TYPE OF BUSINESS ORGANISATIONS:

Business Organization

1. All necessary arrangements required to conduct a business in an optimized manner.

2. Steps for establishing and maintaining relationship between men, material, and machinery
to carry on the business efficiently for earning profits.
3. This is a process of planning and organizing.
4. Process of organizing the factors required for commencing and carrying on the business is
called a business undertaking.

CHOICE OF BUSINESS ORGANISATION

1) The right choice of the form of the business is very crucial because it determines the power,
control, risk, and responsibility of the entrepreneur as well as the division of profits and
losses.
2) It influences the success and growth of a business.
3) Difficult to switch over to another form.
FACTORS GOVERNING THE DECISIONS FOR SUITABLE FORM OF ORGANISATION

1) Nature of Business Activity

i) Small trading businesses, professions, and rendering of personal services, sole

proprietorship is predominant.

ii) Bigger Scale

iii) Manufacturing on a modest scale
iv) Finance Partnership Firm
v) Trading
vi) Real estate (Small Scale)
vii) Hotels and lodging places
viii) Wholesale trade, retail houses
ix) Small scale manufacturing enterprises,
x) Small drug manufacturers

xi) Person wants legal entity + Corporate form + Single Ownership then OPC.
xii) OPC = Limited Liability + Legal entity distinct from owner.
xiii) OPC personal property of the owner(s) is protected, and this gives the owner(s) the
ability to build the business credit, get loans and raise capital.

xiv) Business lines such as carrying on large chain stores, multiple shops, super-bazaars,
engineering industrial activities with high capital and working capital requirements and
software industrial activities = Company
xv) LLP = 2 or more persons, formed under the Limited Liability Partnership Act, 2008.
xvi) Liabilities (if any), of the LLP lies with the entity and does not fall on the individual
partners unlike the partnership form of business organization under the Indian
Partnership Act, 1932, where the joint and several liabilities of the partner(s) is one of
the features.
xvii) Liability of the Partner is limited to the extent of his contribution towards the LLP,
except in case of intentional fraud or wrongful act of omission or commission by the
partner himself
xviii) suitable generally in the service industry and where there is no dependence on large
amounts of financing from outside sources.
NIDHI COMPANIES:

A. Members = Individuals only

B. Primary object = accepting deposits and lending money to member-borrowers only against jewels,
etc., and mortgage of property
C. cultivating the habit of thrift and saving amongst its members
D. complies with the rules made by the Central Government
E. No dealing with non-members
F. Nidhi cant do
i) chit fund
ii) Insurance
iii) investment in shares or debentures
iv) Hire purchase.

Origin of the Concept in India (not Imp for exam)

Sabanayagam Committee

 examine the various aspects of the functioning of Nidhi Companies

 suggested an appropriate policy framework for overall improvement of the Nidhi Companies
 alternative mechanism to regulate and facilitate Nidhi Companies to play key role in mobilizing and
gainfully investing small savings and improving their viability, resilience and performance.

Dr. Jamshed J. Irani

 effectively non-banking financial companies

 deposit taking activities of NIDHIs are governed by the RBI Act and guidelines made thereunder
 the power to give exemptions to the NIDHI companies in the administration of NIDHIs is with the
Ministry of Corporate Affairs

Prevailing Regulatory Aspects of Nidhi

1. Section 406 of the Companies Act, 2013, “Nidhi” or “Mutual Benefit Society” = A company which
Central Government may by notification in the Official Gazette, declare to be a Nidhi or Mutual
Benefit Society
2. Central Government issued the Nidhi Rules, 2014 which came into force on the 1st day of April 2014.
They are applicable to the following:
i) every company which had been declared as a Nidhi or Mutual Benefit Society under companies
act 1956.
ii) functioning on the lines of a Nidhi company or Mutual Benefit Society but has either not applied
for or has applied for and is awaiting notification to be a Nidhi or Mutual Benefit Society under
sub- Section (1) of Section 620A of the Companies Act, 1956
iii) every company incorporated as a Nidhi pursuant to the provisions of Section 406 of the
Companies Act, 2013.
iv) every company declared as Nidhi or Mutual Benefit Society under sub-section (1) of section 406
of the Companies Act, 2013.

Declaration of Nidhis (Rule 3A of the Nidhi Rules, 2014)

Central Government

On receipt of application (Form NDH-4) pub co for declaring it as Nidhi + being satisfied that the company
meets the requirements under these rules notify the company as a Nidhi in the official Gazette
Nidhi incorporated under the Act on or after the commencement of the Nidhi (Amendment) Rules, 2019
shall file Form NDH-4 within sixty days from the date of expiry of: -
(a) one year from the date of its incorporation or
(b) the period up to which extension of time has been granted by the Regional Director under sub-rule (3) of
rule 5: