Company and cooperatives 2

Basic description of working of a company

1. COMPANY AND COOPERATIVES

2. COMPANY MEANING OF A COMPANY A COMPANY IS AN ARTIFICIAL PERSON CREATED BY THE LAW. IT IS A VOLUNTARY ASSOCIATION OF INDIVIDUALS FOR PROFITS A company, abbreviated co., is a legal entity made up of an association of people, be they natural, legal, or a mixture of both, for carrying on a commercial or industrial enterprise .

3. DEFINITION According to Prof. L.H. Haney , “Company is an artificial person created by law having separated entity with a perpetual succession and common seal” According to Justice Lindley a company means association of persons who contribute in shape of money or money’s worth to a common stock and employ it for some specific purpose. An organization of individuals conducting a commercial or industrial enterprise. A corporation, partnership, association, or joint stock company

4. CLASSIFICATION OF COMPANY

5. CLASSIFICATION (CONT.) INCORPORATED COMPANIES : THESE ARE THE ASSOCIATIONS OF THE PERSONS WHO CONTRIBUTE MONEY TO A COMMON STOCK KNOWN AS CAPITAL OF THE COMPANY. THEY HAVE EXISTENCE INDEPENDENT OF THEIR MEMBERS. UNINCORPORATED COMPANIES : THESE ARE THE MERE COLLECTION OF THE PERSONS WHO HAVE AGREED TO JOIN IN PARTNERSHIP TO RUN A BUSINESS AND SHARE THE PROFITS. CHARTERED COMPANIES : A chartered company is an association formed by investors or shareholders for the purpose of trade, exploration, and colonization.

6. CLASSIFICATION (CONT.) STATUTORY COMPANY : A COMPANY MAY BE INCORPORATED BY MEANS OF A SPECIAL ACT OF THE PARLIAMENT OR A ANY STATE LEGISLATURE. SUCH COMPANIES ARE CALLED STATUTORY COMPANIES. SUCH COMPANIES ARE GENERALLY FORMED TO CARRY OUT SOME SPECIAL PUBLE UNDERTAKINGS. REGISTERED COMPANIES : COMPANIES ARE REGISTERED UNDER COMPANIES ACT,1956,OR EARLIER COMPANIES ACT ARE CALLED REGISTERED COMPANIES. SUCH COMPANIES CAME INTO EXISTENCE WHEN THEY ARE REGISTERED UNDER COMPANIES ACT.

7. CLASSIFICATION (CONT.) GOVERNMENT COMPANIES : IT IS A COMPANY OF WHICH 51% OR MORE EQUITY SHARE CAPITAL IS HELD BY GOVERNMENT. REST OF THE SHARES CAN BE HELD BY PRIVATE INDIVIDUALS OR BUSINESSMEN. FOREIGN COMPANIES : ITS IS INCORPORATED OUTSIDE INDIA BUT HAS A PLACE OF BUSINES S IN INDIA. SOME POPULAR MNC’S OPERATING IN INDIA ARE COCA COLA(USA),SONY(JAPAN),ETC.

8. REGULATING ACT PARTNERHIP FIRM COMPANY INDIAN PARNERSHIP ACT, COMPANIES ACT, 1932 1956

9. NUMBER OF MEMBERS PARTNERSHIP FIRM COMPANY MINIMUM-2 PRIVATE COMPANY : MAXIMUM-20 IN ODINARY BUSINESS MINIMUM-2 , MAXIMUM-50 & 10 IN BANKING BUSINESS. PUBLIC COMPANY : NUMBER OF SHARES DIVIDED BY LOT OF MINIMUM NUMBER OF SHARES.

10. SEPARATE ENTITY PARTNERSHIP FIRM COMPANY NO SEPARATE LEGAL ENTITY FROM SEPARATE LEGAL ENTITY FROM THAT OF ITS PARTNERS. THAT OF ITS MEMBERS.

11. TRANSFER OF INTEREST PARTNERSHIP FIRM COMPANY NOT POSSIBLE WITHOUT THE CONSENTS FREELY TRANSFERABLE EXCEPT IN OF ALL PARTNERS. CASE OF PRIVATE COMPANY.

