Forms of Business Organization

 

Step required for raising funds from public :

1. SEBI Approval : SEBI regulates the capital market of India. A public company is required to take approval from SEBI.


2. Filing of Prospects :- Prospects means any documents which invites offers from the public to purchase share and Debenture of the company.


3. Appointment of bankers, brokers, underwriters :- Banker of the company receive the application money. Brokers encourage the public to apply for the shares. underwriters are the person who undertake to buy the shares if these are not subscribed by the public. They receive a commission for underwriter.


4. Minimum subscription : According to the SEBI guide lines minimum subscription is 90% of the issue amount. If minimum subscription is not received then the allotment cannot be made and the application money must be returned to the applicants within 30 days.


5. Application to Stock Exchange :- It is necessary for a public company to list their shares in the stock exchange therefore the promoters apply in a stock exchange to list company shares.


6. Allotment of Shares : Allotment of shares means acceptance of share applied. Allotment letters are issued to the shareholders. The name and address of the shareholders submitted to the Registrar.

IV. COMMENCEMENT OF BUSINESS :

To commence business a public company has to obtain a certificate of commencement of Business. For this the following documents have to be filled with the register of companies.

1. A declaration that 90% of the issued amount has been subscribed.
2. A declaration that all directors have paid in cash in respect of allotment of shares made to them.
3. A statutory declaration that the above requirements have been completed and must be signed by the director of company.

IMPORANT DOCUMENTS USED IN THE FORMATION OF A COMPANY :

I. Memorandum of Association :

Memorandum of Association is the important document of a company. No company can be registered without a memorandum of association. It is called life giving document.

Contents of Memorandum of Association :

1. Name clause :- This clause contains name of the company. It should not be similar to the name of another company.


2. Situation clause :- In this clause the name of the state in which the registered office of the company is to be situated is given.


3. Object clause :- This clause define the object for which company is formed.


4. Liability clause :- This clause limits the liability of the members to the amount unpaid on the share held by them.


5. Capital clause :- This clause specifies the maximum capital which the company will be authorized to raise.

II. ARTICLES OF ASSOCIATION :

The articles of association are the rules for the management of the internal affairs of a company. The articles define the duties, right and power of the officer and director of the company.

Contents of the Articles of Association :

	The amount of share capital and different types of shares.		Rights of each class of shareholder
	Procedure for making allotment of shares.		Procedure for issuing share certificates.
	Procedure for forfeiture and reissue of share.		Procedure for conducting, voting and proxy.
	Procedure for appointment of director.		Procedure for declaration of dividend.
	Procedure for alteration of share capital.		Procedure regarding winding up of the company.

III. PROSPECTUS :

Prospectus means any document which invites the public to purchase shares and debentures of the company. It contains past history, present status and future prospectus of the company.

Contents of the Prospectus.

	Name, address and registered office of the company.		The main object of the company.
	Authorized capital and types of share		The name and address of the directors.
	Name of the Bank, Brokers name and underwriter name.		Merchant bankers to the issue.

1 MARK QUESTIONS :-

1. Write the name of form of business organization found only in India.
2. Name two types of business in which sole proprietorship is very suitable.
3. Name the person who manages a Joint Hindu Family business.
4. Write the names of systems which govern membership in Joint Hindu Family Business.
5. Enumerate the two conditions necessary for formation of Joint Hindu Family business.
6. What is the minimum no. of persons required to form a co operative society?
7. Explain the meaning of unlimited liability.
8. Name the type of Co. which must have a minimum paid up capital of 5 lacs
9. What is meant by minimum subscription?

3 MARKS QUESTIONS

10. Explain the concept of mutual agency in partnership with suitable example.
11. What is the role of Karta n Joint Hindu Family business?
12. Which document is called charter of a company?
13. Define prospectus state its contents.
14. What is meant by “Partner by estoppel”?
15. What is “Secret Partner”?
16. Write a short note on producers co-operative society.
17. Explain how a co operative organization is a democratic setup.

4/5 MARKS QUESTIONS :

18. Is registration of partnership compulsory? What are the consequences of non-registration?
19. Explain any four clauses of memorandum of association.
20. Define Articles of Association. How does it differ from Memorandum of  Association?
21. Differentiate between :-

Memerandum of Association & Articles of association.
Private company and Public Company

6 MARKS QUESTIONS :

22. Mr. Amit is interested in the floatation of a company. Briefly discuss the steps he should take.
23. Discuss the reasons for the superiority of Joint Stock co. over sole proprietorship and partnership.
24. Explain the factors which affect the choice of form of business organization.
25. Which form of business is suitable for following types of business and why?

	Beauty Parlor		Coaching centre		Hotel
	Restaurant		Shopping Mall		Chartered Accountancy firm.

 

CBSE Business Studies Class XI ( By Mr. Kailash Gururani )
Email Id : [email protected]