J.S.S.

MAHAVIDYAPEETHA
JSS SCIENCE & TECHNOLOGY UNIVERSITY
Mysore - 570006

A Seminar Report on

“______MANAGEMENT AND ENTERPRENURSHIP______”

Submitted by
BALAKRISHNA . S– 01JST20ME404
DAYANANANDA SAGAR- 01JST20ME407
DIXITH . R- 01JST20ME409
KUMARASWAMY.R - 01JST20ME412
BRUHASPATHI M . S – 01JST20ME413
NANDAN KUMAR . K -01JST20ME416

Submitted in partial fulfilment of the requirements for the award of degree of

Bachelor of Engineering
in
Mechanical Engineering

Submitted To
Ms. BHAVYA . V B.E., M.Tech
Assistant Professor, Department of Mechanical Engineering
JSSSTU, Mysore -570006.

DEPARTMENT OF MECHANICAL ENGINEERING

JSS SCIENCE & TECHNOLOGY UNIVERSITY
MYSORE – 570006
2021
CONTENTS :

1. Joint stock company definition and features.

2. Formation of a joint stock company.

3. Advantages and disadvantages of joint stock company.

4. Types of companies.

5. Domestic and foreign companies.

6. Difference between a public limited company and private

limited company.


JOINT STOCK COMPANY

A joint stock company is an organisation which is owned jointly by all its

shareholders. Here, all the stakeholders have a specific portion of stock owned,
usually displayed as a share.

Each joint stock company share is transferable, and if the company is public,
then its shares are marketed on registered stock exchanges.
Private joint stock company shares can be transferred from one party to another
party. However, the transfer is limited by agreement and family members.

FEATURES OF A JOINT STOCK COMPANY

1] Artificial Legal Person :

A company is a legal entity that has been created by the statues of law.
Like a natural person, it can do certain things, like own property in its name,
enter into a contract, borrow and lend money, sue or be sued, etc.
It has also been granted certain rights by the law which it enjoys through its
board of directors.

However, not all laws/rights/duties apply to a company. It exists only in the law
and not in any physical form. So we call it an artificial legal person.

2] Separate Legal Entity :

Unlike a proprietorship or partnership, the legal identity of a company and its

members are separate.
As soon as the joint stock company is incorporated it has its own distinct legal
identity.
So a member of the company is not liable for the company. And similarly, the
company will not depend on any of its members for any business activities.

3] Incorporation :
For a company to be recognized as a separate legal entity and for it to come into
existence, it has to be incorporated.
Not registering a joint stock company is not an option. Without incorporation, a
company simply does not exist.

4] Perpetual Succession :

The joint stock company is born out of the law, so the only way for the
company to end is by the functioning of law. So the life of a company is in no
way related to the life of its members.
Members or shareholders of a company keep changing, but this does not affect
the company’s life.

5] Limited Liability :

This is one of the major points of difference between a company and a sole
proprietorship and partnership.
The liability of the shareholders of a company is limited.
The personal assets of a member cannot be liquidated to repay the debts of a
company.

A shareholders liability is limited to the amount of unpaid share capital. If his

shares are fully paid then he has no liability.
The amount of debt has no bearing on this. Only the companies assets can be
sold off to repay its own debt. The members cannot be made to pay up.

6] Common Seal :
A company is an artificial person. So its day-to-day functions are conducted by
the board of directors.
So when a company enters any contract or signs an agreement, the approval is
indicated via a common seal. A common seal is engraved seal with the
company’s name on it.

So no document is legally binding on the company until and unless it has a

common seal along with the signatures of the directors.

