adopt Table (A).
8. Alteration	Alteration can be done after passing special resolution in Annual General Meeting and previous approval of central government or company law board is required.	Alteration can be done in the Articles by passing special Resolution at Annual General Meeting.
9. Relation	Define the relationship between company and outsider.	Regulates the relationship between company and members.
10. Acts done beyond the scope	Absolutely void.	Can be satisfied by shareholders.

5. Answer in brief.

Question 1.
State any four clauses of Memorandum of Association.
Answer:
Memorandum of Association is a basic document, which gives information about the aims and objects of the company. It is also a charter of a company.

The following are four clauses of Memorandum of Association:
(i) Name Clause:

This clause state the company’s proposed name.
It must end with the word limited if its a public company or private limited if its a private company.
It can’t be identical to any existing company’s name.
It can’t resemble any registered Trade Mark.
It should not be misleading in any way.

(ii) Registered office clause:

The registered office clause lists the name of the state where the company’s registered office is physically located.
The registered office’s physical location determines which jurisdiction the Registrar of companies and which court the company would fall under.
It also confirms the company’s nationality .
The registered office’s full address must be provided to the Registrar of companies to simplify further communications.

(iii) The object clause:

This clause defines the objects for which a company is formed. It indicates the range of activities a company can undertake. This clause states in detail the main object for which the company is to be incorporated.
The objects of the company must not be illegal, immoral or against the public policy.
A company cannot do anything beyond or outside the scope of its objects.

(iv) Liability clause:

The liability clause explains what liability each of the company’s member faces. If the company is limited by shares the liability that each member faces can be no more than the face value of share.
If the company is limited by guarantee, this clause must define how much liability each individual company member holds.

Question 2.
State any four contents of Articles of Association.
Answer:
Articles of Association is a document which contains rules and regulations that governs the internal management.
The following are the four contents of Articles of Association:

Share capital – Shares and their value and their division into different types of shares.
Rights of each class of shareholders and procedure for variation of their rights.
Procedure relating to allotment of shares, making of calls and forfeiture of shares.
Rules relating to transfer and transmission of shares and the procedure to be followed.

Question 3.
State the statutory requirements in relation to Prospectus.
Answer:
Prospectus is an invitation to public to purchase its share and debentures. It is issued after the formation of company.
The following are the statutory requirements in relation to Prospectus:

Draft Prospectus to be made Public: A draft prospectus filed with SEBI by the company should be made available to the public and to the stock exchange where the company wants to lists its shares.
Signed by Director’s: Prospectus must be signed by all directors or by duly authorised attorney.
Registration of Prospectus: A copy of the prospectus must be registered with ROC before issuing it to the public.
Dating of Prospectus: A prospectus has to be dated. The date on the prospectus is considered as the date of publication of prospectus.
Issuing Prospectus to Public: Prospectus must be issued to the public within 90 days from the date of registering a copy with the ROC.

6. Justify the following statements.

Question 1.
Memorandum of Association defines the limitations of the powers of the company.
Answer:

The Memorandum of Association is a basic or fundamental or primary document of a company.
It contains the following clauses: Name clause, Address clause, Object clause, Liability clause,Capital clause, Association of subscription clause.
The entire business centres around its object clause.
Object clause of the Memorandum of Association defines the area beyond which the company cannot do anything.
It determines the powers of the company.
It helps the stakeholders to know what is its permitted range of operation.
A company is governed by Memorandum of Association and any act beyond it shall be considered as ultra-vires.
Hence, Memorandum of Association defines the limitations of the power of the company.

Question 2.
Ultra-vires acts are null and void.
Answer:

A Memorandum of Association of a company is a basic charter of the company.
If a company departs from its Memorandum of Association such an act is ultra-vires.
The doctrine of ultra vires is a fundamental rule of company law.
An act legally in itself but not authorized by the object clause of Memorandum of Association of a company is ultra-vires.
Hence if the company does an act or enters into a contract beyond the powers of the company then the act is said to be null and void.
The company cannot sue on an ultra-vires transaction or it cannot be sued.
Thus, I agree with the above statement.

Question 3.
Contents of Articles can be altered.
Answer:

As per section 2(2) of the companies Act, 1956 ‘Articles’ means Articles of Association of a company as originally framed or as altered from time to time in pursuance of any previous companies’ law or of this Act.
The Articles regulate the internal management of a company.
It states the relationship between the company and its members.
The articles, being the internal regulations of a company can be altered easily.
The articles are required to be altered from time to time as per changes made by the government in the company law or as per changing situations in the corporate sector.
Thus, the Articles of Association can be altered by passing a ‘Special Resolution’ at a general meeting.

Question 4.
The doctrine of Indoor Management protects outsiders who are unaware of the correctness of the internal proceedings of a company.
Answer:

The doctrine of Indoor Management states that a person entering into a contract with the company need not inquire whether the company has followed the internal processing.
It is assumed that the company acts as per the Memorandum of Association and Articles of Association.
Because certain information which is internal to a company cannot be known to outsiders.
So the doctrine of Indoor Management protects the interest of the outsider when the act is based on the Memorandum of Association and Articles of Association.

Question 5.
A prospectus is an important document issued by a public company.
Answer:

A prospectus usually is in the form of a statement giving all material information about the company and showing its future prospectus.
It aims at inviting investors to subscribe to its shares and debentures.
It is a must for every public company to prepare its prospectus.
It is through the prospectus that the prospective investors know the details of the shares offered by the company.
Otherwise, the investors would have no idea of the shares that a public company is selling.
All detailed information about a company like its business management, financial structure, etc., are provided in the prospectus.
The main idea to issue a prospectus is to collect capital for the company from the general public.
It should contain true, fair, and correct information.
Hence, the prospectus is very important for a public company.

Question 6.
Company and officers responsible for issuing Prospectus are liable for mis-statements in Prospectus.
Answer:

The prospectus is a written document giving an invitation to the public to purchase shares or debenture of the company.
It provides all the necessary information about a company, its business, the management, financial structure, etc., of a company.
A prospectus must be prepared very carefully and accurately.
It should contain true and correct information and honest disclosure of facts.
A company and all those officials can be held responsible for any mis-statement in the prospectus.
These people have to face severe consequences.
The shareholder can cancel the contract.
Persons authorizing the issue of prospectus containing mis-statement are punishable with imprisonment of two years and a fine up to ₹ 5,000.
Thus, I agree with the above statement.

7. Answer the following questions.

Question 1.
Briefly explain the clauses of the Memorandum of Association.
Answer:

The Memorandum of Association is the principal document of a company.
It is considered the charter of the company.
It contains the powers and objectives of the company.
It can be altered only according to the provisions made in the companies act regarding its alterations.
Memorandum of Association provides information to the outsiders.

The Memorandum of Association contains the following clauses:
1. Name clause:

This clause contains the complete name of the company.
The company can choose any name subject to the following restrictions.
The name of the company must end with the word limited in the case of a public limited company and with the word private limited in the case of a private limited company.
The name should not be similar or identical to the name of any other company.
The name should not contain the word cooperative.
The name should not convey any connection or link of the company with the government department.

Alteration of name clause: A company can change its name by passing a special resolution and by obtaining approval from the central government.

2. Address clause:

This clause contains the name of the state in which the registered office of the company is to be located.
It is necessary because a company gets the registration from that state only.
A registered office is a place where all the important documents are kept.
A company must have a registered office when it starts its business activities or within 30 days whichever is earlier.

Alteration of address clause: A company may change its Registered office from

One place to another place within the same city or town.
One town or city to another town or city within the same state.
One state to another state.
In both these cases, a special resolution is to be passed in General Meeting.

3. Object clause:

It is the most important clause of the Memorandum of Association.
It contains the main object of the company.
This clause defines the scope and limitations of the activities of the company.
The objects must be defined keeping in mind the following conditions:
the objects of the company must be legal.
the objects should not be contrary to the provisions of any law.
the objects must not be immoral.

Alteration in object clause: In order to alter its object clause, a company must pass a special resolution.

4. Liability clause:

This clause defines the liability of the members of the company.
In the case of a company limited by shares, the liability of the members is limited to the extent of the unpaid amount of share capital.
In the case of a company limited by guarantee, the liability is limited to the amount of guarantee.

Alteration of liability clause: If a company wants to make any alteration in its liability clause then it must pass a unanimous resolution in a meeting.

5. Capital clause:

The clause specifies the amount of share capital with which a company is to be registered.
The capital with which a company is registered is called registered capital.
A company can issue only that number of shares that are authorized by its memorandum.

Alteration of the capital clause: A company can alter its capital clause by passing a special resolution and by obtaining approval from the company law board.

6. The Association clause or Subscription clause:

A company is an association of persons, who subscribe to its capital.
For a public company minimum of 7 persons must subscribe to a memorandum by signing it and giving their undertaking that each one shall buy at least one share of a company.
For a private company minimum of 2 persons must subscribe to the Memorandum of Association by signing it and they also give an undertaking that each one shall buy at least one share of a company.
Each subscriber has to put his name address and occupation in the presence of at least one witness who shall also put in his details.

Question 2.
Define Memorandum of Association. Explain briefly its features.
Answer:
Definition:
As per section 2(28) of the companies Act 1956 “Memorandum of Association means the Memorandum of Association of a company as originally framed or altered from time to time in pursuance of any previous company laws or of this Act”.
As such this definition does not state exactly the scope, use, and importance of memorandum in a company.

Lord Cairns observed that – “The memorandum of association is a charter and defines the limits of the powers of a company. The memorandum contains the fundamental conditions upon which alone the company is allowed to incorporate”.
Lord Macmillan states that – “The purpose of the memorandum is to enable the shareholders, creditors and those who deal with the company to know what is its permitted range of enterprise”.

Meaning:
In simple words, the Memorandum of Association of a company means

a basic or fundamental primary document of a company.
a charter or constitution of a company
no company can be incorporated without the Memorandum of Association.
It lays down the range of its activities.
It is a public document and can be inspected by those who deal with the company.

Features of Memorandum of Association:
The following are the features of the Memorandum of Association:

Memorandum of Association states the nature of business activities to be conducted by the company.
It informs about the scope of activities of the company.
It is prepared by promoters of the company.
It is signed by at least 7 persons in the case of a public company and 2 persons in the case of a private company.
It is submitted to the registrar of companies for registration.
All companies must prepare their own Memorandum of Association.
It defines the relationship between the company and outsiders.
It is an unalterable charter of the company.
It is a public document.

Question 3.
What are Articles of Association? Explain briefly its content.
Answer:
Articles of Association contain rules and regulations regarding the management of the company’s internal affairs.

