Incorporated Companies

                              Incorporated Companies

The companies act no 7 of  2007 shall apply , to all  incorporated companies in sri lanka

                             Definition of Incorporated companies 

" It is an  incorporated or unlimited liability institute having  registered under the companies act and function to  the provisions of same being  treated as a person before the law "

     Classifications of companies 

                                                     

                                                 Companies                                                        

                            _______________|___________________                               

                            |                                                                    |

                  Limited Companies                                   Unlimited Companies 

     ____________|_____________

     |                                                   |

Companies limited                       Companies limited

by guarantee                                     By shares

                                       ______________|_________________

                                     |                            |                                 |

                      Limited Public              Limited Private              Limited off shore

                        Companies                  Companies                        Companies

 

                                            Types of Companies

                  In terms of companies  Act no 07 of 2007 , the companies are mainly of three forms         

            1. Limited Companies 

                                                It is company  where the liability of the share holders is limited only up to the quantity specified in the Articles of Association , based on the number of shares subscribed by them

           2. Unlimited Companies 

                                                 the liability of the share holders of these companies is not limited to the number of shares held as specified in the Articles . In addition, they are bound for the settlement  of the companies liabilities without any limit.

           3. Companies Limited by Guarantee

                                                             These companies do not issue  shares and in case of settlement of company's  debts or liabilities  without any limit.

        Features of company limited by Guarantee

- Bind up to the value of fixed Guarantee as shown in the Article , in case of settlement of debts of liabilities 

- Does not issue shares 

- There should be an Article of Association which specifically states the following 

              1. Objective of the company

              2. In the event of winding up of the company the amount each member should contribute to the assets for the settlement of liabilities should be indicated.

- It is possible to register as a " Company limited by guarantee " without inserting the word "Limited " to the company name.

                                         

                                    Private Limited Company 

    A Private Limited Company should be interpreted as an incorporated organization which cannot sell in public using a corporate statement its shares or securities to the public , where the maximum number of shareholders is limited to 50 and liability is limited , which has a legal personality and it has to be registered under the companies act .

Features of a private limited company 

- Maximum of share holders is limited to 50

- Shares or other securities cannot be issued ti the public 

- Should be subjected ti statutory control to the share holders control as well

- The management of all the activities should be by a board of directors 

- Liability is Limited 

- Has a legal personality

- Minimum number of directors is 01. no limit regarding the maximum 

- Could refrain from following certain provisions of the company act on a written unanimous consent of the share holders

- It is compulsory to maintain Accounts 

- When mentioning the name of the company . the word " Private Limited " should be stated .

- Shares cannot be transferred without the consent of other shares holders  .




                            

  

                                                                  

 

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Joint ventures

                             Joint ventures

A joint venture could be defined as a relationship built up for a short period of time for the purpose of achieving a definite purpose . Usually in  this instance a name of a business is not used. once the expected purpose is achieved the joint venture too gets terminated . it is a temporary type of business organization.

             The differences between a joint venture and a partnership

 

Partnership                                                                       Joint venture

- long term continuity when                                                         -   short term continuity when compared                                                                                         compared                                                 
- normally operated with an agreement                                        - no agreement signed

- normally book keeping is maintained                                         - accounting is done under special 
agreement                                                                                      method

- business take place with the business                                       - not operated with a business name
  name

   Limited partnerships

 Within srilanka , permission is not given to start this type of partnership .  in this type of business there too are bound , but with regarding to limited partners their limited is limited only to the capital they have invested .

The features of a limited partnership 

- there are partners with both limited and unlimited liability

- in a limited partnership there should be at least one unlimited partner and a limited of one limited partner

- The limited partners cannot participate in the management activities of the partnership.

- The limited partners have no capacity to enter into agreements ( on behalf of the partnerships )

- There are no possibilities of drawing on the capital without the approval of the other partners.

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Types of partnerships

                                    Types of Partners

General partner/ Active partner

He actively participates in the affairs of the partnership.His debility or death would result in the termination of the partnership.He has the right to actively participate in the managerial activities of the partnership.He has unlimited responsibility regarding his business activities.
  

   features

- Contributes to the capital

- Unlimited liability 

- Activity participates in managerial activity 

- Has claim over profit and loss 

- Usually draws a salary or a wage 

- Public knows that he is a partner

Dormant/sleeping partner

He invested capital, but does not participate in the managerial activities of the business 

    features

- Contributes to the capital

- Unlimited liability

- Does not participate in the managerial activity 

- Public is not aware that he is a partner

- Has claim over profit and loss

- Usually he does have a right to a salary  or wage 

Silent Partner

he is a partner who has invested capital to business and enjoy profit and loss but does not get involved in managerial activities

   features

- Contributes to the capital 

- Unlimited liability 

- Enjoy profit and loss 

- Participate in managerial activities 

- Public knows that he is a partner 

Secret Partner

He is a partner who invests capital in his business with unlimited liability, enjoys profit and loss and participates in managerial activities.

