 In this class, we are going to discuss company form of organization, which is included in the fifth unit of paper business organization and business ethics or become first semester. The whole discussion will be divided into three parts. In the first part, we will discuss meaning and features of company form of organization. In the second part, we will discuss merits and demerits of company form of organization. And in the last part, we will discuss different types of company. So what do we mean by a company? A company is an association of person created by law to carry on the expressly laid down objectives. It is established by law and can be dissolved by law only. Company has a separate legal existence from its members so that even if its members die, the company remains in existence. So a company is an organization which is created by a group of person to carry on the expressly laid down objectives. It has a separate legal entity and it is established by law. The capital of the company is divided into small units called shares. Since members invest their money by purchasing the shares of the company, they are known as shareholders and the capital of the company is known as share capital. And in India, the Zainstab company are governed by the provisions of Companies Act 2013. Earlier it was Companies Act 1956, the Act has been repealed and now it is Companies Act 2013. Now the definition. There is no concrete definition of company. According to section 2, subsection 20 of the Companies Act 2013, a company means a company incorporated under this Act or under any previous company law. So any organization which is incorporated under the Companies Act are known as company. Now a company form of organization has various features. Some of those features we are going to discuss here. So number one feature and very important feature is company is an artificial person. A Zainstab company or a company is an artificial person created by law and does not possess any physical attributes of a natural person. It cannot eat, it cannot walk, it cannot smile, it cannot marry, it cannot read or it cannot write. But it acts as an artificial person. It has a legal status like a natural person. It purses, sales and make agreements like a person in its own name. It can sue other and it is sued by other in its name. The second important feature is created by law. So a company can be created by law only. It is a company is formed, carried on and even owned up by observing legal formalities. The companies has to be registered with the register of companies of the state with various documents like memorandum of association, article of association and prospectus. Only after that a company can start its business. So the legal recognition is very important before starting its activity. So the next important feature is separate legal entity. So being an artificial person a company has separate legal entity from its owners. That is members. It can make contract, purses and sell goods, employ people, conduct any lawful business, enter into any contract in its own name. It can sue and can be sued in the court of law. A shareholder cannot be held responsible for the act of the company. With the company act illegally or the if company violates any rule for that the owner that is the shareholder cannot be made liable. So for that only the company is liable. The next important feature is formation. So as we already discussed that for incorporation of a company it needs to undergo through a legal process. So it obviously takes lots of time and lots of effort. So the promoters of the company need to take help of some professionals and it requires again some time. So formation of a zoonster company is a time consuming task and it involves preparation of several documents and compliances of several legal requirements before it starts its business. A company comes into existence only when it is registered under the Indian companies act. The next important feature is limited liability. So the most important feature of the zoonster company is the liability of its shareholder is limited to the face value of the shares allocated to them. For example if a person purses 10 shares of rupees 10 each so the liability of that shareholder is only 100 rupees that is 10 into 10, 10 share of rupees 10 each. So the liability of that shareholder who holds 10 shares is only rupees 100 even if the company fails to pay, even if the company owned up, even if the company incur loss or whatever it may be. So the liability of a particular shareholder is limited to the value of his or her shares only. So this is very important feature which make the company form of organization different from all other kinds of business organization. Another important feature of company form of organization is participial succession or permanent life. A company has a continuous life, the date, the withdrawal or insolvency of any member that is any shareholder will not cause discontinuation or closure of a company. It will continue even if its shareholders die, its shareholders become incapable, any one of its shareholders become bankrupt even then also the company will continue. Company has a distinct legal identity and management so there is a divorce between the ownership and the management of the company. The company is owned by shareholders and managed by the board of directors. The next feature of company form of organization is democratic management. So a company is managed in a democratic way. A company is established by shareholders and they elect the board of directors. The day-to-day functioning of the company is look after and managed by the board of directors who are again responsible to the shareholders that is actual owner of the company. The day-to-day affairs of the company is managed by the board of directors who are responsible to the shareholders that is the actual owner of the company. The last feature we are going to discuss here is commonship. So being an artificial person company enters into contract with different parties but since a company is an artificial person it cannot sign of its own. So its use the seal of the company therefore every company is required to have its own seal which act as official signature of the company. Any document which does not carry the common seal of the company is not a binding