Feat ures of Public Sector Enterprises (PS Es)

Publlc sector A publlc

g ment
Publlc sector enterprises are ma,tall eany
l has a maJor role to
enterprises owned ~the particular form of
pla, In the organisation
contribu te to the ubllc ndare
-format ion of de Ing upon
economic account able to the
)
publlc sector the ,. of Its
develop ment. publlc throu h
rises. But 0 onsand
the govemm ent areex arllame nt.
to contribu te to are characte rized their relatlonshlp
acts through Its with the
the economic ~ publlc
pie, Ices, govemment. The
develop ment of ownership, publlc
empl sand sultablllty of a
the country In funds being used
th8" talle decisions particular form of
tocta,'s llberallzed, for Its activities organisation would
on behalf of the
competitive world. and publlc depend upon Its
ment.
accountablllty. requirements. lJ l l Cl l
 - - - - - - - - - - - - - - - Code: J W G 7 E Z,,

De pa rtm en tal Undertabings

( . \ This Is the oldest and most tradltlo nal form
(;;\ act through the officers of the
~ of publlc
•
.• re
sheet as deparbnents of the ministry
~ ~Nmm ent and Its empl!CMMes are
and are considered part or an exttmslon of
the mlnlsby ••••• r:;\ These unclertablngs may be under the
f-\
The C1D11,arnment functions through these
\V c•-....,al or the sta1ta a.11¥Wtmment and the
n1les of ciantiral / stata govemm ents are
~ deparbnents and the activities perform ed
applica ble. For exampl e, the Indian
~ u..111 are an Integra l part of the
Rallwa ~ are manage d ~ the Mlnlsby of
function ing of the CHK,emment.
Rallwa ~, Post and telegraph.
~ have not con • as
\V a ..,_fUlftmous or lndeN111aent ln1t11~on s
1
r-;;\ The Deihl Mllb e, All India Radio,
and as such are not Independent legal ~ DalM'llllanhan etc. are other exampl es of
entitles . deparb nental unclerta blngs.
 Code: J W G 7 E Z,,
/ They are accountab le to the mini since their
managem ent Is d1rect1, under the concillft~ ml •

~~=~--.,;:;.;~~~ .neAPnrlses come dlr--=DV

are an annual
11ft of the Go\1'8111111alt.
The ...,.1nue earned ~ these Is also paid lnlo the
"' treasury.

emploueas of the Allll-.nrlse are \aOvet'llment

sen,ants and their recrulbne nt and conditions of
service are the same as that of.,.... empl~ s
d1rect1, under the ~,wmme nt. Tl-s, are headed ~
Indian Admlnlll ftdh• Service (W) officers and dvll
servants who are transferable from one mlnlsby lo

It Is aat11an1lly consl1aatrea lo be a major subdivision of

the Govemme nt department and Is subJect lo direct
control of the ministry.
 Code: J W G 7 E 2,,,

, These unclertalllngs facll the Pent

. ' to -rcls e ett.ca ve i1!81d1NIII over their
• operations.

its of These ensure a high degree of

• __• publlc a~nt abllt ty. •
, , ? •• ··" rtm en tal
•

nd ert ab ing s •
The ue earne d~ the
goes dlrectlV to the tnasm y ancl nenm Is
•

a source of IIVftll11a for the QM,ern m,ent.

I Is this fann Is
most suitable since It Is uncNr the direct mn11N111
• and supervision of the mnc:et114NI mlnlstr ,.
IIWpae1its of Depgrtme'1tal Unilert~ , 1
Depart mental The emplavw a or heads of
These AMJNprlses are unable
cleparbne nts of such
underta lllngs fall to unclertalllngs are not al1IIVW'l1111
to talle advanta ge of business
provide flexlblllty, which to talle Independent decisions, opportun ities. The
Is essentia l for the u11Ulftad the approval of the
burea~m r•s over-cau tious
ministry conc·..,...INI. This leads and con1!la.laa ave approva l
s 100tcn ,...,..._tlon of does not allow thaim to lalle
to catalVI, In mntt.11'111 11...,.
business. prompt decisions are required. rls~uaaw res.