   features

- Contributes to the capital

- Unlimited liabality

- Participates in managerial activities 

- Public is not  aware that he is a partner

- Usually gets a salary or a wage

  Nominal partner

He does not contribute to the capital of the business. He  invites his popular name or the good will only . Liability is unlimited and enjoy profit and loss. Does not participate in managerial activity 

Eg:  Famous sportsman (sanath jayasurya ),famous actor (sharook khan)

   features 

- Does not contribute to capital

- Liability is unlimited 

- Enjoys profit and loss

- Does not participate in managerial activities

- Public knows that he is a partner

     Limited partner 

His liability only to the amount of capital he has invested.He is not permitted to participate in managerial activity. But enjoys profit and loss. Liability is limited.

  features

 - Liability is limited

- Contributes to the capital

- No rights to participate in managerial activities

- Public knows that he is a partner

- If a part of capital were to be removed as drawing the approval of the rest partners are required

- His death,bankruptcy and debility would not result in liquidating the partnership

- He many transfer his share to another limited partner on the consent of others

    Quasi partner    

He is a partner who has  retired from his partnership. But he invest his capital in the business and makes profits. He is entailed to a variable interest or an additional profit based on the profits earned by the business .

 features

- Contributes to the capital

- A retired partner

- Unlimited liability

- He has a right to an additional interest or a profit, based on the profits of the business 

- No permission to participate in managerial activities

- Public knows that he is a partner

First partner 

The partner whose name appears first in the document of registration of the agreement and other publication. Usually problem such as tax payments are addressed to the first partner 

Duties of partners 

- Every partner should contribute ti the capital

- Profit and loss should be shared on agreed ratio

- No partner should make secret profits from the activities of the partnership

- Should not derive a salary or a wage, by participating in partnership activity 

- Should not engaged in competitive business with the partnership business

- Should maintain the confidence of the partnership as well as the confidence among the partners 

-  Should not behave in a way damaging the goodwill of the partnership

- Should be jointly and severally, liable for the activities of the partnership

- The liability of all the partners is unlimited on the loans taken by the partnership 

Rights of the Partners 

 - The right to share profit in the agreed ratio

- The rights of all other partners to share secrets profiles when a single partner receives such profiles

- The rights to participate in the affairs of the partnership

- The rights check up the books of the partnership 

- The right to get at least a minimum of 5% interest on moneys invested besides the capital that has been invested 

- Right of reimbursement of expenditure incurred personally or the partnership

- The rights  to enter the agreements on behalf of the partnership.

- The right to recruit staff on behalf of the partnership   

   

 

 

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Partnership

                                       Partnership

 As per partnership ordinance of 1980, a partnership is a            relationship which subsists among persons caring on a
 business in common with the motive of making profit

Accordingly the following features are surfaced in a partnership

- The aim of making profits 

- Collective relationship 

-to act in unison (To act for a common aim )

Rules and regulation affective partnership 

 Unlike the case of sole trade with regard to partnerships there are 
 no few rules and regulations which are directly influencing them.

- Partnership ordinance 1890

- Fraud prevention ordinance 1840

- Limited partnership ordinance of 1907 (Not applicable to srilanka)

- Business names ordinance of 1918

- Other rules and regulation (case decision garner vs murrey)

 Fraud prevention ordinance of 1840

if in any partnership starting capital were to be rupees one thousand (rs  1,000/-)or more it has been emphasized that should be carried out on a written agreement . in this instance although it could be carried out without written agreement it would not be possible to any relief from court in the absence of a written agreement 

Commencement of a partnership

as partnership in a relationship between a few persons it could be started up in any of the following ways.

- By verbal agreement among partners 

- By coming into a written agreement

- By implying or by the behavior of partners 

partnership agreements 

a partnership agreements is a written or verbal agreement which takes into a consideration all the facts relating to carry on the partnership business. the agreement could be maintained either as a written agreement or verbal agreement. if the agreement were to be written agreement the following facts should be include in it.