7] Transferability of Shares :

In a joint stock company, the ownership is divided into transferable units known
as shares.
In case of a public company the shares can be transferred freely, there are
almost no restrictions.
And in a public company, there are some restrictions, but the transfer cannot be
prohibited.
Formation of a Joint Stock Company

Joint Stock company:

The business which is owned by its investors or shareholders is known as a

Joint Stock Company.
We can say that the Joint Stock Company is a voluntary association of
individuals who contribute money or money’s worth for a common purpose,
nobody can enter this business without his/her interest.
By issuing shares, the company can raise funds from the public. For making
large-scale investments, public funds are used for operations like – production
of goods, expansion, purchasing assets, etc.
You have learnt that formation of a sole proprietorship organisation or a
partnership firm does not involve much formalities so much so that even the
registration is not compulsory.
That is not the case with formation of a joint stock company as it involves a
lengthy legal procedure.
Its registration with the Registrar of Companies is obligatory, before it can
commence its business. In this lesson you shall learn about the various stages
involved in the formation of a Joint Stock Company and have an idea about the
important documents that regulate its functioning.

Joint Stock Company:

“Joint Stock Company is meant as an association of many persons who

contribute money or money’s worth to a common stock and employ it for
some common purpose.“

-Justice Lindley

What is the Formation of a Joint Stock company?

Formation of a company means the establishment of the business/company

which includes promotion, incorporation, subscription of the capital, and after
these steps, the final decision is taken by the promoter related to the starting
of the business.
The steps of the formation of the company are explained below with the name
of various stages. These stages or steps make the concept of formation more
clear.
Stages involved in the formation of the company
It is very easy to establish a sole proprietorship business or a partnership firm as
there are a few regulations to meet. But for the establishment of a company, a
lot of formalities are to be complied with.
The registration of the company is mandatory before starting its operation.
The formation of a company, right from the origin of idea to establish a
company goes through four different stages, like:
There are some important steps and stages which are playing important role in
the formation of the business, these are as follows:

A. Promotion:

Promotion means the generation to start the company.

This is the process of planning and organizing all the resources which are
needed to form a company.
The person who performs all these activities related to the promotion of the
company is called a promoter.
Promotion of a business simply refers to all those activities that are required to
be undertaken to establish a new business unit for manufacturing or distribution
of any product or provide any service to the people.
It starts with conceiving an idea of business or discover an opportunity for
doing a business, assess its feasibility and then take the necessary steps to
launch the business unit.
This involves ascertaining as to whether all the basic requirements such as land,
building, raw material, machine, equipment’s etc. are available or not.
If they are available one can assemble them, arrange the necessary funds and set
up the business unit to give shape to the initial idea of establishing the business.
The whole process is called business ‘promotion’ and the person who does it is
called the ‘promoter’.
Before knowing the various stages of promotion of a joint stock company let us
discuss about the role and importance of promoters.
The promoter can be a group of persons, institutions, or individuals.
ROLE AND IMPORTANCE OF PROMOTER

A promoter can be defined as a person or group of persons who conceive the

idea of setting up a new business, assess its feasibility and take necessary steps
to arrange the basic requirements and establish a business unit say, a Company
and put into operation.
Promoter plays a pivotal role in the promotion of a company. He conceives the
idea of business enterprise, analyses its prospects, works out a tentative scheme
of organisation, brings together the requisite men, material, machines and
money and starts the enterprise.

TYPES OF PROMOTERS

The task of business promotion may be carried out by an individual, a firm, a

body corporate or a banker. Based on the nature of their operation the promoters
can be classified into the following categories.

(a) Professional Promoters:

These promoters are specialists in promoting new business ventures. They

do it on a whole time basis as their occupation or profession. They initiate
all the steps in establishing new enterprises and find out the persons who
can finance it.
After completing all the formalities they pass on the management to their
owners or shareholders and then move to another new venture.

(b) Financial Promoters:

These promoters float companies only during favourable conditions in the

securities market. They have the financial capacity and look forward to
opportunities for new investment. Business Studies 141 Notes MODULE -2
Business Organisations.

(c) Technical Promoters:

These promoters are technical experts in different fields. They make use of
their specialised knowledge, experience and training in promoting new
business. They generally charge fees for their services.
(d) Entrepreneurial Promoters:

They are the people who conceive new ideas of business, take necessary steps to
set up the business unit to give it a shape and ultimately control and manage it.
Most promoters in India (like Tata, Birla, ) fall in this category.

