CONSTITUTION OF INDIA (COI)

(BNC501/ BNC601)

Unit 5-

Business Organizations and E-Governance: Sole Traders, Partnerships, Companies: The

Company’s Act: Introduction, Formation of a Company, Memorandum of Association, Articles
of Association, Prospectus, Shares, Directors, General Meetings and Proceedings, Auditor,
Winding up. E-Governance and role of engineers in E-Governance, Need for reformed
engineering serving at the Union and State level, Role of I.T. professionals in Judiciary, Problem
of Alienation and Secessionism in few states creating hurdles in Industrial development
 Sole Traders (Sole Proprietorship)
A sole trader is a business owned and run by one person. The owner and business are the same legally, and the business is not always
registered. It is best for small or medium businesses.

Legal Aspects & Liability:

1.No special legal rules apply; minimal formalities.

2.The owner bears all risks and enjoys all profits.
3.The owner's liability is unlimited.

Advantages:

1.Easy to Start: Minimal paperwork; owner’s personal ID can serve as the business ID.
2.Full Control: The owner makes all decisions.
3.Profit: The owner keeps all profits.
4.Privacy: No need to share business details with others.

Disadvantages:

1.Unlimited Liability: Personal assets may be used to pay business debts.

2.Funding Issues: Hard to get loans compared to registered companies.
3.Taxation: Can result in higher taxes.
 Partnership
A partnership is a business where two or more people share ownership, profits, and liabilities. It operates under the Indian Partnership
Act, 1932.

Features:

1.Formation: Requires a legal agreement between partners.

2.Unlimited Liability: Partners are personally responsible for the firm's debts.
3.Discontinuity: The business dissolves if a partner dies, retires, or goes bankrupt.

Types of Partners:

1.Active Partner: Participates in business and shares profits.

2.Dormant Partner: Only invests; doesn’t manage daily tasks.
3.Secret Partner: Involved in profits and management but remains unknown publicly.

Advantages:
1.Easy to Start: Needs only a partnership deed.
2.More Funds: Easier to raise funds than sole proprietorships.

Disadvantages:

1.Unlimited Liability: All partners are responsible for losses.

2.Limited Members: Maximum of 20 partners.
 The Company’s Act

The Companies Act, 2013 is a law in India that sets rules for forming, running, and closing companies.
It applies to all types of companies and focuses on better governance and shareholder rights.

Key Features:

1.More power for shareholders

2.Role of women on company boards

3.Corporate Social Responsibility (CSR)

4.Special court for company cases (NCLT)

5.Changing auditors regularly

6.Simpler merger and closing process

 Steps to Start a Company

•Choose a unique name and check its availability.

•Get the name approved by the Registrar of Companies (RoC).
•Write the company’s Memorandum (MOA) and Articles (AOA).
•Fill and submit necessary forms with required documents online.
•Pay the registration fees and send signed copies to RoC.
•Get the Certificate of Incorporation, which makes the company official.

Memorandum of Association (MOA)

The MOA is a document that explains:

•What the company does (its objectives).

•Its name, location, and capital details.
•Liability of its members.

It is like a rulebook that sets limits on what the company can do.
 Articles of Association (AOA)

The AOA is another document that explains:

•How the company operates internally, like rules for meetings, appointments, and managing finances.
•It is more about day-to-day operations and can be easily updated by passing a resolution.

Difference Between MOA and AOA

MOA AOA

Explains what the company can do. Explains how the company runs daily.

Hard to change (requires approval). Easier to change.

Sets boundaries the company cannot cross. Covers details within those boundaries.
 Prospectus

A prospectus is a document issued by a company to invite the public to invest in its shares or debentures.

Contents of a Prospectus:

1. Company name, address, directors, and key officers.

2. Details of the share issue and purpose of raising funds.
3. Financial performance reports.
4. Statements about legal compliance.

Types of Prospectus:

1. Abridged Prospectus: A short summary of the full prospectus.

2. Deemed Prospectus: Issued when securities are sold to the public indirectly.
3. Shelf Prospectus: Allows multiple issues of securities without reissuing a new prospectus.
4. Red Herring Prospectus: Incomplete prospectus used before finalizing the issue price.
 Shares

- A share is a unit of ownership in a company, representing a portion of the company's assets.

- Shares are movable properties and can be transferred according to the company’s rules.

Directors/Board of Directors

- A director manages the company’s affairs per the Companies Act, 2013.
- The Board of Directors is responsible for making decisions in the company's best interest.

- Types of Directors:

1. Residential Director
2. Independent Director
3. Small Shareholders Director
4. Women Director
5. Additional Director
6. Alternate Director
7. Shadow Director
8. Nominee Director
 Annual General Meeting (AGM)

- A yearly meeting for company shareholders, mandatory for all companies.

- First AGM must be held within 18 months of incorporation.
- No more than 15 months should pass between two AGMs.

Minutes of Proceedings of General Meeting

- Minutes are written records of what happened at the meeting, signed and kept by the company.
- They must be completed within 30 days of the meeting and are legally binding.

Auditor's Role

- An auditor checks the company’s financial records and ensures accuracy.

- Types of Auditors:

1. External Auditor: Independent auditor hired by the company.

2. Internal Auditor: Company employee auditing internal financial controls.
 Winding Up (Liquidation) Process

- The process of ending a company’s existence, selling assets, paying off debts, and distributing any remaining funds.

- Steps:
1. Appoint a liquidator to manage the winding-up process.
2. Liquidator sells assets, pays debts, and distributes the remaining amount to members.
3. The company is dissolved and removed from the company register if all assets and debts are settled.

E-Governance

- E-governance is the use of IT to improve government services, making governance simpler, accountable, and
transparent.

- Types of E-Governance:
1. G2C (Government to Citizens): Delivers services to citizens efficiently.
2. G2B (Government to Business): Improves business-government interactions.
3. G2E (Government to Employees): Enhances government-employee communication.
4. G2G (Government to Government): Facilitates smooth inter-governmental operations.

Advantages of E-Governance:
- Improves government service delivery.
- Reduces corruption and paperwork.
 Role of Engineers in E-Governance

- Engineers help implement e-governance by developing software, understanding cyber laws, and ensuring processes
comply with regulations.

Need for Re-engineering

- To improve government operations and adapt to technological progress, re-engineering is needed to redesign
workflows for better performance.

Use of Technology in Judiciary:

- Technology helps manage case files, reduces delays, and improves efficiency in courts.
- Role of IT Professionals: Manage court software, design systems for case tracking, and maintain digital records.

Alienation:

- Alienation refers to the feeling of disconnection and dehumanization, especially in a capitalist work system.

Secession:

- Secession is the act of a group or region leaving a larger political entity to form its own independent state.