There , plsm In There is lot of

da~-~ peratlon s These organiz ations are
politic al usuall~ Insensitive to
n~ ' ·~ on can be
Interfe rence consum er needs and do
. less It goes
' h the proper ! throug h the not provide adequa te
J els of author •-• mlnistay. services to them.
, ~Dl'tnel'.its of De par tme nta l Un iler t .
'~part menta l The emp,aowm or heads of These enaarpnses are unable ·,
departments of such
Jertall lngs fall to underta lllngs are not al11v.M11'11
to talN advant age of business
Ide flexlblllW, which to talle Independent decisions, rtunltles. The
essentlal for the 's over-cautious
1 _ . ,....

and con181'11,cnn,a approv al

smoot h operation of does not allow to talle
1

business. rls~ venmres.

There Is tap sm In There is lot of

da~-to - a~ operat ions These organizations are
1\and no action political / usuall ~ Insensitive to
can be
tallen unless It goes I in~erference / consum er needs and do
1

throug h the proper throu gh thr not provide adequ ate

channe ls of author ity. mlni st~. services to them. ~-' -~. :
0 I l C l l
 ► As per The Compa nies Act 2013, a compan'-' Is an
artlflcla l person having a separa te legal entity,
. pan~ perpetu al succession and a commo n seal. The
shareho lders are the au,,nairs of the compan '-' whlle the
board of dlrecttors Is the chief managing bod'-' elected
~ the sharelMNCHtrS•

res of Joint Stocll Com pan, :

Person:
pans, Is a r...•lon of law and exists lndeNf1ta,ent of Its membe rs. Ube natural persons, a
s, can own pro~tu , Incur debts, borrow m.....lU, . .. , Into contracts, sue and be sued but ,111111

t breathe , eat, run, talb and so on. Therefore, It Is called an artlflclal person.
al Entits,:
date of Its Incorporation, a compan y acquires an Identity, dlstlnd from Its mem ll ■
and liabllltles are separat e from those of Its owners. The law does not recognize t
 1Featu res of Joint Stocb Com pany :
• 1) ,;rtifici alPerson 1
hciiin pany Is a creation of law and exists lnde,nat~HW of Its members. UIN natural persons, a
company can own p,o,nAtl'ftl, Incur , cts, sue and be sued but
l_ It cannot b..,~. , eat, nan, talll and so on. I naiNan.

2 Separate Legal Entity 1

► rom liecla ts lncol'Dlllwatt,on, a compan y acquires an Identity, distinct from Its members.
► Its assets and llabllltles are separat e from those of Its owners. The law does
not recognize the
business and owners to be one and the same.

rmation 1
n of several
The tonlllClttlOn of a com.-.., Is a llm.-c:omu mlng, nmlMlllve and complladiecl Pf'NISS. It lnuollUeS the pnparatlo
documents and compllance with several let,al ,equiNNtN lnts before It can stimt 11111mc11111ne-
_ _, aut_ate_ea_rller.
lncorporatlon of companies I! ~pullOfY under The Companie s Act 20IJ • an, of the "MIICMII compa_n,
DI_

4) Perpetua l Succession 1
► The existence of a compan, Is not ~ the coming and going of the members. The compan, Is created~ the law, ■e 111
■ can only bring It to an end.
45 ,t Its dosure, called winding up Is completed .
► It can be brought to an end only when the entlN legal pro ll /
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1) limited Llabillty 1
;... Th• shaNholde n aN liable to the mrtanl of the amount unpaid on the 1haN1 held bt, them.
► Also, only the assets of the compa1'9" am be used to settle the debts which l'WIIAll.ln the c1eg,.. of
risb borne bv an Investor.
Perpetual Existence 1
1....llal'ILL reskmldlon. ln1sot.,...cv or l1nsm,11tv of Its rnandl.s m
► Existence of a compa"" Is not attfectbad
It has a separat e-~ from Its ....111111...-t.
► A com~ wtl conttnue to abt eve1 If aD the mamll_, .._ It can be llalllldatlld ._asper
the .,..,..lam of The
Com11111111at Act_ 200.