of the company that is if the contract or if the paper do not carry the seal of the organization for such documents the company will be not liable. So this is very important. Being the mostly followed and largest form of business organization, company form of business organization has many merits and demerits. In this part we are going to discuss some merits and demerits of company form of organization. Firstly we are going to discuss the merits of a company or a general company. So number one is the permanent existence. So as we discussed in the research a company has a permanent life. A company never cease to exist or a company never die if any one of its shareholder or shareholders become insolvent or die or become incapable. So a company will continue to run or continue to walk, continue to function even if its owners that is the shareholders become incapable or become lunatic or become insolvent or he or she dies. So this is one of the very important merit of a company form of organization. The next merit is limited liability. So the liability of the member, the liability of the shareholder of a company is always limited to the value of the shares held by the shareholder. So for example a shareholder holds 100 shares of rupees tenets. So he holds shares of rupees 1000. So the liability of that shareholder is limited only up to 100 rupees even if the company become insolvent or company die then also that particular shareholder liability is rupees 100 only. The company can make him liable only up to 100 rupees. So that is very advantageous for the shareholders. So no other assets will be liable for the debt of the company or the liability of the company. The next important advantage is transpirability of shares. So the shares of a public company are easily transpirable whenever the shareholder want his money back he can sell his shares in the market and he can realize cash. So shares of the companies are very liquid the shareholder can convert it into cash as and when he feels necessary. So the next is professional management. So a company can afford to pay higher salaries to the professionals and specialists so they can hire experienced person and engaged in their management. So the management is always in the hands of professionals. So this is another advantage of Zwinster company. The next is diffused rigs. So since the capital of the company is divided into many small parts called shares and those shares are holds by numbers of people numbers of shareholders. So all the shareholders share that risk and it become nominal. So this is not the case in sole proprietorship and partnership where the loss has to be borne by the individual proprietor and limited numbers of partners of the firm individually or collectively. So this is another marriage of company firm organization. The next is expansion potentiality. So as there is a no limit of the maximum number of shareholders in a public limited company expansion of business is easy by issuing new shares and divins. So company as and when company feel and as and when the company become capable of expanding its business a company can go for expanding its business by raising additional capital since there is no restriction on that. Now the demerits. So though the company firm of organization have many marriage it suffers from some demerits also. So number one is complexity information. So as we already discussed in features of company firm of organization that to incorporate a company firm of organization one need to fulfill various legal formalities and go through a lengthy process of fulfilling various requirements. So that is very time consuming and tedious. So that makes the formation process very complex. So this is one disadvantage. The next is lack of secrecy. So what happened? Since company is incorporate under provision of law various law requires disclosure of various information. So a company cannot hide any information. It's a company always need to disclose different information under different provisions of different law. So there is no secrecy. So company has to make most of its information public. So that is one difficulty. So it's very difficult to maintain secrecy in case of a company firm of organization. Then numerous legislation or numerous regulations. Though in India companies are regulated under companies at 2013 but there are many other laws related to environment, related to pollution, related to many aspects. So all those legal provisions must be fulfilled by a company. So this again make it difficult to run a company. Then delay in decision making. So as we discussed the company is always managed in a democratic way. So since there is a democratic way the decision or the idea need to pass through various phases or need to pass through various hands. So that makes the decision making process delay. It has to decision is initiated or if an idea is initiated by the top level of management then it needs to go to the middle level, again need to go to the lower level. So that makes the process very lengthy. The next is impersonal work environment. So separation of ownership and management leads to situation in which there is lack of effort as well as personal involvement on the part of the officers of the company. Since there is a separation between the ownership and the management the company is not run by the owners directly. It is run by somebody who is appointed by the owners to manage the company. In the next part we are going to discuss different types of companies. So companies can be divided into different types based on different parameters. So based on incorporation company may be of different kind. So first one is statutory company. So when a company is formed under the provision of a law passed by the parliament or by the state legislator such companies are known as statutory companies. For example we can say the live incidents corporation of India. So these companies are governed by or these companies are established by a separate legislation passed by the Indian parliament. So these type of companies are known as statutory company. So even if a statutory company is incorporated under a separate law but the provisions of Indian companies act and other acts operating in the country are applicable to these companies. Next one is registered companies. So any company which