CHAPTER-9, CLASS-XI
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Transcript of CHAPTER-9, CLASS-XI
FORMATION OF A COMPANY
PROMOTION
INCORPORATION
FLOATATION
COMMENCEMENT OF BUSINESS
CONCEPT & STAGES IN PROMOTION
CONCEPT It implies the discovery of business idea, its investigation and assembling of necessary resources to set up a business as a profitable concern.
It is a term of business and not of Law
STAGES IN PROMOTION
DISCOVERY OF BUSINESS IDEA
INVESTIGATION
ASSEMBLING
FINANCING
1. DISCOVERY OF BUSINES IDEA
Conception of business opportunity relating to starting of a new business or taking over of an existing undertaking
Preliminary analysis is done to ensure that the idea deserves time and cost of detailed investigation(relating to feasibility and economic viability of the product concept)
2. DETAILED INVESTIGATION
To establish the soundness of the proposition in terms of technical feasibility & commercial viability.
To ensure that the estimated income will be sufficient to meet the estimated expenses and would yield sufficient returns to investors
It involves study of market demand, availability & cost of raw materials, machineries, labor, capital, land, probable selling price, degree of competition, mkt size, consumer behavior, current economic scenario, profits, etc.
Data so collected thru’ detailed investigation are presented in the form of Project-Report
The report helps in procuring licences and finance from Government agencies and financial institutions respectively
3. ASSEMBLING
Making contracts for the purchase of materials, building, machineries, tools, capital, raw-materials, etc
Selecting factory site, deciding about types & capacity of plant & machineries, acquiring patent rights, etc
Deciding about size & layout of plant and office
Persuading other persons to join hands
Procurement of required staff & executives
4. FINANCING OF PROPOSITION
Financial plans are prepared with respect to Capitalisation, Capital Structure, Time and Method of Capital Issue
Agreement with Underwriters, Stock- Brokers, Bankers, Special Financial- Institutions
A Joint stock Company may be promoted inany of the following two ways:-
by converting an existing partnership or proprietorship firm into a Joint stock – Company OR
by setting up a New Company altogether
PROMOTERS
A Promoter is one who conceives a business opportunity, assembles resources and takes the necessary steps to bring an enterprise into existence
ROLE OF PROMOTERS
Conceiving an idea of business opportunity in the form of Joint stock Company
Making preliminary investigation
Conducting detailed investigations to ensure project feasibility and economic viability
Bringing together various persons who agree to associate themselves in the business
Preparing various documents and getting the company incorporated
Entering into contracts relating to purchase of various assets, acquiring rights and hiring employees
Raising the necessary capital and launching the enterprise as a going concern
QUALITIES OF A PROMOTER
Initiative
Resourcefulness
Fertile Imagination
Foresightedness
Organising ability
Wide Knowledge
Dynamic Outlook
Self-Confidence
Salesmanship
Integrity of Character
TYPES OF PROMOTERS1. PROFESSIONAL
These promoters are specialised agencies and promotion is their whole time occupation.
They promote business enterprises and hand over the management of such enterprises to their owners or shareholders.
ACCIDENTAL Promotion is not their whole time job.
They promote their own enterprises as entrepreneurs.
They own and manage the enterprises promoted by them.
In our country, most of the business enterprises are promoted by such promoters.
FINANCIAL
Financial / Investment promoters float new enterprises during favourable conditions in the securities market.
They are interested in making gains from favourable investment climate rather than in the commercial success of the firm.
TECHNICAL These promoters promote new enterprises on the basis of their specialised knowledge and training in technical fields.
They charge fees for their services.
Consultants and engineers may promote enterprises to commercial use of their inventions.
SPECIALISED INSTITUTIONS
Specialised financial institutions like IDBI, IFCI, NIDC, NABARD, etc., provide technical managerial and financial assistance for the promotion of new enterprises.
Many of them have set up merchant banking division to provide services for launching new enterprises.
GOVERNMENT
Since Independence, the Government of India has been promoting several enterprises in diverse fields of economic activity ranging from foreign trade to machine tools and heavy electricals.
LEGAL STATUS OF A PROMOTER
Since a company does not come into existence, during the preliminary stage, a promoter cannot be called an agent or trustee of the company.
A promoter stands in Fiduciary Relationship with the company he is promoting. A relationship involving a confidence and trust.
The relationship of good faith requires the promoter to act honestly, sincerely and in the best interests of the company.
He should not misuse his position for personal gain.