It defines the powers, duties, and rights of managers, officers, and the board of directors.
It establishes a relationship between the company and its members.

Contents of Articles of Association:

The amount of share capital and different classes of shares
Rights of each type of shareholders
Procedure for making allotment of shares
Procedure for issuing share certificates
Procedure for transfer of shares
Procedure for forfeiture of shares
Procedure for reissue of forfeited shares
Procedure for conducting meetings
Procedure for appointment and removal of directors
Duties powers and remuneration of directors
Procedure for declaration and payment of dividend
Procedure regarding the keeping of books of accounts and their audit
Procedure regarding winding up of the company
Seal of the company

Alteration of Articles of Association:

A company may change its Article of Association by passing a special resolution.
A company can alter its Articles of Association in the following ways:
- by the adoption of a new set of an Articles
- by deletion of an article
- by addition or insertion of a new article
- by substitution of an article
- by amendment of an article

Question 4.
Define Prospectus. Explain its contents.
Answer:
Definition: “Sec 2(70) of Companies Act, 2013 defines prospectus as any document described or issued as a prospectus and includes 32a Red Herring Prospectus or shelf prospectus or/and notice, circular advertisement or other document inviting offers from the public for the subscription or purchase of any securities of a body corporate”.

Meaning: Prospectus is a document that contains information about various aspects of the company and invests the investors to buy the securities offered by the company.

Contents of Prospectus:
A prospectus must contain the following:
(i) Information and Reports:
As per the Companies Act, the prospectus must contain information such as the name of the issuing company its full registered office address with phone numbers, email address, nature, number and price of securities being offered, details of a lead merchant banker, registrar to the issue, name of the stock exchange where the shares are listed.

It must also have listed a clause of general risk date of opening and closing of issue etc.
It must also have reported on financial information.

(ii) Declaration:
There should be a declaration by the company saying that all the provisions of the Companies Act have been complied with and that the prospectus does not contain anything contrary to the provisions of the Companies Act.

(iii) Statement of an Expert:
A prospectus may contain a statement made by an expert like Company Secretary, Chartered Accountant, Cost Accountant, Valuer, Engineer, etc., relating to matters that they have looked into.

Any other matter as may be prescribed by the Companies Act.
The expert has to give written consent to issue the prospectus.

(iv) Any other matter as may be prescribed by the Companies Act.

Maharashtra Board Class 11 English Yuvakbharati Solutions Chapter 4.3 Extracts of Drama

July 4, 2024July 3, 2024 by Bhagya

Balbharti Yuvakbharati English 11th Digest Chapter 4.3 Extracts of Drama – (B) An Enemy of the People Notes, Textbook Exercise Important Questions and Answers.

Maharashtra State Board Class 11 English Yuvakbharati Solutions Chapter 4.3 Extracts of Drama – An Enemy of the People

11th English Digest Chapter 4.3 Extracts of Drama – An Enemy of the People Textbook Questions and Answers

Character:

Question 1.
Mayor Peter Stockmann is a contrast to Dr. Thomas Stockmann. Justify.
Answer:
There are lots of good things you can say about Dr. Stockmann, the protagonist of ‘An Enemy of the People’. He is an idealist and a man having great love and care for his family. He is generous with his neighbors and truly cares for his fellow men. Despite his troubles, he wishes to make the world a better place. Most importantly, the doctor is a man of principles willing to fight for justice no matter what it costs.

On the contrary, Mayor Peter Stockmann, his brother is a practical man. He is the antagonist in the play who is less worried about the common men in the city. Throughout the play, the Mayor, Stockmann mercilessly tries to ruin his brother’s life in order to keep the truth from being revealed. He hardly shows any affinity towards his brother. He never shows any feeling of guilt for the fact that he’s totally messing up the life of a family member.

Question 2.
Write the character sketch of Dr. Stockmann.
Answer:
Dr. Stockmann is the brother of the Mayor, Peter Stockmann and the protagonist/hero of the play. He is a practising medical doctor and the medical officer of the town baths. He is an ideal person who has great love for family, fellow citizens and social values. Dr. Stockmann believes strongly in individual freedom and the right of every man to express himself freely.

He is a man of morality and truth and is ready to fight against injustice. He tries to raise his voice against the hypocritical ways of his brother and the members of conservative government. The play revolves around his struggle to give justice to common men of the city. Finally, his fruitless efforts lead him to such misfortune to ruin everything in his profession and life. However, he is not ready to give up his efforts for truth. We see him as a man of patience and strength when he remarks – “The strongest man in the world is he who stands alone!”

3. Read the given extract.

Question (i)
Complete the following table. (Answers are given directly in bold)
Answer:

Character	Supportive Character	Incident
1. Dr. Stockmann	(a) Mrs. Stockmann (b) Petra Stockmann	(a) Ready to stand with him in every difficulty. (b) Joins her father in his fight against injustice.
2. Peter Stockmann	(a) Aslaksen (b) Hovstad	(a) To stand in opposition of Dr. Stockmann (b) Turned to the Mayor’s side in the final scene.
3. Aslaksen	(a) Dr. Stockmann (b) Tradesmen	(a) Trusted him for printing the article. (b) Gave their support to him.

Question (ii)
Match the column ‘A’ with column ‘B’

Column ‘A’	Column ‘B’
1. Dr. Thomas Stockmann	Opportunist
2. Katherine	Vulnerable
3. Peter	Honest and upright
4. Petra	Coward
5. Hovstad	Timid but supportive
6. Billing	Cunning and corrupt
7. Aslaksen	Courageous

Answer:

Column ‘A’	Column ‘B’
1. Dr. Thomas Stockmann	Honest and upright
2. Katherine	Vulnerable
3. Peter	Cunning and corrupt
4. Petra	Courageous
5. Hovstad	Timid but supportive
6. Billing	Opportunist
7. Aslaksen	Coward

Plot:

Question 1.
Describe the climax scene in your own words. Write your comments on it.
Answer:
In the final scene, Dr. Stockmann realizes that no one is going to support him to publish the article as no one is ready to take any step against the Mayor. So, Stockmann asks Hovstad to give him back his papers (article). He announces in front of the Mayor that he will read out the article in a mass meeting for everybody to hear the voice of truth. But, the Mayor assures him that no one will lend him a hall in the city to do this.

Billing and Hovstad have also the same opinion. Mrs. Stockmann feels shameful to know the fact that no one is willing to give her husband a hall. She is rather shocked to know that everyone has turned against her husband. Dr. Stockmann is ready to hire a drum to walk on the city streets reading the article. It shows his determination to reveal the truth at any cost. All the family members are ready to stand with Dr. Stockmann in his sincere efforts to purify the society.

Question 2.
Describe in your own words the incident when Hovstad’s real intention to help Dr. Stockmann is exposed.
Answer:
When Dr. stockmann reached Hovstad’s office, he notices the Mayor’s stick and hat and suspects him of hiding in the next room. Dr. Stockmann enquired if Hovstad was going to publish the article in ‘People’s Messenger’. Hovstad answered him that he had to wait for publishing the article.

Hovstad didn’t refuse him but was not ready to publish it. He was under the influence of the Mayor and had personal interest. In addition, both Billing and Aslaksen supported the editor. Dr. Stockmann approached to Aslaksen for requesting him to atleast print the article as a pamphlet. However he denied doing so. Finally, Hovstad refused to print the article saying it would ruin doctor’s family. Here, the Dr. realized Hovstad’s real intention of not printing the article as he was doing everything to protect himself.

3. Write down the consequences of the following occurrences, with the help of the play.

Question (a)
Dr. Thomas Stockmann wants an article exposing social evils to be printed in the newspaper.
Answer:
Dr. Stockmann was an idealist and a lover of truth. When he came across the unhygienic condition of the baths which was a direct threat to the health of the people, he decided to publish the article in the newspaper exposing the Mayor and his cronies. This would directly affect the ruling government to lose their seats. In addition, it would raise public outcry against the social injustice of the Mayor and his stakeholders had to pay a large amount to rectify the issue.

Question (b)
The Mayor, Peter Stockmann persuades Mr. Hovstad and Mr. Billing from printing the article.
Answer:
The Mayor entered Hovstad’s office through the back doors. He didn’t want to let Dr. Stockmann know about his visit to Hovstad. When he met Hovstad and Billing, he told them that Dr. Stockmann is a headstrong man and had some wrong informations about the condition of the baths.

He also praised both Hovstad and Billing and assured them that he had another article to publish which would clear the doubts of all regarding the baths. He indirectly assured them to have their favour in this matter if they supported him. As Dr. Stockmann came to know about the Mayor’s visit to Hovstad’s office to persuade them, he was of the firm opinion that they would not publish his article.

Question (c)
Aslaksen declares that he would not print Dr. Stockmann’s article.
Answer:
As the Mayor told Aslaksen his idea of raising the money from the small tradesmen, Aslaksen thought that Dr. Stockmann’s idea of extensive alternation of the baths was unrealistic. So he decided not to print the article in the newspaper and save the small tradesmen from this unnecessary burden. As Aslaksen denied printing the article, Dr. Stockmann assured them that he would read the article in the mass meeting or raise the issue on the streets of the city. He would anyway expose the ruling government and give justice to common men.

Question (d)
Katherine encourages Dr. Stockmann to proceed in his attempts in the cause of public attempts.
Answer:
When the Mayor and his supporter opposed Dr. Stockmann, Mrs. Stockmann felt shameful that all of them turned against her husband. She put her arm onto his neck and told him that she was ready to stand with him. She encouraged him not to give up his idea and she and her children would help him in his mission. She finally promised to support him till the end. She added that her children Morten, Ejlif and Petra would follow him on the streets of the city.

Setting:

Question 1.
The setting of the act is the office of the newspaper ‘The Herald’. Explain how it is the proper background for the theme of the play.
Answer:
This act is set in the editor’s room at the office of ‘People’s Messenger’. One door leads to the printing office and another to the rest of the offices. There is a large table in the middle covered with books, papers and newspapers and there is a desk at the window. The room is described as ‘dingy and cheerless’.

The setting of the play is appropriate to the theme as the single door opening shows that truth is the only way to be followed by everyone. The dingy and clumsy atmosphere and old furniture urge need of change and renovation in the existing situation. The table covered with books and newspapers is a symbol of chaos and anarchy in the government.

The window stands for a ray of hope in the darkness of injustice. A few closed chairs symbolize time to wind-up prevailing conservative government and bring in new liberal governance. The glass panels stand for transparency and clarity in every section of the government.

