Presentation on theme: "BUSINESS BASICS. Types of Business BUSINESS MAY BE UNDERTAKEN BY DIFFERENT TYPES OF ORGANISATION WHICH IS BRIEFLY DESCRIBED BELOW SOLE PROPRIETORSHIP."— Presentation transcript:
Types of Business BUSINESS MAY BE UNDERTAKEN BY DIFFERENT TYPES OF ORGANISATION WHICH IS BRIEFLY DESCRIBED BELOW SOLE PROPRIETORSHIP UNDER WHICH AN INDIVIDUAL CONTRIBUTES CAPITAL. HE EARNS PROFIT OR BEARS THE LOSSES HIMSELF AND HIS LIABILITY IS UNLIMITED. PARTNERSHIP FIRM: PARTNERSHIP IS AN AGREEMENT BETWEEN TWO OR MORE PERSONS WHO HAVE AGREED TO SHARE PROFITS AND LOSSES OF THE BUSINESS CARRIED ON BY ALL OR ANYONE ACTING UPON ALL
FEATURES OF PARTNERSHIP FIRMS THERE SHOULD BE AN AGREEMENT BETWEEEN TWO OR MORE PEOPLE WHO WILL BE CALLED AS PARTNERS. CAPITAL WILL BE INVESTED IN THE AGREED PROPORTION. PROFIT/LOSS WILL BE SHARED IN THE AGREED PROPORTION. LIABILITY OF THE PARTNERSHIP FIRMS WILL BE UNLIMITED. THE RELATION OF PRINCIPAL AND AGENT WILL BE EXISTING AMONG THE PARTNERS.
COMPANY A company can be defined as “an artificial person created by law, having a separate legal entity, with perpetual succession and common seal.“ Features of a Company Separate legal existence Perpetual succession Limited liability Transferability of shares Common seal Separation of ownership and control
Voluntary association Artificial legal person Kinds of Company Statutory Company: These companies are formed by a special Act passed either by Central or State Legislatures. Eg: RBI, SBI, IDBI Government Companies: A company which not less than 51% of the share is held by Central or State Government. Foreign Companies: A company which is incorporated outside India and has a place of business in India
Registered Company: Companies formed by registration under the Companies Act as known as the Registered Company. Types of registered companies are Company Limited by shares, Company limited by guarantee Unlimited company. Registered Companies can be further divided into Private Companies: Private Company can be defined as company which has a minimum paid up capital of Rs.1 lakhs or such higher capital as may be prescribed and which by its articles:
Restricts the right of its members to transfer shares Limits the number of members to fifty, excluding present and past employees of the company who are the members of the company. Prohibits any invitation to the general public to subscribe for its shares or debentures. Prohibits any invitation of acceptance of deposits from other than members, directors or their relatives.
Public Company means a company which. is not a private company has a minimum paid up capital of Rs. 5 lakhs or such higher paid up capital as may be prescribed. is a private company which is a subsidiary of a company which is not a private company. A Public Company needs minimum seven persons for its registration.
Incorporation of company Steps involved Ascertainment of availability of the proposed names of the company. Application for license. SEBI’s approval to the draft of prospectus. Preparation of Memorandum of Association. Preparation of Articles of Association. Preparation of prospectus. Fixation of underwriters,brokers,solicitors, auditors and bankers to the issue.
Obtaining Certificate of incorporation Obtaining of Certificate for commencement of business.
SHARE CAPITAL Share Capital Share capital of the company is the capital contributed by the shareholders. This is the real capital of the company. The share capital is divided into shares which is normally at Rs.10 per share. Types of Share Capital Authorized Capital Issued Capital & Subscribed Capital (Under-subscribed / Over-subscribed) Called up Capital Paid Up Capital
Types of Shares Preference shares: these are the shares which carry the following preferential rights over other classes of shares: Preferential right in respect of fixed dividend. Preferential right to repayment of capital in the event of company’s winding up. Types of Preference shares Cumulative Preference shares Non Cumulative Preference shares Participating Cumulative Preference shares Non Cumulative Preference shares
Convertible Cumulative Preference shares Non Convertible Cumulative Preference shares Redeemable Preference shares Non Redeemable Preference shares
ISSUE/SUBSCRIPTION OF SHARES Oversubscription of shares: When a company receives application for a larger number of shares than offered by it to public for subscription. Undersubscription of shares: When a company receives application for a lesser number of shares than offered by it to public for subscription. Calls in advance: When the call amount is received in advance. Calls in arrears: When the call amount is not fully received. Issue of shares at a discount: when the shares are issued at a price less than the face value
Forfeiture of shares: means termination of membership and taking away of shares because of default in payment of allotment and/or call money by a shareholder. Surrender of shares: means the return of shares voluntarily by the shareholder to the company for cancellation. Rights shares refer to the first option given to the existing shareholders to purchase additional issues of shares.
Underwriting of shares Underwriting responsibility that the shares or debentures offered to the public for subscription will be fully subscribed for and in the even of any failure, the underwriter will subscribe for the un subscribed shares or debentures. The underwriter is paid a commission which cannot exceed 5% of the issue price in case of the shares and 2.5% of the issue price in case of the debentures
Buyback of shares: means that the buying of shares by the company from its existing shareholders. This is subject to certain condition that the company may purchase out of the following : Free reserves. Securities premium account. Proceeds of any shares or other specified securites.