(e) Specialised Institutions:

There are certain financial institutions which provide financial assistance and
guidance in launching new ventures and often collaborate with new
entrepreneurs to promote new business.
They also provide management and technical expertise to the existing
enterprises. (f) Government: Both the central and state governments also act as
promoters in most cases where the new business is floated either in public
sector or joint sector which involve huge amount of capital and risk. HMT,
ONGC, SAIL, BHEL are glaring examples of units set up by the government.

There are some functions that are performed by the promoter:

1.Determining the business idea:

The promotion stage starts with the discovery of the idea to set up the business.
It includes the different decisions related to the type of business capital
requirement, profitability and how many human resources are needed for this
business, and so on.
The promoter also analyses all these resources and the degree of risk involved
so that it will come to know what is good or not good for the company.
2. Suitability:

Once the idea is formed the next step is to check the feasibility or we can say
suitability of the business idea. The promoter starts doing a detailed
investigation for the practical shape of the idea of the business.
In this stage, the promoter takes the help of the experts like chartered
accountants, engineers, regarding the decisions related to the size of the
business, location, capital requirement, and the purchasing of machinery &
equipment for the business.

3. Name Approval:

Every company needs registration to gets its name approved. Under this stage,
the approval of the name of the company is given by the registrar after the
investigation related to the other company’s name. In other words, we can that
the name of the company does not match the other company’s name.

4. Memorandum of association:

The promoter decides about the people who will be signing the memorandum.
In this stage, the people who sign the MOA with written consent become the
first directors of the company.

5. Appointment of professionals:

The promoter appointed the bankers, brokers, and underwriters for the smooth
flow of financial dealing and ensuring the availability of the capital.

6. Documentation:
In this stage, legal documents are prepared which have to submit to the registrar
at the time of the commencement of the business.

B. Incorporation:

This is the second stage of the formation of a Joint Stock Company. It means
the registration of the company which is incorporated under the companies act
1956.
A sole proprietorship or partnership firm can be formed to carry out its business
even without any registration. But a company can not be formed or permitted to
run its business without registration. Infact, a company comes into existence
only when it is registered with the Registrar of Companies

The steps of incorporation are as follows:

1.Filling of necessary Document:

It includes the submission of the following documents:

1. Memorandum of association
2. Articles of Association
3. Statement of authorized capital
4. A list of directors with their names, addresses, age, and occupation
5. Address of the registered office of the company.

2. Payment of fee and Registration:

With the filling of the documents, the specified fee for the registration also has
to submit or deposited. The registration fee depends on the amount of
authorized capital.
On the other hand, the registrar verifies all the documents and checks the
deposited fee receipt for finalizing the name of the company.
3. Certificate of Incorporation:

once the name of the company is finalized then the registrar issues a certificate
of incorporation.
The effect of the certificate of incorporation represents that the company is
legally born on the date printed on the certificate. It is now considered as a
separate legal entity with perpetual succession from the date of incorporation.

C. Capital Subscription:
This stage includes the task of obtaining the required capital for the
commencement of the company. In the case of a private company, after getting
the certificate of incorporation it can start the business but the public company
has to perform some activities which are as follows:

1. Approval from SEBI:

Security Exchange Board of India is a regulatory body that performs the
activities regarding the control of the capital market to safeguard the investor’s
interest.
In this stage, the Public Ltd. company has to submit all the required information
with the SEBI before issuing its securities in the capital. If the company hides
some material facts from SEBI then the registration can be cancelled.

2. Prospectus and minimum subscription:

It is another important document required for the invitation to the general public
for subscribing to the shares of the company. On the other side, the company
has to receive an application for a minimum number of shares. The public
company cannot make allotment of shares unless a minimum subscription is
received.

3. Application to the stock exchange:

The company has to get listed itself on a stock exchange. Firstly, the stock
exchange authorities evaluating the soundness of the company if they are
satisfied then the company will be listed.

4. Allotment of shares:
When a company is listed under the stock exchange then the company has to
submit a return of allotment with the registrar stating the addresses, names, and
number of shares allotted to the shareholders.