Question 2.
Explain the use of the following property in the development of the play.
Answer:
(a) Hat – Hat plays an important role in the development of the play. It stands for the city’s authority, ‘the Mayor’ as it was a part of the official uniform. When Dr. Stockmann put on the hat, he told his brother that the entire city was in his hand. He also added that with that supreme power he would throw him off the existing government. Dr. Stockmann saw the Mayor’s hat in the editor’s room and could realize that the Mayor was hiding in the next room, listening his conversation with the editor. This made him understand the Mayor’s plot of ruining his article.

(b) Stick – The stick at certain instances was a symbol of assertiveness, commitment, new ideas or sticking to the old things. The stick in Dr. Stockmann’s hand suggests his assertiveness, commitment and new ideas in the existing government with the support of everyone. But the stick in the Mayor’s hand, suggests that the whole situation was groomed by him to turn against Dr. Stockmann. The stick in the hand of the Mayor also proves his authority and command over other people.

(c) An envelope containing the letter – The envelope of the letter focuses over the issue of grievance which everyone keeps by hiding a secret. Dr. Stockmann took various efforts to expose the issue but finally Hovstad returned the envelope to him, which suggests how everyone tried to conceal the burning issue. The issue needed immediate attention, but was hidden from the public as the letter was hidden by the envelope.

3. Explain the following statements with reference to the context.

Question (a)
And then, once the ring is broken, we’ll get to work and show the public every day just how incompetent the Mayor is!
Answer:
When both Hovstad and Billing read Dr. Stockmann’s article, they were shocked to know that the article would bring a revolution in the city. Hovstad was ready to publish that article the next day in ‘People’s Messenger’. Billing thought that if the Mayor didn’t like it then it would be a great trouble for them. But Hovstad was ready to take the risk as the problem was acute.

The Mayor would be in trouble from either by the small tradesmen and the householders’ association or by the shareholders in the bath. Anyhow the ring would be a broken and they would get a chance everyday to expose the Mayor through the newspaper and the entire government would go in the hands of the liberals.

Question (b)
From now on The Herald shall be my artillery.
Answer:
Billing, Aslaksen, Hovstad and Dr. Stockmann were discussing about the article. Hovstad was ready to publish the article in the ‘People’s Messenger’ on the next day only. Seeing this Aslaksen agreed with Hovstad to print whatever he wished to print. Dr. Stockmann was of the opinion that it would disrupt on the entire system.

Dr. Stockmann told them that the Mayor and his cronies tried to persuade him by all means but he was determined to publish the article at any cost. Now, Dr. Stockmann considered ‘People’s Messenger’ as his sheet-anchor (additional support)to use it as an artillery to attack on the Mayor with one article after another.

Question (c)
You ought to be ashamed of yourself.
Answer:
Petra visited Hovstad and she told him that she could not translate the novel he had given her. Hovstad asked the reason why she could not translate that book. She answered that the book was unrealistic and she didn’t find it to be read by the common men. At that time, Petra came to know Hovstad’s original intention not printing her father’s article revealing the truth. She thought him as a loyal person but he turned a traitor. So she said that he ought to be ashamed of himself.

Question (d)
Because your father can’t do without my help.
Answer:
Petra did not wish to translate the book as it was unrealistic. When she asked Hovstad about her father’s article, Hovstad told her that he was not going to print the article. She sensed the intention of Hovstad and his behaviour. She did not like his way of looking at the truth. She got upset when Hovstad told her that she was fighting against it as it was only a matter of her father. She became furious as she heard his remarks that her father couldn’t do anything without his help. She got to know the attitude of Hovstad to support the Mayor in the issue.

Question (e)
And it’s by no means the small sacrifice the town will have to make.
Answer:
The Mayor tried hard to persuade Aslaksen and Hovstad that they should not support Dr. Stockmann in his attempts to publish the article as it was not in favour of the small tradesmen and the householders. If the Mayor would go for the extensive alteration of the baths, the town would have to sacrifice. It would incur great expenditure on the municipal.

As a result, they would have to put extra burden of taxes over the tradesmen and commoners. In addition, the baths would be shut down for two years. In such condition, the householders would have to suffer a lot. Eventually, the city would have to be ready to make the sacrifice but Aslaksen was in no mood to put the additional burden over the tradesmen and householders.

Glossary:

sledgehammer – mallet or a heavy hammer used for breaking rocks
chicken-hearted – cowardly or easily frightened
prudent – wise and sensible, shrewd
bombard – attack/ assault/ bother
bigwigs – VIP or important persons
mince – cut/ chop/ crumble
salvation – deliverance/ escape/ rescue
alderman – an elected member of a city council /next in status to the mayor
compositor – a person who arranges the text and pictures of a newspaper or a book before it is printed
trembling – shake/shiver/vibrate
dingy – dull/colourless
hypocrite – fraud/ deceiver/ pretender
trivial – unimportant/ little/ worthless
subscription – membership fee/ donations/ contribution.

Maharashtra Board OCM 11th Commerce Solutions Chapter 3 Small Scale Industry and Business

July 4, 2024July 3, 2024 by Prasanna

Balbharti Maharashtra State Board Organisation of Commerce and Management 11th Textbook Solutions Chapter 3 Small Scale Industry and Business Textbook Exercise Questions and Answers.

Maharashtra State Board 11th Organisation of Commerce and Management Solutions Chapter 3 Small Scale Industry and Business

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

Question 1.
The problem of ……………….. is becoming more serious in India.
(a) employment
(b) unemployment
(c) pollution
Answer:
(b) unemployment

Question 2.
India is ………………… abundant country.
(a) labour
(b) money
(c) material
Answer:
(a) labour

Question 3.
…………….. cost of power acquisition, frequent power cuts, irregular supply of power affect the productivity of SSI.
(a) Higher
(b) Lower
(c) Average
Answer:
(a) Higher

Question 4.
Before setting up business, it is essential to study prevailing ………………. environment.
(a) business
(b) natural
(c) political
Answer:
(a) business

Question 5.
Small Scale Business are ………………… intensive.
(a) money
(b) power
(c) labour
Answer:
(c) labour

Question 6.
Occurring obscured idea in mind of entrepreneur is ……………….. stage of establishing business.
(a) first
(b) second
(c) third
Answer:
(a) first

Question 7.
Small scale industries contribute nearly ……………….. to the industrial exports of the country.
(a) 40%
(b) 60%
(c) 20%
Answer:
(a) 40%

1. (B) Match the pairs

Group A	Group B
(a) Micro Manufacturing Sector	(1) Handloom
(b) Traditional Small Scale business	(2) Unskilled
(c) Registration	(3) Does not exceed Rs. 25 lakhs
(d) Labour	(4) 40% of exports of India
(e) Bicycle Parts	(5) Does not exceed Rs. 1 lakhs
	(6) DIC
	(7) Marketing Problem
	(8) Modern Small Scale business
	(9) Project Appraisal
	(10) Cost-efficiency

Answer:

Group A	Group B
(a) Micro Manufacturing Sector	(3) Does not exceed Rs. 25 lakhs
(b) Traditional Small Scale business	(1) Handloom
(c) Registration	(6) DIC
(d) Labour	(2) Unskilled
(e) Bicycle Parts	(8) Modern Small Scale business

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

Question 1.
A sector which is back bone of rural India.
Answer:
Small Scale Sector

Question 2.
An industry using power with less than 50 employees.
Answer:
Small Scale Industry

1. (D) State True or False

Question 1.
Small Scale industries should be developed in order to maintain, economic balance in a country.
Answer:
True

Question 2.
Majority Small Scale Industry uses advanced technology.
Answer:
False

Question 3.
Small business easily get access to low interest rates.
Answer:
False

Question 4.
Small business cannot survive in the competition.
Answer:
True

1. (E) Find the odd one

Question 1.
Coir, Handicraft, Spare Parts, Hand-loom
Answer:
Spare Parts

Question 2.
Bicycle Parts, Sericulture, Electronic Appliances, Sewing Machine
Answer:
Sericulture

1. (F) Complete the sentences

Question 1.
…………….. industries plays an important role in developing countries.
Answer:
Small Scale

Question 2.
SSI is …………….. largest industry which creates huge employment opportunities.
Answer:
second

Question 3.
SSI enjoys the advantage of ……………… cost of the produce.
Answer:
low

Question 4.
SSI are ……………… intensive.
Answer:
labour

Question 5.
SSI requires ………………….. capital as compared to large scale industries.
Answer:
less

Question 6.
SSI produces consumer goods as well as …………………. components.
Answer:
industrial

1. (G) Select the correct option

(Small Manufacturing Sector, Micro Manufacturing Sector, Micro Services Sector, Medium Manufacturing Sector, Small Services Sector)

Group A	Group B
(1) More than Rs 25 lakhs but does not exceed Rs 5 Crores	—————-
(2) —————-	Does not exceed Rs 25 lakhs
(3) More than Rs 5 crores but does not exceed Rs 10 crores	—————
(4) —————-	Does not exceed Rs 10 lakhs
(5) More than Rs 10 lakhs but does not exceed Rs 2 crores	—————-

Answer:

Group A	Group B
(1) More than Rs 25 lakhs but does not exceed Rs 5 Crores	Small Manufacturing sector
(2) Micro Manufacturing sector	Does not exceed Rs 25 lakhs
(3) More than Rs 5 crores but does not exceed Rs 10 crores	Medium Manufacturing sector
(4) Micro Services Sector	Does not exceed Rs 10 lakhs
(5) More than Rs 10 lakhs but does not exceed Rs 2 crores	Small Services Sector

1. (H) Answer in one sentences

Question 1.
What is SSI?
Answer:
Traditionally the industries in India which are organised on a Small Scale and produces goods with the help of machines, labour and power are considered as Small Scale Industries.

Question 2.
State the example of Traditional Small Scale Industry.
Answer:
Hand-loom, Handicraft, Coir, Sericulture, Khadi and Village Industries are the examples of Traditional Small Scale Industries.

Question 3.
Give examples of Modern Small Scale Industry.
Answer:
Bicycle Parts, Sewing Machines, Blades, Razors, Electric Appliances, Spare Parts are examples of Modern Small Scale Industries.

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

Question 1.
The problem of employment has been becoming more serious in India.
Answer:
The problem of unemployment has been becoming more serious in India.

Question 2.
India is material abundant country.
Answer:
India is labour abundant country.

Question 3.
Small scale Industry uses advanced technology.
Answer:
Small scale Industry uses outdated technology.

Question 4.
SSI begin with large amount of capital.
Answer:
SSI begin with small amount of capital.

Question 5.
Business proposal is the first step in setting up of a small scale business.
Answer:
Decision of Business area is the first step in setting up of a small scale business.

1. (J) Arrange in proper order.

