CORPORATE LAW- I SYNOPSIS

CORPORATE LEGAL FORM AS A VEHICLE FOR SMALL COMPANIES

Abstract: Current enthusiasm for the 'enterprise culture' results in strong support for easy
access to limited liability forms of business organisation. The U.K Company Law Review
is examining ways of enhancing the attractiveness of the limited liability company to small
business owners. This paper examines the claims made for the 'efficiency' of limited
liability and the applicability of these claims to small firms. It raises the importance of
taking into account public policy issues beyond economic efficiency when considering the
degree of risk taking and shifting to be encouraged. The paper concludes that, although it
is difficult to find rational methods of restricting access to limited liability, it should not
follow that limited liability should be positively encouraged for all small firms. It is
important to adhere to the limitations of limited liability.

INTRODUCTION
It is widely held that our companies’ legislation is of a length and complexity which is to
some extent inappropriate to the small, private company. The fashion for deregulation
emphasises the facilitative role of company law, which leads to proposals for simplification
and removal of burdens from small firms. Blanket application of new corporate law
provisions, investor protection rules and accounting standards increases the unsuitability of
the applicable rules for small companies. It is widely argued that corporate law is burdensome
for small companies. On the other, in a form in which incorporation is often associated with
entrepreneurship, Therefore, the logic seems to point to amendments to corporate law, either
generally or in relation to small firms only. The provisions of the Companies Acts are said to
be too detailed and complex for small firms. Relaxing regulatory provisions could bring real
benefits to companies if consistent with investor and creditor protection, but removal of too
much third party protection will not only be undesirable for reasons of public interest but will
also destroy the credibility of the small company sector which is very important to those
choosing incorporation. An apparently simple legislative solution, where the underlying
situation is complex, could create ambiguity and uncertainty and have the ultimate effect of
increasing costs. Flexibility seems a more appropriate objective than simplicity.

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STATEMENT OF PROBLEM
It is a mistake to imagine that because the financial assets of the company are low, the
situation is a simple one. Small companies can give rise to difficult disputes, more so because
they are frequently associated with breakdown of personal relationships in the family or
between friends. As soon as a firm ceases to be a one person concern, some minority
protection may become necessary. Protective provisions may be more necessary for some
small firms than for listed public companies where the market exerts some control. For these
reasons, simplicity may not be an attainable. However, the precise balance desired within the
structure can be left to those engaged in the venture and need not be the concern of outsiders,
provided there are default provisions for cases where the internal relationship breaks down
and no provision has been made by the parties. Out of several problems faced by small and
medium scale enterprises, the absence of adequate marketing and export facilities is one of
the major concerns. Almost all types of business enterprises face marketing problems, but the
small and medium scale enterprises face greater difficulty in the marketing and distribution of
their products. Some of these are:Small and medium entrepreneurs tend to face tough competition from the products and sales/
marketing strategies of large scale enterprises. They face the difficulty in terms of cost,
quality, standards, popularity, meeting ever-changing demands/ preferences of consumers,
etc.
They lack their own marketing distribution network. So, they depend on external agencies for
distributing their outputs. This ultimately increases the cost of their products and services.
Most of the small entrepreneurs are unaware of the modern marketing and business strategies.
As a result, they are unable to cope quickly with changing market scenarios. Though the
products they produce has huge market potential but they unable to opt for efficient
marketing techniques.
They lack effective sales promotion because of the lack of funding and resources. They
cannot afford to spend much on advertising, sales promotion, market research, etc.
They find it difficult to sell their output at a profit because of higher cost of production and
non-standardized quality of products.

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They also have to sell their products at a loss because they cannot bargain with the big buyers
and requirement for the urgent need of working capital.
Small business often find it difficult to tap foreign markets for their products, either due to
lack of awareness on the potential markets or due to inadequate information on various
regulations, guidelines and procedures for exporting to the foreign markets.
REVIEW OF LITERATURE
1) Hastings Robert, Small Business Marketing: Marketing for Small Business owners,
publisher Businessman 101, edition 2011; “In this book the author has emphasized on
promoting and marketing of small business by utilizing the Information technology
and Web promotion”

2) Hornor Jody, Reierson Vickie, Power Marketing for Small Business ,Oasis Press/PSI
Research, 2000; “In this book the author has given step by step guidelines marketing
of small business.”
3) Judith Freedman, Small Business and the Corporate Form: Burden or Privilege ? 57:4
MLR 555 (1997): the author in this article tries to apply the concept of limited
liability to small firms in context to u.k small companies. The researcher will be
trying to apply the similar propositions in the Indian context
4) Judith Freedman. Limited Liability: Large Company Theory and Small Firms, 63:3
MLR 317 (2000): The author in this article states that limited liability has its limits
and says that creating a specialist limited liability form for small firms, or a less
regulated version of incorporation, might encourage inappropriate use of the limited
liability regime that could otherwise have been avoided. If such a regime is to be
provided, therefore, it is most important to be aware of the disadvantages of limited
liability in micro-firms so that an attempt can be made to counter them by protecting
or compensating those who must bear the resulting

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RESEARCH METHODOLOGY
According to CR Kothari the researcher methodology which the researcher will be applied,
qualitative and conceptual research methodology and also books and articles from primary
data and internet sites were searched.
Objective and scope:
Objectives of the study and analyse the application of limited liability to small businesses and
evaluate the existing marketing framework for the small business by highlight the problem
faced by the small business sectors in marketing products and services and evaluating the
different strategy in a competitive and globalised environment.
RESEARCH QUESTIONS
Whether, there are appropriate laws dealing with the small companies under the Companies
Act, 2013?
Whether, application of the concept of limited liability to small firms prove to be an
successful on?
Whether, there is any legislation providing benefits to small companies in other countries and
how far can they be adopted in Indian context?
What is the protection provided to creditor in case of small companies and private company?

TENTATIVE CHAPTERISATION:
Chapter 1: Introduction (The development of small companies in India)
Chapter 2: Problems faced by small and private companies
Chapter 3: Recent legislations in the Companies Act, 2013
Chapter 4: Comparison of various legislation of countries like U.K
Chapter 5: Scope of limited liability and its advantages and disadvantages
Chapter 6: Applicability of limited liability concept to small companies
Chapter 7: Conclusions and recommendations

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CONCLUSION AND FINDINGS
The analysis of the various problems and marketing activities of the Small business in India
indicates that there is no single perfect plan for promotion of these small firms . Since these
small firms play a pivotal role in the economic and social development of the country, often
acting as a foundation for growth entrepreneurship. The marketing consultants as well as the
government must take effort for designing a viable plan for the development of these sectors.
The major advantage of the sector is its employment potential at low capital cost. The various
alternative plan needs to be analyzed to find the a solution for the small sectors. In recent
years, the MSME sector has consistently registered higher growth rate compared with the
overall industrial sector. With its dynamism, the sector has shown admirable innovativeness
and adaptability to survive .Developing innovative marketing strategy is the need of the hour
for growth and sustainability of MSME sectors.
Ruchi Sharma (BC0140049)

BIBLIOGRAPHY:
PRIMARY SOURCES:
Companies Act,2013
Secondary sources:
Books;
1.Y.V.Chandrachud (2004),A.Ramaiya Guide to Companies Act, Lexisnexis Wadhwa,
Nagpur.
Articles:
1. Judith Freedman, Small Business and the Corporate Form: Burden or Privilege ? 57:4
MLR 555 (1997)
2. Judith Freedman. Limited Liability: Large Company Theory and Small Firms, 63:3 MLR
317 (2000)
WEBLIOGRAPHY:
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www.jstor.com

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