D. Commencement:
The registrar issue the certificate of Commencement of business after receiving
the minimum subscription, along with the application. This is the final stage and
in this stage legal documents are prepared after the certification company can
run its operation smoothly.
In case of a private limited company, it can immediately start its business as
soon as it is registered. However, in case of public limited company a
certificate, known as ‘certificate of commencement of business’ , must be
obtained from the Registrar of Companies before starting its operation. For this
purpose it has to file a statement with the following declarations to the Registrar
of Companies.
(a) That a prospectus has been filed with the Registrar of Companies.
(b) That the shares have been allotted upto the amount of the minimum
subscription. SEBI- Securities and Exchange Board of India Senior Secondary
Business Organisations
(c) That the Directors have taken up or purchased the minimum number of
shares required to qualify themselves to be Director.
(d) That no money is liable to become refundable to the applicants by reason of
failure to obtain permission for shares to be traded in a recognised stock
exchange.
(e) A statutory declaration by a Director or the Secretary of the company stating
that the requirements relating to the commencement of business have been duly
complied with.

Some of the advantages or merits of joint stock company are:-

1. Larger Capital.
2. Limited Liability.
3. Stability of Existence.
4. Economies of Scale .
5. Scope for Expansion .
6. Public Confidence .
 7. Transferability of Shares .
8. Professional Management.
9. Tax Benefits.
10. Risk Diffused .
11. Social Benefits .
12. Greater Borrowing Capacity .
13. Promotes Savings and Investment .
14. Greater Accountability .
15. Greater Adaptability .
16. Synergy of Capital and Capability
17. .Use of Latest Technology.

Some of the disadvantages or demerits of joint stock company

are:-

1. Difficulty in Formation.
2. Lack of Secrecy .
3. Delay in Decision Making .
 4. Concentration of Economic Power .
5. Lack of Personal Interest.
6. More Government Restrictions.
7. Incapable and Unscrupulous Management.
8. Undue Speculation in the Shares of the Company.
9. Impersonal Work Environment .
10. Numerous Regulations.
11. Oligarchic Management.
12. Conflict in Interests.
13. Lack of Motivation and Personal Touch.
14. Social Evils.
15. Separation between Ownership and Management.
16. Fraudulent Promotion and Management.
17. Adverse Impact of Large Scale.
18. Lack of Continuity .
19. Lack of Secrecy and a Few Others.

Advantages of Joint Stock Company:

1. Larger Capital- The huge capital required by modern enterprises would not be possible
under other forms of organisations like sole individual proprietorship and even in partnership.
The joint stock company by its widespread appeal to investors of all classes can raise
adequate resources of capital required by large-scale enterprise.

2. Limited Liability- Liability of the shareholders of a company is limited to the face value
of the shares they have purchased. It has a stimulating effect on investment. The private
property of shareholder is not attachable to recover the dues of the company.

3. Stability of Existence- The organisation of a company as a separate legal entity gives it a

character of permanence or continuity. As an incorporated body, a company enjoys perpetual
existence.

4. Economies of Scale- Since the company operates on a large scale, it would result in the
realisation of economies in purchases, management, distribution or selling. These economies
would provide goods to the consumer at a cheaper price.

5. Scope for Expansion- As there is no restriction to the maximum number of members in a

public company, expansion of business is easy by issuing new shares and debentures.
6. Public Confidence- Formation and working of companies are well regulated by the
provisions of the Companies Act.
The provisions regarding compulsory publication of some documents, accounts, director’s
report, etc., create confidence in public.
Their accounts are audited by a chartered accountant and are to be published. This creates
confidence in the public about the functioning of the company.

7. Transferability of Shares- The shareholders of a public company are entitled to transfer

the shares held by them to others.
The shares of most joint stock companies are listed on the stock exchange and hence can be
easily sold.

8. Professional Management- The management of a company vests in the directors duly

elected by shareholders. Normally, experienced persons are elected as directors. Thus, the
available skill is utilized for the benefit of the company. The company organisation,
therefore, is like a bridge between the skill and capital.

9. Tax Benefits- Company pays lower tax on a higher income. This is because of the reason
that the company pays tax on the flat rates. Similarly, company gets some tax concessions if
it establishes itself in a backward area.