(a) Selection of a place
(b) Selection of a product
(c) Business proposal
(d) Selection of technology
Answer:
(a) Selection of a product
(b) Selection of a place
(c) Selection of technology
(d) Business proposal

2. Explain the following terms/concepts.

Question 1.
Small Scale Industry.
Answer:
Any Industrial Unit is regarded as Small Scale Industry, if the following condition is satisfied.
“Investment in fixed assets like plant and equipment either held on ownership terms or on lease or hire purchase should not be more than Rupees one crore. However, the unit in no way can be owned or controlled or auxiliary for any other industrial unit.”

Question 2.
Service Sector.
Answer:
According to MSMED on the basis of investment Micro Service Sector ‘does not exceed Rs 10 lakhs’, Small Service Sector, ‘more than 10 lakhs but does not exceed 2 crores’ and Medium Service Sector ‘more than Rs 2 crores but does not exceed Rs 5 crores’.

Question 3.
Micro Small Scale Business.
Answer:
Micro small scale business is classified as Manufacturing sector and Services Sector. According to MSMED, Micro Manufacturing sector does not exceed Rs 25 lakhs and Micro Services sector does not exceed Rs 10 lakhs.

Question 4.
Traditional Industrial Sector.
Answer:
Small Scale Industries are further classified as Traditional Small Scale Industries and Modern Small Scale Industries. Handloom, Handicraft, Coir, Sericulture, Khadi and Village Industries are the examples of traditional SSI Industries.

Question 5.
Modern Industrial Sector.
Answer:
Small Scale Industries are further classified as Traditional Small Scale Industries and Modern Small Scale Industries. Bicycle Parts, Sewing Machines, Blades, Razors, Electric Appliances, Spare Parts are the examples of Modern Small Scale Industries.

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

1. Mr. Ram wants to start Small Scale business of manufacturing parts of bicycle or machinery.

Question 1.
Identify the first step or stage of setting up his Small Scale business.
Answer:
Ram has to first decide whether the setup will be corporation, proprietorship or partnership. He has to identify his strength and weaknesses which can help him to decide what type of business would be most suitable. He has to study the amount of capital requirement needed to start his business. Once he gets the idea of total capital requirement he can decide what type of business to start.

Question 2.
State the different ways of raising the capital for his business.
Answer:
If Ram decides to start as proprietorship than he has to raise all the capital by himself. He can get it from his own savings or borrow money form bank, financial institutions. He can also study the different government schemes and raise capital through those schemes.

If Ram decides to start partnership firm than he will have to find a person who is ready to invest in his partnership firm as well as he has knowledge about manufacturing parts of bicycle. They can raise capital by investing their savings, borrowing through financial institutions and friends. They can also take help from various government schemes and institutions set-up to help SSI.

If Ram decides to start corporation i.e. Pvt. Ltd. Company than he can raise capital by issuing equity shares privately. He has to sell the shares to his friends and relatives. He can also study of various government schemes and raise capital through those schemes. Ram can also borrow money from bank, financial institutes, etc. He can also accept deposits from public in the further stage of his business.

Question 3.
‘Marketing is a necessary step of running a business.’ Comment on it.
Answer:
Goods are ultimately manufactured for consumers. There is competition among many manufacturers and traders to sale goods in the market.
Without selling the goods, manufacturer cannot earn profit. Profit is main motto of business.

To sale goods in market, advertising and publicity is required. To make your brand image in market, advertising with quality of goods is required. Branded goods are easily sold in the market. Marketing can be done through many ways like TV, Radio, Bill Boards, Internet, Websites, Salesman, etc.
Thus, marketing is a necessary step of running a business.

4. Answer in brief.

Question 1.
State any four points of importance of Small Scale Industry/Business.
Answer:
Importance of Small Scale Industry:
Job Opportunities
Regional Balance
Maximum use of Natural Resources
Reduces Migration

1. Job Opportunities : SSI is second largest industry which creates huge employment opportunities, because it can be operated with minimum amount of capital. SSI can be run with basic and potential skills. This is a boost for a labour surplus country like India.

2. Regional Balance : In India, all regions are not developed due to lack of industrialization. SSI can be setup with minimum amount of capital. Small industries manufactures product using simple technologies, local available resources, material and labour. Thus, they contribute significantly to the balanced development of the country.

3. Maximum use of Natural Resources : Small scale industries are labour intensive. They utilize available natural resources and raw materials from local areas. Such use of local natural resources minimizes the cost of production which result into reasonable price of goods.

4. Reduces Migration : Small Scale industries can create a large number of employment in rural area. SSI is also a best example of self-employment. Therefore, migration of people from rural to urban can be reduced or minimized.

Question 2.
Write any four advantages of Small Scale Industry.
Answer:
Advantages of Small Scale Industries:
1. Large Employment
2. Less Capital Requirement
3. Contribution to Export
4. Opportunities for Entrepreneurship

1. Large Employment: Small Scale Industries has huge potential to create employment opportunities. They are labour intensive and use more labour than other factors of production. Their gestation period is also low and can provide employment opportunities to large number of people.

2. Less Capital Requirement : SSI requires less capital as compared to large scale industries. SSI can be started by small entrepreneurs with limited capital resources.

3. Contribution to Export : Nearly 40% of the industrial exports are contributed by SSI. Product such as hosiery, knitwear, gems and jewellery, handicraft, coir products, woolen garments, processed food, chemical and allied products and a large number of engineering goods contribute substantially to India’s exports. Products produced by SSI are used in the manufacturing of products by large scale industries which are exported. It contributes directly and indirectly to exports and helps to earn valuable foreign exchange.

4. Opportunities for Entrepreneurship : Small Scale Industries provide opportunities for entrepreneurs with limited capital as it requires less capital and lower investment in technology and machines as compared to large scale enterprises. Therefore, small entrepreneurs can start small scale industries easily.

Question 3.
State any four challenges before Small Scale Industries.
Answer:
Challenges before Small scale industries:

Inadequate Finance
Problem of Raw Material
Labour Problem
Marketing Problem

1. Inadequate Finance : SSI generally begins with a small amount of capital. Many of the units in the small sector raise funds from capital market. These units frequently suffer from lack of adequate working capital.

2. Problem of Raw Material : Another major problem of Small Scale Industries is inadequate supply of raw materials. Due to that SSI have to compromise on the quantity and quality of raw material, or pay more, price for good quality of raw material.

3. Labour Problem : Small industries generally appoint unskilled and semi skilled worker on daily wages, This creates the problem of low labour productivity, higher absenteeism and poor job commitment. The wages are low due to financial limitations. This leads to labour dissatisfaction and increase the problem of labour turnover. Improper shifts and lack of job security makes employment in small industries unattractive and the talented work force does not opt for such job.

4. Marketing Problem : Marketing is a weaker part of small industries. SSI have to depend excessively on middlemen who at times exploit them by paying low prices and delayed payments. Further, direct marketing may not be feasible for small business firms as they lack the necessary infrastructure.

5. Justify the following statements.

Question 1.
Generally Small Scale Industries are sick.
Answer:

There are many problems faced by Small Scale Industries. These problems may be internal problems or external problems.
Internal Problems are like unskilled labour or untrained labour, lack of managerial skills and marketing skills, lack of modernisation, etc.
External problems like shortage of working capital, inadequate loans, delayed payments, shortage of raw material, etc.
According to RBI a sick unit is that which has incurred a cash loss for one year, is likely to continue it for current year as well as following year.
Thus, mainly due to financial problem, industrial units are unable to sustain themselves and are called as sick units.

Question 2.
Small Scale Industry require less amount of capital.
Answer:

The production of Small Scale Industries is less.
General unskilled labours are employed.
As production is less raw material requirement is also less.
In a place like India, where capital formation is low, small business is suitable.
Due to small in size, such form of business can easily adapt to changing atmosphere. This promotes flexibility. It can easily change their working style without much loss as compared to large businesses.
Thus, SSI requires less amount of capital.

Question 3.
Small Scale Industries have problems.
Answer:
Small scale industries have to face many problems:

Lack of Adequate Finance : Due to small scale of production and sale, Banks and Financial Institutions are afraid to give loans.
Problem of Raw material : Due to inadequate finance they cannot purchase raw material at a time. Thus, the cost of raw material increases.
Labour Problem : Due to inadequate finance, they cannot employ skilled labour which affects the production.
Marketing Problem: The goods manufactured if not marketed properly can be risky as it will affect the sales,
Problem of Transport: Transportation cost increases the cost of the product which hampers the sale as large scale industries cost may be less.
Sickness : Due to financial problem industrial units are unable to sustain themselves and finally turn to sick units.
Thus, Small Scale Industries have problems

6. Attempt the following.

Question 1.
Explain the meaning of Small Scale Industries.
Answer:
Small Scale Industries are those industries where fixed assets i.e. plant and machinery which is owned or hired or taken on lease basis, does not exceed more than one crore.

MSMED has classified Small Scale Industries into Manufacturing sector and Services sector, and further into three categories of business i.e. Micro business, Small business and Medium business.
Subsequently over a period of time, a new definition was introduced by MSMED Act, 2006 (Micro Small and Medium Enterprises Development) is as follows
(A) Manufacturing Enterprises:

A micro enterprise, where the investment in plant and machinery is less than Rs 25 lakh.
A small enterprise, where the investment is more than Rs 25 lakh but less than Rs 5 crore.
A medium enterprise, where the investment in plant and machinery is more than Rs 5 crore but less than Rs 10 crore.

(B) Service Enterprises:

A micro enterprise, where the investment in equipment is less than Rs 10 lakh.
A small enterprise, where the investment in equipment is more than Rs 10 lakh but less than Rs 2 crores.
A mediuiri enterprise where the investment in equipment is more than Rs 2 crore but less than Rs 5 crores.
An industrial unit can be categorised as small business if it fulfills the above capital investment criteria.

Question 2.
State importance of small business.
Answer:
Following are the importance of Small Business:
(i) Supply of Raw Materials to Large Industries : Finished goods of Small Scale Industries is raw material – for large scale industries. E.g., head lights supplied to automobile industries. Small Scale Industries supply raw materials to large scale industries and they get easy market available to their product.

(ii) Balanced Development between Rural and Urban Areas : With the help of locally available raw materials and labour, more and more Small Scale Business can be started in rural areas. This helps to reduced regional imbalance between urban and rural areas.

(iii) Opportunities to Young Generation : Young generations by using their creative skills make product unique in the market. Small scale business gives an opportunity to youngster to show their creativity and abilities to prove themselves and achieve success in development.

(iv) Large Employment : India is second largest populated country after China, which faced problem of unskilled and semi skilled labour. Small Scale Industries operate with more labour and less capital, which can accommodate more man power to solve employment problem.