is registered under the provisions of companies act 2013 are known as registered company. So in simple any company which is registered under the provision of Indian companies act are registered company that is all companies operating in India are registered company. Now on the basis of liability company can be of different types. Number one company limited by share. Sometimes shareholders of some companies might not pay the entire value of their shares in one go. In these companies the liability of members is limited to the extent of the amount not paid by them on their shares. This means that in case of winding up members will be liable only until they pay the remaining amount of these of their shares. So this is what we already discussed when the liability of the shareholders is limited to his shares only. If liability of a shareholders is limited to the value of shares he or she holds then that type of companies are known as company limited by shares. Next is company limited by guarantee. In some companies the memorandum of association mentioned amounts of money that some members guarantee to pay. In case of winding up they will be liable to pay only the amount so guaranteed. The company or its creditors cannot compel them to pay any more money. That is what if a shareholder give guarantee to the company that in case of default or in case of winding up of the company I will pay only to the extent of this amount. Suppose I am liable a shareholder guarantee that I will pay maximum 10,000 rupees in case the company wind up. So in that case the liability of that particular shareholder is limited to rupees 10,000 only. Now such companies are known as companies limited by guarantee then unlimited company. So as the name suggests in this type of company the liability of the shareholders the owners is unlimited and his personal asset or his personal things may be used for paying the liability of the company. So that is why it is called unlimited companies where the liability of the shareholders is unlimited. So again on the basis of numbers of members company can be of different types. Number one is one person company. So this is a new type of company which is incorporated only in the companies at 2013 earlier this type of company was not there. So one man company or one person company is separate from the sole proprietorship because one person companies are legal entities distinct from their sole members. So again in case of one person company also the ownership and the business is separate. Unlike the other companies one person company do not need to have any minimum share capital and there is another unit features of one person company is that the sole member of the company has to nominate a nominee while registering the company. Next is private companies. Private companies are those whose article of association restrict free transpirability of shares. In terms of members private companies need to have minimum two members and maximum 200. These members include present and former employees who also holds shares of that company. So a private company is a company which restrict free transpirability of shares that is one member cannot transfer his or her share to another members. And again in case of numbered of members there must be at least two members to start a private company and that cannot exceed 200. The next is public company. So a public company is a company which allow their members to freely transfer their shares that is the shareholders can sell their shares to anybody at any point of time. So this is the primary characteristics of a public limited company and in case of minimum and maximum number a public company must have minimum seven members and there is no limit of maximum number of members. So a public limited company can have n numbers of members. On the basis of control or holding there may be holding company subsidiary company or associate company. So what is a holding company? In some case a substantial portion of a company's shares are held by another company. So in that case the company owning these shares become the holding company or parent company that is the company which holds maximum shares of a company of another company that company is known as holding company or parent company and the company whose shares are acquired or whose shares are hold that company is known as subsidiary company of that parent company. So this is all about holding and subsidiary company and there is another type of company called associate company. In associate companies what happen? Companies have significant influence. This significant influence amount to ownership of at least 20% shares of the associate company. So when a company has acquired more than 20% shares of another company then that company become associate company. So there are some other classification of company like government companies. So what is a government company? A government company is a company where the government holds more than 50% share capital. So in that case we call it a government company the shares may be held by central government or a state government or by central and state government or by two or more state government. So there may be different patterns of holding but if more than 50% shares of a company is hold by any government then it is called a government company. Then foreign company so any company which is which are incorporated outside India but they are doing business in India such companies are known as foreign company. Then there is charitable companies or we call it section 8 companies this is also new type of company incorporated under companies at 2013. So there are some companies which are established for charitable purpose or their objective is to carry out some charitable activity. These companies are called section 8 company because they are registered under section 8 of the company's act. Generally these charitable companies are associated with a promotion of art, culture, film, trade, sports, commerce etc. Since they do not earn profit or their objective is not to earn profit they don't pay dividend to the shareholders. Thank you. This is all about company form of organizations. This is not all. This is a part where we discuss about company form of organization. You can further consult our SLMs or other groups for in-depth knowledge. Thank you.