10. Risk Diffused- The membership of a company is large. The business risk is divided
among several members of the company. This encourages investment of small investors.

Disadvantages of Joint Stock Company:

1.Difficulty in formation- The legal formalities and procedures required in the

formation of a company are many.
It has to approach large number of people for its capital and it cannot commence
business, unless it has obtained a certificate of incorporation and a certificate to
commence business.
2.Lack of Secrecy- Every issue is discussed in the meeting of the board of
directors. The minutes of meeting and accounts of the firm’s profit and loss etc.,
have to be published. In this situation maintenance of secrecy is difficult.

3.Delay in Decision Making- In company form of organisation, all important

decisions are taken by the board of directors and shareholders in general
meeting. Hence, decision making process is time consuming.
Board of directors itself has often to be at the mercy of bureaucracy.

4.Concentration of Economic Power- The company form of organisation

gives scope for concentration of economic power in a few hands. It gives easy
scope for the formation of combinations which results in monopoly.
Large joint stock companies tend to form themselves into combinations or
associations exercising monopolistic power which may prove detrimental to
other firms in the same line or to the consumers

5.Lack of Personal Interest- In company form of organisation, the day-to-day

management is vested with the salaried persons or executives who do not have
any personal interest in the company.
This may lead to reduced employee motivation and result in inefficiency.

6.More Government Restrictions- The internal working of the company is

subject to statutory restrictions regarding meeting, voting, audit, etc. The
establishment and running of a company, therefore, would prove to be
troublesome and burdensome because of complicated legal regulations.

7.Incapable and Unscrupulous Management- Unscrupulous individuals may

bring economic ruin to the community by promoting bogus companies. The
fraudulent promoters may be fool the public to collect capital and misuse it for
their personal gain.
Misuse of property, goods and money by the managerial personnel may harm
the interests of the shareholders and create panic among the investing public.
8.Undue Speculation in the Shares of the Company- Illegitimate speculation
in the values of shares of a company listed on the stock exchange is injurious to
the interest of shareholders.
Violent fluctuations in the values of shares as a result of gambling on the stock
exchange, weakens the confidence of investors and may lead to financial crisis.

Conclusion:

On the basis of the advantages and disadvantages of a joint stock company

discussed above, it may be concluded that the advantages of a company form of
organization outweigh its disadvantages.

Most of the negative points listed above radiate, basically, from the weaknesses
of the persons who are entrusted with the task of management; they are in no
way a natural part of the system itself. If the management and control of a
company is in right hands, no form of organization can be parallel to it.

TYPES OF COMPANIES

Chartered Companies

Statutory companies

Registered Companies
 Chartered Companies

Chartered companies are those which are incorporated under a special

Charter or proclamation issued by the king or queen. The activities of such

Companies are laid down in the charter under which they are established. Such

Companies were generally started in the 17th and 18th centuries. The East India

Company, The Bank of England, the Chartered Bank, etc., are examples of

Chartered companies. In India chartered companies are not in existence because

There is no monarchy. This method of incorporation is rarely used now.

 Statutory companies

Statutory companies are those which are incorporated under a special act

Of parliament or legislature. The activities of statutory companies are governed

By the special act under which they are established. The method of incorpora-

Tion is used for companies of national importance and public benefit, such as

Railways, electricity supply companies, water works etc. The Reserve Bank of
India, the State Bank of India, the Life Insurance Corporation of India, the In-

Dian Airlines Corporation, the State Trading corporation of India, etc., are ex-

Amples of statutory companies.

 Registered Companies

Registered companies are companies incorporated under the Companies

Act. The activities of registered companies are governed by the Companies Act.

Registered companies are the most important type of Companies, Most of the

Trading companies belong to this type, Registered companies may be divided

Into three classes from the point of view of liability of the members. They are

• Companies limited by shares,

• Companies limited by guarantee and

• Unlimited companies.

(i) Companies Limited by shares

These are companies in which the liability of the members is ‘limited to the
nominal face value of the shares held by them in the case of these companies, if
a member has already paid the full nominal value of his shares cannot be called
upon to pay even a paisa, more, whatever may be the debts of the company. But
if he has paid only a part of the nominal value of his shares, he can be called
upon to pay only the unpaid amount on his shares in case of need. These
companies are usually trilling companies. Most of the companies registered
under the Companies Act are of this type.