(v) Utilisation of Domestic Resources : Small farmers can start their own unit of small industry by using locally available raw materials. He can get self employment and involve his family members too.

Question 3.
Explain in brief the impact of capital, on Small Scale industries.
Answer:
Major problem faced by small scale industries is insufficient capital, which creates following difficulties with them.
(i) Borrowings of Capital from Landlords and Money Lenders : Nationalised and Co-operative banks are not ready to finance Small Scale Industries without security. Thus, they are forced to borrow from money lenders, where they have to pay very high rate of interest.

(ii) Storage of Raw material: Small Scale Industries are agro based. Raw material is available seasonally. To stock goods they required huge finance. Due to lack of finance, they run industry only in seasons.

(iii) Lack of Skilled Labour : Only unskilled and semi skilled labourer are available. Small Scale Industries cannot afford labour cost of skilled labourer which affect quality and quantity of production and profitability.

(iv) Outdated technology : Due to insufficient capital, production methods used by SSI are old, which results in poor quality and quantity of output.

(v) Weaker Marketing Skill : In todays world marketing plays an important role. Rural area is facing marketing problem due to lack of facilities and knowledge and they are exploited by middlemen too.

Question 4.
State the problem faced by Small Scale industries.
OR
Explain in detail the challenges faced by Small Scale Industries.
Answer:
Problems faced by Small Scale Industries:
(i) Outdated Technology : Traditional methods of productions are used due to lack of finance and knowledge about latest technology. This results in poor quality of production with low output.

(ii) Problems of Infrastructure: Problems of infrastructure faced by small business are power cuts, improper transport facility, problem like congestions, bottlenecks, strikes, rise in freight charges, inadequate space, bad repair of premises, unsuitable location, high rent, etc. These problems definitely affects smooth working of small business.

(iii) Underutilization of Capacity : Small Scale Industries cannot utilize optimum resources and capacity due to lack of marketing skills, lack of demand, etc. This lead to increase the cost of product and wastage of resources.

(iv) Lack of Capital: Nationalised and Co-operative banks are not ready to provide finance without securities. Owners of Small Scale Industries don’t have any option other than borrowings funds from landlords and money lenders where they have to pay very high rate of interest.

(v) Problem of Skilled Labourers : Mostly unskilled and semi skilled labourers are available to Small Scale Industries as they cannot afford the wages to highly skilled labourer. This affect quality and quantity of output which result in less price for sales.

Question 5.
Explain the role of Small Scale Industries in employment generation.
Answer:
Small Scale Industries play very important role in generation of employment as follows:

Small Scale Industries are Labour Intensive : There is shortage of capital with small scale industries. They are labour intensive. They use more man power than machines, they creates more opportunities for rural employment.
Employment to Unskilled and Semiskilled Labourer : Small Scale Industries are using old and traditional method of production where they need unskilled and semi-skilled labourer.
Employment of Rural Land Less Labourer : Small Scale Industries are set-up in rural areas. They provide employment to local labourers. They have potential to create opportunities to large scale employment to mass population in villages.
Decrease in Migration of Labourers : Migration means movement of labourers from village to city in search of job. Due to increase in small scale industries in village areas migration of labour is reduced. Labourers are getting good employment at their own villages.

7. Answer the following

Question 1.
Explain the challenges before Small business.
Answer:
Small scale business are playing very important role in development of developing countries. They faced following challenges / difficulties:
(i) Problems of Marketing : Small business organizations depend excessively on middlemen who many times exploit them by paying low price and delayed payment. Further direct marketing may not be possible for them as they lack necessary infrastructure. Major marketing problem are lack of advertising, non-branding of products, poor quality, transportation problem, local difficulties, competition, etc.

(ii) Infrastructural Problem : Problems of infrastructure faced by small business are power cuts, improper transport facility, problem like traffic congestions, bottlenecks, strikes, rise in freight charges, inadequate space, bad repair of premises, unsuitable location, high rent, etc. These problems definitely affects smooth working of small business.

(iii) Credit and Finance : Lack of finance is the major problem faced by small business. Artisans or Craftsmen running cottage industry take credits from mahajans or traders who charge large amount of interest from them. For small scale industries, institutional source of finance (e.g. banks) is also available, but the funds allocated to this sector are inadequate.

(iv) Delayed Payment: They face problem of delayed payment by large firms and Government departments.

(v) Sickness Problem: According to RBI a sick unit is that which has incurred a cash loss for one year, is likely to continue it for current year as well as following years and unit has an imbalance in financial structure. Sickness is generally seen in small business industries like cotton, jute, sugar, textile, etc. Internal causes of sickness are lack of skill labour, faulty planning, problem of recovery, etc. External causes of sickness are shortage of capital, inadequate loans, shortage of raw material, etc. However, rehabilitation of sick unit is a costly affair.

(vi) Personal Problems : Personal problems like spending long hours to work and less time with family and the rewards have not been favourable.

(vii) Shortage of Raw Material : Shortage of raw material often take place due to reasons like natural calamities, transport problem, industrial strikes, poor quality of raw material, exploitation done by traders, etc. Traders or agents who supply raw material often exploit the owner by charging higher prices. They also insist on buying finished products at lower rate. Thus, small business owners are subject to double exploitation.

(viii) Outdated Technology : Use of low-grade technical know-how and skills have resulted in low productivity in small business industries. Many units in small business make use of primitive methods of production, this leads to increase in cost of production, whereas productivity is low. Small units often do not care about the changing tastes and fashions of customers.

(ix) Underutilization of Capacity : Small business units cannot utilize optimum resources and capacity due to lack of marketing skills, lack of demand, they work below full capacity, etc. This lead to increase the cost and wastage of resources.

(x) Labour Problem : It includes highly demanding employees, absenteeism, lack of skilled workers and transportation of workers, strikes, high wage rates, inefficiency, etc.

Question 2.
Write down the benefits or advantages of small business.
Answer:
Small scale business plays very important role in the economic development of the country.
The following are the benefits or advantages of small business:
(i) Cost Savings : Small scale business used micro production method which results into quality product at low cost of production. Production cost of small business is much more less compared to large scale industries due to low cost of operation.

(ii) Adaptability : Small scale business can change themselves as per the market requirement. They can change product, line of product as per market changes, like fashions, new product, demand, etc.

(iii) Limited Capital : As small business is labour intensive they requires very small amount of capital for plant and equipments.

(iv) Low Gestation Period : To start a new business requires very short period as compared to large scale industries. Small scale business can start production of good in very short period of time and can increase the scale of production.

Labour Intensive : Small business units use less machines and more labours. Absorption of local labour helps to solve problem of absolute poverty and control inequality of income.

(vi) Opportunities to Rural Youth : New generation youth has smart creativity. With available technology and raw materials, rural youth can start their own business unit. Small business unit plays very important role in developing countries.

(vii) Upliftment of Economy : Majority of small scale business used traditional method of productions. Rural craftsman and artisans do have their own talents and skills which they have learnt from their forefathers. Such products are very much demanded in market which results in high income.

(viii) Decentralised Economy : Small scale business prevents concentration of economic power in the few hands. Income is divided equally among large number of people.

(ix) Export Earning : Small business contributes remarkable to country’s export. 40% of India’s exports are contributed by small business like textiles, handicraft, handloom, embroidery, etc.

(x) Regional Balance : There is wide gap between urban and rural India. Small scale business helps to reduce gap between developed and underdeveloped or developing areas.

Question 3.
Explain the process of establishment of Small Scale Industries.
Answer:
In todays world, youth are more attracted towards business opportunities rather than employment.
To start a small scale industries following stages to be followed:
(i) Idea to Setup a Business : This is a first step to start a small scale industry. The prospective entrepreneur with his own capacity decide the sized and type of business like sole proprietorship, partnership or corporation.

(ii) Analysis of Business Surrounding : It is necessary to understand different business surrounding and policies before starting any business. They are competitors, legal, economical, industrial, technological, etc.

(iii) Choice of Product : Entrepreneurs has to decide his sector of production i.e. Manufacturing or Service sector. After doing market survey and understanding advantages and disadvantages one should decide line of product or services.

(iv) Location for Business : Entrepreneur has to select location to start business. It plays very important role in success of business while selecting location many factors are to be taken into consideration like availability of labour, raw materials, power supply, transportation, etc.

(v) Technology Selection : An entrepreneur has to select available and suitable technology for his business. He should select technology he is familiar to use.

(vi) Project Appraisal : It means the study and assessment of a project. One should study the project very carefully from the point of view regards to economy, finance, marketing and profitability.

(vii) Capital Requirement : The entrepreneur has to plan for capital requirement and sources available for capital. It can be self finance, loan from relatives or banks.

(viii) Incorporation / Registration : It is compulsory for every small scale industry to registered with the respective Government Authorities. A printed application form is available with District Industries Centre (DIC). Entrepreneur has to duly filled the information with his signature in the form and submit to DIC.

(ix) Implementation of Resources : After registration of business entrepreneur has to start with production process:

Financial Resources : The entrepreneur has to collect finance and make necessary arrangement for capital.
Factor Set up : The entrepreneurs has to allocate space for various operations, purchase of machinery and tools and installation of it.
Electric power and water supply : The entrepreneur has to calculate total electric power requirement in KW (Kilowatt) and get connection from the authority and supply for water connection.
Appointment of staff : Small scale industries are labour, intensive. One has to appoint unskilled and semi-skilled staff as per requirement to start production.

(x) Manufacturing and Selling of Product : After assembling all financial and physical resources goods are manufactured and send to market for sale. Advertising and publicity plays very important role in marketing and selling of product.

(xi) Customer’s Feedback : Customer satisfaction is very important in business. Regular feedback from customers is helping to make qualitative changes in product.

Question 4.
Explain the importance of small business.
Answer:
Following are the importance of Small Business:
(i) Supply of Raw Materials to Large Industries : Finished goods of Small Scale Industries is raw material – for large scale industries. E.g., head lights supplied to automobile industries. Small Scale Industries supply raw materials to large scale industries and they get easy market available to their product.

Question 5.
It is clear that the absence of capital and raw material is the main reason for the short term sickness. Explain it.
Answer:
Industrial sickness means the industry which has financial losses over period of time. Short term sickness is a temporary phenomenon.
Followings are the main capital and raw material reasons for short term sickness:
Financial / Capital:
(i) Non availability of Finance from Banks : Nationalised and Co-operative banks are not ready to finance SSI as there is less possibility of recovery of loans. Banks demand securities against loans, which is difficult to arrange for the small businessman.

(ii) Loans from Money lenders : As bank finance is difficult to raise, small businessman borrow capital from money lenders who charged very high rate of interest.