► The shaN of the publk Rmtt.d CIDllll1NIIIV can be sold In the 111C1•1t and as IUCh Clm'I be..._ CD1111M1tad Into cash
In
auethen Nd.t....
► This avoids bladN:aae of IIMIISIIINllt and lll'llltlallilH 1M compa~ GI a fa.iNNliralble Clu.1111118
Professiona l Manageme nt 1
11111111'811. . . em.-, people who C1N
► A compa"" can nH-"' to PGl' IIIOller salartel to spedallltl and Pl"CntWOnallS.
mn!IM'tl In that, area of 1pedaftlsattm'l11..
► A compa"" has various depa1t:n111111b
'"'""_.. clecblon•
malling as well as ....~ . elfflcjlaftcv
5) Scope for Expansion 1
► As compa"" has large ffnandal resources as compaNCI to other fonn1 of business 011,cmaaltl
on.
► A compa"" can attarnd capital from the publk as well as through loam &om banlts and
fl:narlclal lnstftutlons. Thus,
thare II gra.nrt.. Kope for expansion.
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 of the affftan et a
maltes It dll'IKIJIII b the top level ma111Q11,-...a to 1111111....a.... ...,,...... alMlld
► Thela..,.1 lzeofa
customers and c:redlton.
Numerous Re,gulatlons 1
:,. The ful,dltNW • of G compcmt, IJ subted ta mant, ...... pnulslens G_. Clel!IIIMMNU.
;. A COfflpCl"I' Is bul~INd wtth In Nlped ef a s ~ . . . . Vellln9, . . . . of ND_..
clocuawlftb. GfMI II NC1UINd to obtain from • via., ,..r1ra, Sl9I etc.

Delay In Decision Malling 1

~ the lop fflG~ae,lll alll,, ffllilldle ffNlll. . . . . .tnt
:,. Companies C1N de,noc,cdjkolfl, nMDl~NI lt1NMi1Gh the lloard of DIPIMh!,.. wNdl Is IOIIOWIINI
and lower level fflGIICIIMII MnL
dedslons but abo In odlng upon them.
:,. Com:nKlnkilltictn GI well GI ClDDl~m of various . . .l9011Glt ~ COUM ~ not-"' In IICllltna
6} Conflict in Interest 1
..e faces lob of Dl'Clllillffll tn eo111fd111G1:lnll
;. Sometimes It hM_.. very ...,rm.1• • fuffll the detinmNI of ucm....._ staJNh...en.1'11e manac.-,
and fflCllnGl""9 the affeln ef the Gfl~nv,.
;. , _ DDm. The shaNh-'i in want a hlglla dividend. Qll1t.n,_. want betw
CIUClllllV p,oduetl at lower p,tees and emiDlel,_ . want .......
uwm.a..__ ..... It NCIOlftlS .,.,, ..ifla.lBfo& , the ta fulfll al these dellnm,m.

Types of Companies
 795170

Jy ••• · Co mp an .

Three r,p es of Companies

One Person
Priva te Publ lc Com pany
Com panl ' Com pany (OPC) I

! ■
.-~ ■·
,I
 Basis Privat e compa ny Public Comp any -7
A publk compa~ has a minimum of
A prtvat. com~ has-a minimum of 7 members and there Is no llmlt on
Memben 2 and a maximum of 200 members. maximum members.
~-

Numbero f
must be 3 dl~tiwt In a publk
..,._ __ must be at least 2 dl,~tan In a
private
directors- - - ~ - compant,. compa~ .
+-=-------~-- ---':;___------~f----------------1

Mal1118t'Mlnce of the Index of members Malntttna nce of the Inda of memben

1nclex of Is not compulso r, for a Dnua'I•
1
members Is compulso ,y for a publk compa"" .

The nnua1• eompa~ must we the The p,tuate compa~ must use the
WONI llmlled (Pvt. Lid.) after word llmlled (lld.) after Its name.
Its name.
1
A publk comftftll., can Invite the
111111~1on to f The p-nuii- compant, does not Invite publk to subscribe to Its shafts or
public , the publk to subscribe to Its securities.

Transfer of Members of a private compant, are Members of a publlc compaftll aN

shares restricted to transfer their shares. allaw1111a to transfer their shaNs.

~/45
► With the lmplemARit~lon of The Companies
1

Act, 2013, a slngle person could constit ute, a

compa ny, UINl4H' the One Person Compa ny
(OPC) concept. The l1MW11ri11uct1on of OPC In the
legal s~m Is a move that would atM•ftl.•rage
the ra.11a1' 9t.l,...,., .... of micro businesses and
anl~BN NlaOfl hlp.

► One P~rson Company Is a c:~pa ny with only

one person as a memb er. That one person wlll
be the shareh older of the compa ny. It avails
all the benefits of a private llmlted compa ny
such as separa te legal entity, protec ting
person al assets from business llablllty and
perpet ual succession.
iJ/45