Public Private and Global Enterprises Test - 23

The stages in the formation of a public company typically follow this order:

Promotion: This involves the conception and initial organization of the company, including identifying business opportunities, assembling promoters, and conducting feasibility studies.

Incorporation: This involves submitting the company's memorandum and articles of association, along with other required documents, to obtain the Certificate of Incorporation.

Capital Subscription: This involves issuing prospectuses or offer documents to potential investors and receiving applications for shares.

Commencement of Business: After successfully raising the required capital through the subscription process, the company can commence its business operations.

The reconstruction of sick public sector units is typically handled by the Board for Industrial and Financial Reconstruction (BIFR). BIFR is a statutory body established by the Government of India to address the issues of industrial sickness and facilitate the revival of financially distressed companies, including public sector units. It assesses the viability of sick units, formulates revival plans, and monitors their implementation to ensure their sustainable recovery. BIFR plays a crucial role in restructuring and revitalizing sick public sector units, aiming to safeguard employment and promote economic stability.

A limitation of government companies as a form of public sector enterprise is the lack of autonomy in decision-making. Government companies, although owned by the government, often operate under regulations and guidelines set by the government, which can restrict their independence in decision-making processes. This lack of autonomy can lead to bureaucratic delays, inefficiencies, and challenges in responding swiftly to market dynamics or changing business environments. 

A Government company is defined under Section 2(45) of the Companies Act, 2013 as a company in which not less than 51 per cent of the paid-up share capital is held by the Central Government, or by any State Government or Governments, or partly by the Central Government and partly by one or more State Governments, and includes a company which is a subsidiary company of such a Government company.

Public sector enterprises often prioritize social objectives alongside economic goals, which may lead to a lesser emphasis on profit-maximization compared to private sector enterprises. 

Public sector enterprises may prioritize serving public interest, fulfilling government mandates, or achieving social welfare goals, even if these objectives conflict with maximizing profits. In contrast, private sector enterprises typically have a primary goal of profit-maximization to ensure competitiveness and sustainability in the market. Therefore, the statement that there is a greater focus on profit-maximization in private sector enterprises is typically true compared to public sector enterprises.

According to the Companies Act, 2013 in India, the minimum number of members required to form a private company is 2. This means that at least two individuals or entities are needed to come together and form a private company. This provision allows for flexibility in ownership and facilitates the establishment of small businesses with a limited number of stakeholders.

A joint venture is a business arrangement where two or more entities come together to create a new entity, sharing ownership, control, risks, and rewards. This distinguishes joint ventures from other forms of collaboration where entities may cooperate without forming a new entity.

Joint ventures benefit significantly from an established brand name at the time of incorporation. By partnering with a well-known brand, they gain immediate credibility and consumer trust, facilitating market entry and acceptance. This association also enhances their competitive advantage, attracting customers and investors. Unlike departmental undertakings, government companies, or statutory corporations, joint ventures leverage the strength of established brands to establish themselves in the market swiftly. Therefore, joint ventures stand to gain the most from the brand recognition and reputation of their partners at the time of incorporation.

Disinvestments of Public Sector Enterprises (PSEs) refer to the government's sale of its equity shares in these enterprises to private sector entities or the general public. This process allows the government to reduce its ownership stake in PSEs and raise funds by selling a portion of its shares to private investors or the public. Disinvestment aims to promote private participation, improve corporate governance, and unlock the value of state-owned assets. It does not involve closing down operations, investing in new areas, or buying shares of PSEs. Instead, it entails the sale of government-held equity shares to external investors.

Establishing public sector enterprises primarily aims to fulfill national objectives such as achieving regional balance and fostering economic growth. However, the specific objective of nuclear power development is not a primary justification for establishing public sector enterprises, as this goal can be pursued through various other means, including public-private partnerships or regulatory frameworks.