(iii) Shortage of Working Capital : Majority of small scale industries are depend on local source of raw material which is seasonal. They have to buy large quantity of raw materials to be used through out the years which needs large finance.

(iv) Unawareness of various Government Schemes : Due to lack of awareness among the owners of SSI about various Government Scheme for capital marketing, subsidies, etc. suffer capital problems.

Raw Material:
(i) Local source of raw material : Majority of small scale industries are depends on local supply of raw materials. Local suppliers of raw materials make artificial scarcity for supply of raw materials which make increase in product cost for the businessman.

(ii) Seasonal supply of raw materials : Small scale industries are using local supply of raw materials. The supply of raw material is seasonal. They don’t have huge capital to stock large quantity of raw materials due to this they have to stop production of goods after season ends and face problem of short term sickness.

(iii) Shortage of raw material : There may be short supply of raw materials due to natural calamities, transport strike, etc. affect the running of small scale industries.

(iv) Poor quality of raw material : There is no grading or standardizing of raw materials supply to small scale industry. This affect product quality and quantity.

Maharashtra Board Class 11 Secretarial Practice Solutions Chapter 2 Joint Stock Company

July 4, 2024July 3, 2024 by Bhagya

Balbharti Maharashtra State Board Class 11 Secretarial Practice Solutions Chapter 2 Joint Stock Company Textbook Exercise Questions and Answers.

Maharashtra State Board Class 11 Secretarial Practice Solutions Chapter 2 Joint Stock Company

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

Question 1.
A sole proprietorship has ______________ owner/owners.
(a) one
(b) two
(c) five
Answer:
(a) one

Question 2.
The head of Joint Hindu Family Business is called as ______________
(a) Proprietor
(b) Director
(c) Karta
Answer:
(c) Karta

Question 3.
Indian Partnership Act was passed in the year ______________
(a) 1923
(b) 1932
(c) 1956
Answer:
(b) 1932

Question 4.
The members of Hindu Undivided Family Business are called ______________
(a) Karta
(b) partners
(c) co-parceners
Answer:
(c) co-parceners

Question 5.
The liability of shareholders in the public limited joint stock company is ______________
(a) Limited
(b) Unlimited
(c) Collective
Answer:
(a) Limited

Question 6.
The minimum number of members required for a co-operative society is ______________
(a) 10
(b) 20
(c) 50
Answer:
(a) 10

Question 7.
The ______________ is/are elected representative of shareholders who manage affairs of company.
(a) Secretary
(b) Directors
(c) Auditors
Answer:
(b) Directors

Question 8.
State Bank of India is the example of ______________ Company.
(a) Chartered
(b) Statutory
(c) Foreign
Answer:
(b) Statutory

1B. Match the pairs.

Question 1.

Group ‘A’	Group ‘B’
(a) Sole Trading concern	(1) 1932
(b) Joint Hindu Family Business	(2) Partner
(c) Partnership Act	(3) Artificial person
(d) Joint Stock Company	(4) 1923
(e) Co-operative Society	(5) Karta
	(6) Natural person
	(7) Single Ownership
	(8) Equal voting rights
	(9) Multiple ownership
	(10) Minimum 9 members

Answer:

Group ‘A’	Group ‘B’
(a) Sole Trading concern	(7) Single Ownership
(b) Joint Hindu Family Business	(5) Karta
(c) Partnership Act	(1) 1932
(d) Joint Stock Company	(3) Artificial person
(e) Co-operative Society	(8) Equal voting rights

Question 2.

Group ‘A’	Group ‘B’
(a) Private company	(1) 51% share capital held by Government
(b) Public company	(2) Bank of England
(c) Government company	(3) Maximum 200 members
(d) Statutory Company	(4) Minimum 7 members
(e) Limited Liability Partnership	(5) Maximum 100 members
	(6) Minimum 5 partners
	(7) 40% share capital
	(8) Minimum 5 members
	(9) Life Insurance Corporation
	(10) Minimum 2 partners

Answer:

Group ‘A’	Group ‘B’
(a) Private company	(3) Maximum 200 members
(b) Public company	(4) Minimum 7 members
(c) Government company	(1) 51% share capital held by Government
(d) Statutory Company	(9) Life Insurance Corporation
(e) Limited Liability Partnership	(10) Minimum 2 partners

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

Question 1.
The owner is the sole manager and decision-maker of his business.
Answer:
Sole Trader

Question 2.
The senior-most family member of Joint Hindu Family Business.
Answer:
Karta

Question 3.
The members of Joint Hindu Family Business.
Answer:
Co-parceners

Question 4.
An artificial person created by law.
Answer:
Joint Stock company

Question 5.
The persons who have entered into an agreement of partnership.
Answer:
Partners

Question 6.
A person who purchases shares of a Joint Stock Company.
Answer:
Shareholder

Question 7.
The official signature of Joint Stock Company.
Answer:
Common seal

Question 8.
Name a company that is created by special legislation of parliament or state assembly.
Answer:
Statutory company

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

Question 1.
A Joint Stock company is a voluntary association of persons.
Answer:
True

Question 2.
A Joint Stock company is a formal form of business organization.
Answer:
True

Question 3.
Registration of a Joint Stock company is compulsory.
Answer:
True

Question 4.
A Joint Stock company is a natural person.
Answer:
False

Question 5.
A Joint Stock company does not enjoy independent legal status.
Answer:
False

Question 6.
The liability of shareholders of a public limited company is limited.
Answer:
True

Question 7.
A Joint Stock company has a long and stable life.
Answer:
True

Question 8.
There is no separation of ownership and management in a Joint Stock company.
Answer:
False

Question 9.
Board of Directors manages the Company.
Answer:
True

1E. Complete the sentences.

Question 1.
A company is a creation of law, hence it is called as ______________
Answer:
Legal Person or Artificial Person

Question 2.
A company which is incorporated under a Special Act is called as ______________
Answer:
Statutory Company

Question 3.
A company which has only one member is called as ______________
Answer:
One Person Company

Question 4.
A listed company must follow the provisions of Companies Act and ______________
Answer:
SEBI Guidelines

1F. Select the correct option from the bracket.

Question 1.

Group ‘A’	Group ‘B’
(1) Private company	……………………
(2) Public company	……………………
(3) ……………………..	Member has unlimited liability
(4) Incorporated Outside India	……………………..
(5) ……………………..	service-oriented organization

(Foreign Company, Minimum 7 members, Maximum 200 members, Co-operative society, Unlimited Liability Company)
Answer:

Group ‘A’	Group ‘B’
(1) Private company	Maximum 200 members
(2) Public company	Minimum 7 members
(3) Unlimited Liability Company	Member has unlimited liability
(4) Incorporated Outside India	Foreign Company
(5) Co-operative society	service-oriented organization

1G. Answer in one sentence.

Question 1.
How many member/s can be there in a One Person company?
Answer:
There can be only one member in a Person Company.

Question 2.
What is a Holding company?
Answer:
A company that holds more than one-half of the total share capital of another company or carries the power to appoint or remove all or majority of directors of another company is called a Holding Company.

Question 3.
What is meant by a Foreign company?
Answer:
A company incorporated outside India, but conducting business in India, called a foreign company.

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

Question 1.
Statutory companies are registered under the Companies Act.
Answer:
Statutory companies are registered under Special Act passed by Central or State legislative.

Question 2.
A Subsidiary company holds more than half of the total share capital of another company.
Answer:
A Holding company holds more than half of the total share capital of another company.

Question 3.
A private company must have a minimum of 7 Members.
Answer:
A private company must have a minimum of 2 members.

Question 4.
A public company can have a maximum of 200 members.
Answer:
A private company can have a maximum of 200 members.

2. Explain the following terms/concepts.

Question 1.
Dormant company
Answer:

It is registered for future projects.
It has not made any accounting transactions in the last two years.
It has not submitted a financial statement or annual report in the last two years.
Section 455 of Companies Act, 2013 is applicable to a Dormant Company.

Question 2.
Holding company
Answer:

A company holds more than half of the share capital of another company.
Such a company may have the power to appoint a director of another company.
It has the power to remove directors of another company.

Question 3.
Foreign company
Answer:

A company that is incorporated/registered outside India.
It may conduct business in India.
Bata India Limited, Nestle India Limited, Whirlpool Corporation, etc. are examples of foreign companies.

Question 4.
Company limited by guarantee
Answer:

Such a company is formed under Section 2(21).
This company may or may not have share capital.
Member promises to pay a fixed amount at the time of liquidation.
This fixed amount is mentioned in the Memorandum of Association.
This amount is used to pay debts and liabilities.

Question 5.
Associate company
Answer:

The firm over which another firm exercises control, which is less than the degree of control exercised over a subsidiary company.
A company in which another company has a significant influence.
It means control of at least 20% of total capital or of decisions under an agreement.

Question 6.
Limited Liability
Answer:

The liability of shareholders is limited in Joint Stock Company.
Personal property cannot be used to pay the debts of the company.
Liability is limited to the unpaid part of the face value of shares held by a shareholder.
Shareholders are not liable to pay debts and liability of the company.

Question 7.
Perpetual Succession
Answer:

It means continuous existence.
Joint Stock Company has perpetual succession.
The life/existence of the company is not affected by the death, insolvency, or retirement of any member or director.
The company enjoys long and stable life.

Question 8.
Listed company
Answer:

It means a company that has any of its securities listed on any recognized stock exchange.
A public company may be a listed or unlisted company.
The listed company needs to follow the guidelines of SEBI.
They have to follow the Companies Act.

Question 9.
One Person company
Answer:

In this company, only one person is a member.
It should follow all rules and formalities of a private company.
It is conducted by one promoter with limited liability.
Such a business organization is better as compared to a sole trader.

Question 10.
Government company
Answer:

More than 51% of paid-up share capital is held by the Government.
The government may be Central or State Government or partly Central Government and partly one or more State Government.
It may be a subsidiary company of a Government company.
It may be a Private company or a Public company.

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

1. Two promoters got ‘Super Drinks Pvt. Ltd.’ incorporated on 18th January 2018. The company has 100 members as of 31st March 2019.

Question (a).
What is the maximum number of members this company can have?
Answer:
The maximum number of members for this company is 200 because this is a private company.

Question (b).
Can this company invite the general public to subscribe for shares?
Answer:
This company cannot invite the general public to subscribe for shares.

Question (c).
Can the shareholders of the company sell its shares to outsiders?
Answer:
Being a private company, there are restrictions to shareholders to sell these to outsiders.

2. Kali VFX Ltd. was incorporated on 1st January 2019 as a public limited company.

Question (a).
How many minimum numbers of members must be there in this company?
Answer:
A minimum number of members must be 7 in this company because it is a Public company.