(ii) Companies limited by Guarantee

These are companies in which the liability of the members is limited to a

Fixed amount which they have guaranteed or agreed to contribute to meet the

Liabilities of the company in the event of its liquidation. The amount

guaranteed

By the members is mentioned in the Memorandum of Association of Articles of

Association. The members are required to pay the amount guaranteed by them

Only if the company is wound up and if the assets of the company are insuffi-

Cient to meet its debts, art, science, sports, culture, religion, etc, these compa-

Nies may or may not have share capital. If such companies have share capital,

The members are to pay the amount which are in paid on their shares and the
Amount guaranteed by them. Such companies are very few in number.

(iii) Unlimited Companies

These are companies in which the liability of the members is unlimited as

In the case of partnerships or sole trading concerns, If such companies go into

Allegation, the members can be called upon to pay an ‘unlimited amount even

From their private assets to satisfy the debts of the company. Such companies

Are rarely formed.

Registered companies may be divided into three classes from the point of

View of interest of the general public.

They are:

• Private Companies

• Public Companies

• Government Companies
(iv) Private companies

Which has at least two members?

Which limits the number of its members to fifty, excluding those?

Members who are its present or past employees.

Which restricts the right of its members to transfer shares and

Which does not invite the public to subscribe to its shares or debentures.

(v) Public companies

Which has at least seven members.

Which has no maximum limit to the number of members.

Which generally invites the public to subscribe to its shares and debentures and

Which generally does not restrict the right of its members to transfer

Shares or debentures

(vi) Government companies

A Government Company IS a company in which not less than 51% of the

Share capital is held by the Central Government of by one or more State

Government and partly Central Government and partly by one or more State

Governments.

HOLDING AND SUBSIDIARY COMPANIES

A public or a private company may be holding company or a subsidiary

Company,A Holding Company is one which holds more than half of the
nominal

Value of the equity share capital of another company or which controls the

Composition of the Board of Directors of another company the company, the

Company which is so controlled by the holding company is known company.

For example X Company holds 51% of the nominal value of the equity share

Capital of Y company, then X company is said to be a holding company, and Y

Company is subsidiary company.

DOMESTIC AND FOREIGN COMPANIES

From the point of view of the country of incorporation, companies can be

Divided into two classes namely Domestic and Foreign companies.

A domestic company is one which is incorporated in our country i.e., India.

A Foreign company is one which is incorporated outside India, but has a

Place of business in India.

A private limited company enjoys certain privileges. They are:

Only the members are enough to form a private limited company.

• It can commence business immediately after its incorporation.

• It need not get the certificate to commence business.

• It can allot shares even before the minimum subscription is

reached.

• It need not file a’ prospectus or statement in lieu of prospectus with

• The Registrar

• It need not hold a statutory meeting and need not send statutory re-

• Port to its members.

• Two directors are sufficient for the private limited company.

• It need not file with the Registrar a list of Directors and the consent

• Of the directors to act as such

Domestic Business :

Domestic business refers to the business where economic transactions are

conducted within the geographical boundaries of the one country. The buyer
and seller in domestic business belong to same country.
It is limited to territory. In domestic business it is very easy to conduct business
research.
The nature of customers in domestic business is homogeneous. In this currency
of parent/home country is used for doing business.

A few advantages include:

Transportation cost is much lower

Encourages the establishment of small scale enterprises
The transaction cost is lower
The time period between the production and sale of goods is lesser
Advantage of tax benefits
Protection of business strategies
Easy availability of raw materials and promotes the growth of an industry.
Helps in the expansion of foreign trade where economic transactions are
conducted across border with several countries in the world.
The buyer and seller in international business belong to different country. It is
quite wide. In international
International Or Foreign Business :

International business refers to the business, that conducts business in a state or

jurisdiction other than where it was originally incorporated.
Business research is very expensive and hard to conduct.
The nature of customers in international business is heterogeneous.
In this different types of currencies of different countries are used for doing
business.