12. FINANCIAL RESOURCES PARTNERSHIP FIRM COMPANY CAN RAISE LIMITED RESOURCES. CAN RAISE LARGE FINANCIAL RESOURCES

13. DEFINITION

14. Cooperatives Are primarily controlled by a board of directors elected by and from members Derive equity from member owners Operate for the benefit of member owners Allocate earnings to members based on use Earnings from member business is taxed once Have perpetual existence

15. A C o -ope r at i v e Socie t y can be f ormed as per the p r o v i sions of the C oope r at i v e Socie t i e s A c t , 1 9 12.  At least t en persons h a v i ng the capacity t o en t er in t o a c o n t r act with c om m on e c o n omic o b ject i v e s , li k e farm i n g , w e a v i n g , c o n sumin g , e t c. can f orm a C o - ope r at i v e Socie t y .  A joint applicat i on alo n g with the b y e -l a ws of t h e soc i e t y c o n ta i ning the deta i ls about the socie t y and i t s member s , has t o be submi t t ed t o the R e g is t r ar of C o -ope r at i v e So c ie t ies of the c on c erned sta t e.  Af t er scru t i n y of the applicat i on and the b y e –l a w s , the r e g is t r ar iss u es a C e r t i f ica t e of R e g is t r at i o n Formation of a Co-operative Society

16. Types of Co-operative Societies 1. C onsu m e r s’ C o -ope r at i v e Society: to p r o tect t h e i n terest of g eneral co n su m ers by m aki n g co n su m er g o o d s availab l e at a rea s o n able p rice. 2. P r odu c e r s’ C o -ope r at i v e Society : to p r o t ect the i n terest of s m all p r o d ucers by m aki n g availab l e ite m s of t h eir need for p r o d ucti o n like raw m aterial s , t o o l s and eq u i p m ents , m achi n er y , etc. Ba y ani k a , Har y ana Han d l o o m , is exa m p l e of p r o d u cer s ’ c o - o p er a tive societ y . 3 . C o -ope r at i v e M a r k eting Society: T h ese societies are f o r m ed by s m all p r o d ucers and m an u facturers who fi n d it d i f ficu l t to sell t h eir p r o d u cts i n d i v i d u all y .

17. Types of Co-operative Societies 4. C o - operative C r edit Society: to p r o v i d e fi n ancial su p p o rt to t h e m e m bers. T h e society ac c epts de p osi t s fr o m m e m bers and g r ants t h em l o ans at reasona b le rate of i n terest in ti m es of n eed. E x a m p l es: V illa g e C o -o p erative S ociet y , U r b an Co o perati v e Ban k s 5. C o - operative Farming Socie t y: T h ese societies are f o r m ed by s m all far m ers to w o rk j o i n tly and t h ereby enj o y t h e be n efits o f la r g e -sc a le far m i n g. E x a m p l es: E x : Pan i -pa n cha y ats 6. Hou s ing C o - operative Socie t y: to p r o v i d e re s iden t ial h o uses to m e m bers they p u rcha s e lan d , and c o n struct h o uses or flats a n d a l l o t t h e sa m e to m e m bers. S o m e societies also p r o v i d e l o ans at l ow rate of i n terest to m e m bers to co n struct their own houses.

18. ADVANTAGE Easy formation Open membership Democratic control Limited liability Elimination of middleman’s profits State assistance Stable life

19. LIMITATIONS Limited capital Problems in management Lack of motivation Lack of cooperation Dependence on government

20. TAX SHELTER FOR CO-OPERATIVE SOCIETIES While a c o -ope r at i v e society is t r ea t ed u nder t h e In c om e -tax A ct, 1 961, as an assessee f or ex t end i ng c ertain c o n c essi o ns in c om p u t i n g ta x able i n c ome, the i n c ome of a c o -o p e r at i v e soc i ety is n ot e x empt in its enti r et y .

21. User-Benefit Principle The cooperative’s sole purpose is to provide and distribute benefits to members on the basis of their use

22. Cooperative Functions Three Core Functions Marketing - extend control of members’ products through processing, distribution, and sale Purchasing - providing affordable supplies and goods Service - provide needed services