Question (b).
Can the members of this company sell their shares to outsiders?
Answer:
Being a Public company member can sell its shares to outsiders. There is no restriction on the transferability of shares.

Question (c).
How many maximum numbers of members can this company have?
Answer:
In a public company, there is no limit for the number of maximum members as it is a Public company.

3. Sunset Printers Pvt. Ltd. was incorporated on 5th December 2015 as per the provisions of the Companies Act, 2013. Mr. Manoj was the only subscriber to the Memorandum and Articles of Association and he was also the only member of the company.

Question (a).
Is this company a One Person company?
Answer:
Yes, this is a One Person company, because only one/single person is a member of this company.

Question (b).
Will the liability of Mr. Manoj be limited or unlimited?
Answer:
The liability of Mr. Manoj is limited.

Question (c).
Will the company close down on the death, insanity, or insolvency of Mr. Manoj?
Answer:
No, Company will not close down on the death, insanity, or insolvency of Mr. Manoj.

4. On 1st January 2018 Mr. John bought 100 shares of TIPS Paints Ltd. The face value of each share was ₹ 10. Mr. John paid the full amount of ₹ 1,000. In December 2018 the company suffered a loss of ₹ 10 crores.

Question (a).
Can the company ask Mr. John to pay any further money to the company?
Answer:
No, Company cannot ask Mr. John for further payment, because, he has already paid the full amount of face value.

Question (b).
Which feature of a Joint Stock company is referred to in this example?
Answer:
‘Limited Liability is a feature, which is referred to in this example.

Question (c).
Explain the feature briefly.
Answer:
As per ‘Limited liability’ member of the company is not liable to debts of the company. Member is liable only up to the unpaid amount of share capital. Members’ personal property will not be used for the liability of a company.

4. Distinguish between the following.

Question 1.
Sole Trading Concern and Joint Hindu Family Business.
Answer:

Basis	Sole Trading Concern (STC)	Joint Hindu Family Business (JHFB)
1. Meaning	It is a business organization owned, financed, and managed by a single person.	It is a business organization owned and managed by members of the Joint Hindu Family.
2. Number of members	Only one or single person.	There is no limit on the minimum and maximum number of members.
3. Liability	Liability is unlimited.	Karta has unlimited liability while co-parceners have limited liability.
4. Secrecy	It ensures maximum business secrecy.	It maintains more business secrecy.
5. Management	A sole trader is responsible for the management of the business.	Karta is responsible for the management of the business.

Question 2.
Sole Trading Concern and Partnership Firm
Answer:

Basis	Sole Trading Concern (STC)	Partnership Firm (PF)
1. Meaning	It is a business organization owned, financed, and managed by a single person.	It is a business organization owned, financed, and managed by two or more persons collectively.
2. Number of members	Only one or single person is required to form Sole Trading Concern.	Minimum 2 and maximum 50 members are required for general business.
3. Registration	Registration is not necessary.	Registration is not necessary. But it is compulsory in Maharashtra.
4. Liability	The liability of a sole trader is unlimited.	Partners carry unlimited liability and joint and several.
5. Capital	Comparatively, it requires limited capital.	Compared to Sole Trading concern and Joint Hindu Family business it requires more capital.
6. Secrecy	It ensures maximum secrecy.	Secrecy may be shared by partners.
7. Management	A sole trader is responsible for the management of the business.	All partners are equally responsible for the management of the business.
8. Government Control	There is less government control.	There is limited government control on the working of the firm.

Question 3.
Partnership Firm and Joint Stock Company
Answer:

Basis	Partnership Firm (PF)	Joint Stock Company
1. Meaning	It is a business organization owned, financed, and managed by two or more persons collectively.	It is an association of persons formed under the Companies Act, to run a business.
2. Number of members	Minimum 2 and maximum 50 members are required for general business.	For Private company minimum 2 and maximum 200. For Public company minimum 7 and maximum unlimited.
3. Registration	Registration is not necessary. But is compulsory in Maharashtra.	Registration is compulsory under the Companies Act, 2013.
4. Liability	Partners carry unlimited liability, joint, and several.	The liability of all members is limited, to the extent of shares held by him.
5. Stability	It has no stability. Death or insolvency of a partner may affect stability.	It has a stable business. Death or insolvency of a member does not affect the stability.
6. Capital	Compared to Sole Trading concern and Joint Hindu Family business it requires more capital.	It requires a huge amount of capital.
7. Secrecy	Secrecy may be shared by partners.	It maintains less business secrecy.
8. Management	All partners are equally responsible for the management of the business.	The Board of Directors is responsible for the management of the Joint Stock Company.
9. Government Control	There is limited government control on the working of the partnership firms.	There is more government control on working of Joint Stock companies.

Question 4.
Joint Stock Company and Co-operative Society
Answer:

Basis	Joint Stock Company	Co-operative society
1. Meaning	It is an association of persons formed under the Company Act, 2013 to run a business.	It is a voluntary association of individuals which is formed for providing services to members.
2. Number of members	Private Company minimum 2 and maximum 200. Public company minimum 7 and maximum unlimited.	Minimum 10 and maximum no limit.
3. Registration	Registration is compulsory under the Indian company Act 2013.	Registration is compulsory under State Societies Act.
4. Capital	It requires a huge amount of capital.	Compared to Sole Trading concern and Joint Hindu Family business it requires more capital but less than Joint Stock Company.
5. Management	The Board of Directors is responsible for the management of Joint Stock company.	Managing Committee is a managing body for a Cooperative society.

Question 5.
Private Company and Public Company
Answer:

Basis	Private Company	Public Company
1. Definition	A company, which by its articles restricts the right to transfer of shares and limits maximum membership up to 200 is called a Private Company.	A company that is not a private company is called a Public Company.
2. Number of members	Minimum 2 and maximum 200 members.	Minimum 7 and maximum ‘No limit’ on membership.
3. Number of directors	Minimum 2 directors are essential, in Private Company.	Minimum 3 directors are essential in a Public Company.
4. Right to transfer shares	Shares of Private companies are not transferable.	Shares of public companies are freely transferable.
5. Issue of prospectus	A private company cannot issue a prospectus.	Public companies can issue prospectus.
6. Ending words	Name of the Private Company compulsory ends with “Private Limited.”	Name of Public company compulsory ends with “Limited”.

5. Answer in brief.

Question 1.
How is LLP different from a partnership firm?
Answer:
LLP and Partnership Firm both look alike but are separate and have separate features:

Legal base: Limited Liability Partnership is based on “Limited Liability Partnership Act, 2008” and regular partnership is based on “Partnership Act, 1932”.
A number of partners: In a Partnership firm, a minimum of two partners and a maximum of fifty partners are allowed and in LLP minimum of two partners and a maximum no limit.
Liability: In LLP, partners have limited liability while in a partnership firm, partners have unlimited liability.
Transfer of ownership: There is no restriction on joining and leaving the LLP, but in a partnership firm, partners cannot transfer their shares without the permission of other partners.

Question 2.
Explain the different types of companies on the basis of the liabilities of members.
Answer:
There are three types of companies on the basis of liabilities of members which are explained as under:
(i) Companies Limited by Shares: Such companies are formed as per Section 2(22) of the Companies Act, 2013. Such companies have to share capital and their members have limited liabilities up to unpaid part of the face value of shares held by them. At the time of winding up of the company, the personal property of shareholders is not used. They are liable only for the unpaid part of the number of shares purchased.

(ii) Company Limited by Guarantee: As per Section 2(21), such companies may or may not have share capital. Every Member promises to pay a specific amount for liabilities and debts of the company at the time of liquidation. Such amount is mentioned in Memorandum. Member simply gives guarantee and carries a specific amount of liability. Generally, such companies work for the promotion of sports, art, culture, charity, etc.

(iii) Unlimited Liability Company: As per section 2(92), members of these companies have unlimited liability. Members are fully liable to liabilities and debts of the company. It may be a private, public, or one-person company.

Question 3.
What are holding and subsidiary companies?
Answer:
Holding company:

A company holds more than half of the share capital of another company.
Such a company may have the power to appoint a director of another company.
It has the power to remove directors of another company.

Subsidiary company:

Such companies are controlled by holding companies.
Holding company purchases more than half of the total share capital of the Subsidiary company.
Holding Company has the power to appoint or remove all or a majority of its directors.
A subsidiary company is just the opposite of a Holding company.

6. Justify the following statements.

Question 1.
Registration of Joint Stock Company is compulsory.
Answer:

In India, the Joint Stock Companies are governed by the Companies Act, 2013.
Every company has to be registered under the Companies Act, 2013.
Registration gives birth to a company.
On registration, the company gets a separate legal entity/identity.
Without registration, no company can come into existence.
After getting a registration certificate, it becomes a corporate body.
So, the registration of a Joint Stock Company is compulsory and not optional.
Thus, registration of a Joint Stock Company is compulsory.

Question 2.
A Joint Stock Company is an artificial person.
Answer:

A Joint Stock Company is an incorporated association, which is an artificial person created by law, having a separate name, a separate legal entity, and perpetual succession.
It is an artificial person because it is the creation of law.
It does not have a physical existence but has legal existence.
It enjoys certain rights and also conducts business like any human being.
A company is an artificial person because it is not developed by the process of a natural person.
It is the law of the land that gives birth to a company, hence, it is an artificial but legal person.
A company has a distinct name and a common seal.
It can make contracts, appoint staff, borrow money, open an account in the bank, acquire assets and conduct other business activities by its office bearers and staff.
It can sue and be sued by others. So, a Joint Stock Company is an artificial person, created by law.
Thus, a Joint Stock Company is an artificial person.

Question 3.
The liability of shareholders of the company is limited.
Answer:

The liability of shareholders of the company is always limited.
It is limited to the extent of the unpaid part of the face value of the shares held by them. Personal property of shareholders will not be taken or sold to pay the creditors or loan of the company.
Shareholders are not concerned with other liabilities of the company.
eg. If a shareholder has bought 100 shares of ₹ 10/- each, then he is liable only for ₹ 1000/- and not more.
Thus, the liability of shareholders of a Joint Stock Company is limited.

Question 4.
The ownership and management are separated in Joint Stock Company.
Answer:

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

Question 5.
The Joint Stock Company collects huge capital from the public.
Answer:

A company requires large capital to carry out its activities.
This capital is being collected from the public as it is not possible for an individual to contribute such a big amount.
A company issues shares, debentures, bonds and also accepts public deposits for raising its capital.
A company can also take loans from banks and financial institutions.
a Large number of members bring in a large number of funds that can be profitably invested in the expansion of the company.
So, for a large-scale business, large capital is collected by the Joint Stock Company.
Thus, the Joint Stock Company collects huge capital from the public.