Advantages

 New customer engagement

 Spreading business risk.

 Recruiting new staff.

  Increasing Advantages brand awareness
Monitoring currency fluctuations

 Securing foreign investment

 Lowering costs

 Improved consumer confidence

Disadvantages

 Handling logistics.

 Speaking the language.

 Coordinating time zones.

 Monitoring currency fluctuations

 Following foreign politics

Comparison Chart

BASIS FOR
DOMESTIC BUSINESS INTERNATIONAL BUSINESS
COMPARISON

Meaning A business is said to be domestic, when its International business is one which is
economic transactions are conducted within engaged in economic transaction with
the geographical boundaries of the country. several countries in the world.
BASIS FOR
DOMESTIC BUSINESS INTERNATIONAL BUSINESS
COMPARISON

Area of operation Within the country Whole world

Quality standards Quite low Very high

Deals in Single currency Multiple currencies

Capital investment Less Huge

Restrictions Few Many

Nature of customers Homogeneous Heterogeneous

Business research It can be conducted easily. It is difficult to conduct research.

Mobility of factors Free Restricted

of production

Characteristics of International Business:

1. It is one which is engaged in an economic transaction with several countries in the world.

2. It is carried out across borders and national territories of a country (Inter-country).

3. Many restrictions are imposed while doing business internationally or entering foreign market
e.g. Tariff and non-tariff barriers, exchange controls, local taxes, etc. International and host
country regulations are applicable.

4. Huge capital investment is involved.

5. The market culture widely varies among different nations and regions.
 6. Liking and disliking of the customers are heterogeneous

7. The risk in international business is high.

8. An international business deals in multiple currencies. Hence we have to consider the
exchange rate of the currency.

9. Multilingual, multi-strategic and multicultural human resource is necessary for smooth

operations of an international business.

10. Global human resource practices are carried out in an international business.s

11. Marketing and advertising strategies vary from country to country due to language barriers.

12. Price differentiation is carried out.

13. Quality standards are very high. Global standards are set.

14. It is very difficult and costly. Reliability of information depends.

Characteristics of Domestic Business:

1. A business is said to be domestic when its economic transactions are conducted within the
geographical boundaries of the country.

2. It is carried out within the national or geographic borders of the country (intra-country).

3. Tariffs and quotas are not present and very few local restrictions are imposed on domestic
business. Only local regulations are applicable and are uniform throughout the country.

4. Less capital investment is involved.

5. There is less difference in the market culture of local areas and regions within a country. The
market culture 1s relatively uniform.
6. Liking and disliking of the customers are homogeneous.

7. The risk in domestic business is less.

8. A domestic business deals in a single currency (the currency of the country).

9. It can succeed in a human resource with minimum skill and knowledge.

10. Employees are usually from the same country.

11. Keeping the knowledge of domestic requirements, practices and culture, domestic marketing
and advertising strategies are used.

12. Generally, the same price is charged for similar products.

13. Quality standards may be low.

14. To conduct business research, demand analysis, and customer survey is easy.

15. Cost advantage cannot be enjoyed.

16. A domestic business is only affected by the variables in the domestic.

Difference between Public Company AND Private
Company.

Following are the main points of difference between a public

company and a private company:

1. Minimum Paid-up Capital- A company to be incorporated as a Private

Company must have a minimum paid-up capital of Rs. 1, 00,000, whereas a
Public Company must have a minimum paid-up capital of Rs. 5, 00,000.

2. Minimum Number of Members- Minimum number of members required to

form a private company is 2, whereas a Public Company requires at least 7
members.
3. Maximum Number of Members- Maximum number of members in a Private
Company is restricted to 50, there is no restriction of maximum number of
members in a Public Company.

4. Transferability of Shares- There is complete restriction on the transferability

of the shares of a Private Company through its Articles of Association, whereas
there is no restriction on the transferability of the shares of a Public Company.

5. Issue of Prospectus- A Private Company is prohibited from inviting the

public for subscription of its shares, i.e. a Private Company cannot issue
Prospectus, whereas a Public Company is free to invite public for subscription
i.e., a Public Company can issue a Prospectus.

