Business Environment – Statutory Bodies and Corporations:
Statutory companies are known as Statutory Bodies and Corporations or Public Corporations. These are the public bodies operated by the statute. For e.g. – Reserve Bank of India (RBI), Life Insurance Corporation (LIC), Employee State Insurance Corporation etc. In simple terms, it means a company or a body set up by statute.
The essential features of a public corporation are as under
- Management: Statutory Corporations are managed by the Board of Directors, appointed by the government.
- Accountability: Statutory Corporations are account and audited by the Comptroller & Auditor of India (CAG) as they are accountable to public & parliament. This ensures public accountability.
- No Interference: In day to day working of the corporation, political interference is not allowed because Statutory Corporations have its own pattern.
- Objectives: It works on profit objective and as such its activities are commercial in nature.
- Answerability: It is answerable to the Parliament as regards to its objectives.
- Capital Contribution: Its capital is wholly owned by the Government. The public is not the shareholders of this type of organization as compared to that of Government Company.
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Advantages of a Statutory Corporation:
- Formation: Statutory Corporations are easy to be formed. They can be easily formed by passing Special Act, either at legislature Assembly or at the Parliament.
- Autonomy: There is no political interference in day to day working of the corporation. Statutory Corporations can have its own working pattern.
- Flexibility: Statutory Corporations enjoy full flexibility in its operations. It is free to take any decision related to investment, capital collection, production, recruitment, planning, accounting, etc.
- Capital Raising: Capital is contributed at large by the government to the statutory corporations but they can easily and freely collect capital from the general
- Quick decisions: Quick decisions are possible because all the decisions are taken by the Board of Directors and Board can implement these decisions easily.
- Staff Members: These corporations are free to have its own recruitment policy.
Disadvantages of a Statutory Corporation:
- Difficult Formation: Incorporation of Statutory Corporations is difficult and lengthy. They require lengthy documentation, complicated formalities & passing of statute.
- Rigidity: The policies once approved, the statute once passed require cannot be changed easily. It can be done by the parliament only & this is also very time-consuming.
- Political Interference: The efficiency of the corporation is affected due to the political interference.
- Wastage of Resources: Wastage of physical, capital and manpower resources in several cases is very often with statutory corporations.
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