Question 6.
There is more Government control and supervision over the working of a Joint Stock company.
Answer:

A Joint Stock Company is controlled and supervised by the Government.
A company has to follow numerous provisions of the Companies Act and other Acts.
The company has to follow all rules and regulations of the Government.
If any of the legal provisions are violated, various charges are levied on the company.
Government control protects the financial interest of a large number of investors.
If any of the business of a company is carried out illegally, strict actions are taken by the Government authorities on the working of the company.
So, there is more Government control and supervision over the working of Joint Stock companies.

7. Answer the following questions.

Question 1.
State the features of Sole Trading Concern.
Answer:
Features of Sole Trading Concern.

No separate law: There is no separate law or act for sole trading concern. But, while conducting the business, it should follow routine laws which are applicable.
Ownership: In a sole trading concern, only one person is the ail owner.
Capital: Capital is contributed by the owner and an owner is a single person. Hence, capital is collected by a single person. So the size of capital is very small.
Division of earnings: A sole trader is a single person, so there is no division of profit or loss. All profit is enjoyed by the owner and also bears all the losses of the business.
Management: The business activities of Sole Trading Concern are managed by a single owner. Such an owner is a decision-maker.
Secrecy: Sole Trader can ensure maximum business secrecy. The owner is not required to discuss the business matter with any outsider. Thus, maximum secrecy can be maintained.
Liability: The liability of Sole Trader is unlimited. The owner’s personal property can be used for debts and liabilities of the business concern.
Legal Status: Sole Trading Concern does not enjoy a separate legal status. There is no business registration by law. So, it does not have legal status.
Suitable for small-scale business: Sole Trading Concern is suitable for small-scale business activity. Sole Traders can collect limited capital and thus cannot undertake large-scale business activity.
Government control: There is no much government control over such type of business.

Question 2.
State the features of Joint Hindu Family Business.
Answer:
Features of Joint Hindu Family Business:

Membership: Membership of Joint Hindu Family business is possible only by birth. Every child born in a family is considered a member of the Joint Hindu Family business.
Karta: ‘Karta’is the head of the family. Generally, a senior person of the family plays the role of Karta in the Joint Hindu Family business.
Co-parceners: ‘Co-parceners’ are the members of the family, rather than ‘Karta’. They play a supporting role in the family and have limited liability.
The number of members: There is no limit on the minimum and maximum number of members.
Liability: Liability of ‘Karta’ is unlimited, while the liability of ‘Co-parceners’ is limited in Joint Hindu Family business.
Decision making: Being ahead of a Joint Hindu Family business, ‘Karta’ is the sole decision-maker. Thus, quick decision-making is possible in such type of business.
Management: ‘Karta’ is head of Joint Hindu Family business activity, so such person is considered as manager, controller, and co-ordinator of business.
Profit-sharing: The profit-sharing ratio keeps on changing in the Joint Hindu Family business. This ratio depends on the number of family members, which keeps on changing on birth and death in a family member.
Legal Act: Joint Hindu Family business is governed by Hindu Succession Act, 1956. But, it does not need any registration. There is less government control on the Joint Hindu Family business.

Question 3.
State the features of the Partnership Firm.
Answer:
Features of Partnership Firm:

Meaning: The business organization, which is owned, managed, and controlled by two or more persons under Partnership Act, 1932 is called a partnership firm.
Registration: As per Partnership Act, 1932, registration is not compulsory. But, registration has been made compulsory in the state of Maharashtra.
A number of members: The minimum number of members is 2 partners and a maximum of 50 partners for general business.
Capital: The capital of a partnership firm is contributed by all the partners.
Liability: In a partnership firm, the liability of partners is unlimited and is joint and several. The personal property of partners can be used to pay off the liabilities and debts of the partnership firm.
Legal status: Partners of partnership firm enter into business with an agreement which is made as per Partnership Act, 1932. But, such firms do not enjoy separate legal statuses.
Transfer of shares: In a partnership firm, partners cannot transfer their shares without the permission of other partners.
Management: The business of a partnership firm is conducted, managed and controlled by all the partners. They are the joint owners and joint managers of a firm.
No separation of ownership and management: As per the Partnership Act, 1932 all partners of the firm are owners, and as such it is the responsibility of all the partners to manage the business. So there is no separation of ownership and management.
Profit-sharing: Being an owner of a firm, all the partners share profits and losses as per the ratio which is mentioned in the partnership deed.

Question 4.
State the features of Co-operative Society.
Answer:
Features of Co-operative Society:
(i) Meaning: Co-operative society is a voluntary association of persons, formed to provide services and economic welfare to its members.
(ii) Registration: The registration of a Co-operative society is compulsory in the state of Maharashtra, under Maharashtra State Co-operative Societies Act, 1960.
(iii) Membership: Membership of a Cooperative Society is open to all. Any person of sound mind can enter in Cooperative society.
(iv) Number of Membership: Minimum ten members are required and maximum there is no limit to join Co-operative Society.
(v) Liability: Members of the Cooperative society carry limited liability. The personal property of a member cannot be used for liability or debts of the society.
(vi) Aim of society: Generally, another form of business organization has its aim as profit. But, a Cooperative society has no aim of maximization of profit. They are formed with an aim of providing service and economic welfare to the members.
(vii) Legal status: Co-Operative societies are formed under a specific act, so they enjoy independent legal status different from its members.
(viii) Management: Management in a Cooperative society is based on the principle of ‘Democracy’. Shareholder/member enjoys equal voting right to decide management authority. ‘One Person One Vote’ principle is followed by the Cooperative society.
(ix) Government control: There is strict Government control and supervision on working of Co-operative society. Generally, the state Government controls the activity of Cooperative society.

Question 5.
State the features of a Limited Liability Partnership.
Answer:
Features of Limited Liability Partnership (LLP):

Meaning: It is a combination of features of a partnership firm and a Joint Stock company. The liability of all partners in such a partnership firm is limited.
Legal entity: Limited Liability Partnership has a separate legal entity. Partners and Limited Liability Partnership are distinct from each other i.e. it is a body corporate.
the number of members: In a Limited Liability Partnership, a minimum of two partners are required. There is no limit on a maximum number of partners in a Limited Liability partnership.
Capital: The capital of a business organization is collected from all partners. There is no requirement for minimum capital contribution.
Business operation: It is simple to form and easy to operate.
(vi) Liability: Limited Liability Partnership carry limited liability. The liability of each partner is limited to his share as written in the agreement.
Cost of formation: As compared to a Joint Stock Company, the formation of a Limited Liability Partnership is very simple and easy. It has a low cost of formation.
Transfer of share: In a Limited Liability Partnership, there is no restriction on the transfer of ownership/shares, except to follow rules of the partnership agreement, In short, there is less restriction on joining and leaving the Limited Liability Partnership.
In a Limited Liability Partnership, double taxation is avoided and there is no tax on share in profit.

Question 6.
Define Joint Stock Company and explain its features.
Answer:
Definition of Joint Stock Company:

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

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

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

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

(iv) Artificial person: A company is a creation of law. A company does not have a physical existence, but it can conduct various activities like a human being.
E.g. enter into a contract, open a bank account, purchase or sell assets, appoint employees, etc. The company has corporate existence.

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

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

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

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

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

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

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

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

Question 7.
Define a ‘company’. Explain the types of companies on the basis of the liability of members.
Answer:
Definition of Joint Stock Company:

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

Types of Companies on the basis of liability of members:
(i) Companies Limited by Shares: Such companies are formed as per Section 2(22) of the Companies Act, 2013. Such companies have to share capital and their members have limited liabilities up to unpaid part of the face value of shares held by them. At the time of winding up of the company, the personal property of shareholders is not used.

(ii) Company Limited by Guarantee: As per Section 2(21) of Companies Act, 2013 such companies may or may not have share capital. Every Member promises to pay a specific amount for liabilities and debts of the company on liquidation. Such amount is mentioned in the Memorandum of Association. Members give guarantees and they carry a specific amount of liability. Generally, such companies work for the promotion of sports, art, culture, charity, etc.

(iii) Unlimited Liability Companies: As per Section 2(92) of the Companies Act, 2013 such companies have members with unlimited liability. Members are fully liable to liabilities and debts of the company. It may be a private, public, or one-person company.

Question 8.
Explain any four types of companies.
Answer:
Following are the types of companies:
(A) On the basis of Incorporation:

Statutory Company: Statutory companies are incorporated by Special Act. Such Act is passed in Central or State legislation.
E.g. Reserve Bank of India, State Bank of India, Unit Trust of India, Life Insurance Corporation, etc.
Registered Company: Such companies are formed under the Companies Act, 2013 or any previous company law.

(B) On the basis of Number of Members:
(i) Private Company: It is a company having minimum paid-up capital as prescribed by its Articles. Such companies restrict the rights of their members to transfer their shares and also restrict the maximum number of its members up to 200. Such companies are also prohibited to invite the public to subscribe to their securities or deposits.

(ii) Public Company: It is a company having a minimum paid-up share capital as prescribed by its Articles. Such companies do not restrict the rights of their members to transfer their shares. It requires minimum of 7 members to form a company and there is no limit on the maximum number of members. Such companies can
invite the public to subscribe for its securities or deposits.

(iii) One Person Company: It is a company, in which one person is a member. Such a company is managed by a single person, having limited liability. It should follow the rules of a private company. It may have one or more directors.

(C) One the basis of Liability of Members:
(i) Companies Limited by Shares: Such companies are formed as per Section 2(22) of the Companies Act, 2013. Such companies have to share capital and its members have limited liabilities up to unpaid part of the face value of shares held by them. At the time of winding up of the company, the personal property of shareholders is not used.

(iii) Unlimited Liability Companies: As per Section 2(92) of the Company Act, 2013 such companies have members with unlimited liability. Members are fully liable to liabilities and debts of the company. It may be a private, public, or one-person company.

(D) On the basis of Control:
(i) Holding Company: A company holding more than half of the share capital of another company is called a Holding Company. This company has the power to appoint directors of another company and remove directors of another company.

(ii) Subsidiary Company: The company which is controlled by a holding company is called a Subsidiary Company.

Activity (Text Book Page No. 25)

Identify the type of following companies:

Bajaj Auto Limited
Coal India Limited
Microsoft India
Kirloskar Foundation

Answer:

Bajaj Auto Limited – Public Limited Company
Coal India Limited – Government Company
Microsoft India – Subsidiary Company of American Software Company Microsoft Corporation
Kirloskar Foundation – Company Not for Profit (Corporate Social Responsibility)