6. Number of Directors- A Private Company may have 2 directors to manage

the affairs of the company, whereas a Public Company must have at least three
directors.

7. Consent of the Directors- There is no need to give the consent by the

directors of a Private Company, whereas the Directors of a Public Company
must have file with the Registrar a consent to act as Director of the company.

8. Qualification of Shares- The Directors of a Private Company need not sign an

undertaking to acquire the qualification shares, whereas the Directors of a
Public Company are required to sign an undertaking to acquire the qualification
shares of the public Company.

9. Commencement of Business- A Private Company can commence its business

immediately after its incorporation, whereas a Private Company cannot start its
business until a Certificate to commencement of business is issued to it.
10. Share Warrants- A Private Company cannot issue Share Warrants against its
fully paid shares, whereas a Private Company can issue Share Warrants against
its fully paid up shares.

11. Further Issue of Shares- A Private Company need not offer the further issue
of shares to its existing shareholders, whereas a Public Company has to offer the
further issue of shares to its existing shareholders as right shares.

Further issue of shares can only be offer to the general public with the approval
of the existing shareholders in the general meeting of the shareholders only.

12. Statutory Meeting- A Private Company has no obligation to call the

Statutory Meeting of the member, whereas of Public Company must call its
statutory Meeting and file Statutory Report with the Register of Companies.

13. Quorum- The quorum in the case of a Private Company is TWO members
present personally, whereas in the case of a Public Company FIVE members
must be present personally to constitute quorum. However, the Articles of
Association may provide and number of members more than the required under
the Act.

14. Managerial Remuneration- Total managerial remuneration in the case of a

Public Company cannot exceed 11% of the net profits, and in case of inadequate
profits a maximum of Rs. 87,500 can be paid. Whereas these restrictions do not
apply on a Private Company.

15. Special Privileges- A Private Company enjoys some special privileges,

which are not available to a Public Company.
Difference between Public Company and Private Company: 7 Key
Differences

The key differences between a private enterprise and a public enterprise

are defined as under:

1. Objective:

Private enterprises are mainly profit-driven. Hence, they perform only those
economic activities which offer a regular and steady return on capital
investment. On the other hand, Public enterprises are guided by several socio-
economic and political objectives.

They perform a scale of operations with little regard for making profit.

2. Ownership:

The ownership of a private enterprise rests in one or more private individuals or

corporate bodies. On the other hand, Public enterprise is owned by the Central
Government and / or one or more State Governments either singly or jointly.

3. Management:

A private sector enterprise is managed by its owners or their elected

representatives. The management has to abide by the guidelines laid down by
the owners.

However, there is enough scope for initiative and dynamism because policies
can be modified or even relinquished according to the requirements of the
particular situation.
On the other hand, there is little room for initiative and dynamism in public
sector enterprises because the managers of such enterprises are expected to
function within the rigid policy framework and rules framed by the
Government.

4. Capital:

Private enterprises get their capital from the resources owned by the private
investors/owners.

They have limited capacity to raise capital and may face shortage of funds. On
the other hand, the full or at least 51 per cent of the capital of a Public enterprise
is provided by the Government from public funds.

Such an enterprise can never be short of funds because Government can collect
unlimited financial resources.

5. Freedom of Management:

In a private enterprise, the owners are free to manage and control the affairs
with minimum interference from outside agencies.

Conversely, a Public enterprise faces continuous interference from several

agencies, e.g., ministries, politicians and bureaucrats. Often the business
operations suffer due to the interruption in daily affairs of the enterprise.
6. Flexibility:

A private enterprise can easily execute its policies and operations to meet the
demands of any situation. There are few restrictions on its owners for attaining
the objectives and policies of the enterprise.

However, in a public enterprise, any change in objectives and policies requires

the approval of the government and its functionaries, due to which sometimes
an opportunity may be lost.

7. Area of Operations:

Private enterprises are ready to pursue any realm of investment where steady
and reasonable returns are expected. But, public enterprises operate mainly in
the field of basic and strategic industries, public utility services and other areas
of social benefit.