By the fraud protection ordinance of 1840 if the starting capital of any partnership were to be more than rs 1,000/= it should be compulsory conducts on a written agreement 

- The names of the partners 

- The names of address of partners 

- The objectives of the partnership 

- The main business activities of the partnership 

- The duration of the partners 

- The principal place of business of the partnership 

- How the partners should contribute to the capital 

- Weather interest is getting accumulated to the capital or not

- Weather interest is due on drawing or not 

- Payment of interest on loans granted by the partners to the partnership 

- The steps to be taken when a new partner joins the partnership 

- The duties and rights of partners 

- Payments of salaries to the partners 

- Settlements of disputes 

- Method of dissolution of the partnership 

once signed in the presence of a notary by all partners,it become an agreement 

section 24 of partnership ordinance of 1890

In the following two main situation section 24 applies to a partnership 

- In the situation where the partnership is carried on with out an agreement 

- In the situation where there is a partnership agreement but existence when it is silence regarding certain facts (when it is not mentioned in a partnership or agreement 

contents of section 24 of the ordinance

- The partners should equally contribute towards the capital 

- The profit and loss should be equally distributed

- All the partners should participate in the activities of the partnership and they should not draw a salary of the same 

- If a partner besides his capital contribution were to give a loan to the partnership he should have right to get an interest of at least 5%

- The accounting books of the partnership could be checked by all the partners at any time 

 - That the partnership accounting books should be maintained and kept at the head office               

  

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Business Organizations

The factors taken into consideration when a type of business organization is distinguished from others

- ownership
- capital 
- Decision making 
- Registration
- Legal personality
- Liability 
- Distribution of profit and loss
- Going concern
- Tax payments 
- Accounting and audit
- Objective

                                   Sole trade ( proprietorship )    

It is a type of business organization where an individual makes the capital contribution and 
conducts the business on his own decision making, within minimum of legal procedures. in
the whole world what is common is sole trade. the main reason for this is that in starting a 
business as well as running a business in case of a sole proprietorship, it is possible to carry
on without adhering to strict legal rules and regulations

  The features of a sole proprietorship 

- The ownership is with one person 

- Could commence with minimum of legal procedures. registration is not compulsory . however
   if the business is carried on under the name of another person, it should be registered under the
   Business  Names  Registration  Ordinance    (Business Names Ordinance of1918)

- The capital is supplied by the owner out of his saving or funds obtained from others sources

- Decision making by the owner himself . he has the control over the business

- The profit and loss are borne by the owner himself. there is no sharing or profits with others
   persons. the earning of profits depend on his decision 

- Liability is unlimited . that is for the outside borrowing owners liability is unlimited. those abilities 
   not only extend up to the business properties but even the private property bound by the liability.

- There is no legal personalty. that is front of law business is not treated as a name of the business nor 
   be present in court in the name of the business .

- There is no community. that is one the death of the owner or on his full debility business could get  
   terminated

- Accounting or auditing is not compulsory.

- No taxes could be paid in the name of the business. the owner could personally pay the taxes.

- No special law is applicable to dissolution.  
  

   Although there are no special acts affecting to sole trade the following acts which are common to business are effective regarding sole trade too  

- consumer protection act.
- Employees provision fund act
- Shop and office employees act
- Employees trust fund act
- Labour Laws 

Advantages of sole trader

- Commencement is easy . That is with a minimum  of capital and with minimum of rules and regulations , business could be started

- Profit could be enjoyed individually

- Quick independent decisions could be made

- Registration is not compulsory

- The business could be terminated at any time one wishes .

- Accounting and auditing not compulsory.

- The possibility obtaining the service of one family members 

  Disadvantages of Sole Trade

- Liability is unlimited 

- Lack of capital(limitation of sources of capital)

- Losses have to be borne alone 

-No continuity 

-No legal personality

-Difficulty in making correct decision 

-Difficulty in expanding the business 

-Lack of managerial knowledge 

-The resources are not properly managed as accounting is not 
  cumpulsory

-Difficulty of managing when the business expand       

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M- Commerce

           Mobile Commerce ( M-Commerce)

Mobile Commerce , also known as M - Commerce or m Commerce , is the ability to conduct commerce using a mobile device , such as a mobile phone , a personal digital assistant PDA , a smart phone or other emerging mobile equipment such as dashtop mobile  devices.
Mobile Commerce has been defined as follows :

mobile commerce is any transaction , involving the transfer of ownership or rights o use goods and services , which is initiated and completed by using mobile  access to computer- mediated networks with a help of an electronic device. 

eg : mobile ticketing , mobile vouchers , coupons and loyalty cards . content purchase and delivery , location - based services . mobile banking , mobile brokerage , auctions , mobile browsing , mobile purchases, mobile marketing and advertising. 

                                  

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Industries

Factors Considered in Locating an industry

1. Easy  to access to raw materials
2. Easy access to labour
3. Access to markets.
4.Adequacy of infrastructure facilities.
5.Transportation
6.Opportunities for the development of a foreign market
7.Government industrial policy
8.Strategies for the promotion of industry

  
          E - COMMERCE

WHAT IS E - COMMERCE

Electronic commerce ( e- commerce ) can be defined as a wide range of online business activities for products and services . it can also be explained as any form of business transaction in which the parties interact electronically ( internet and digital media) rather than by physical exchanges .

         E - commerce involves in buying  and selling over the internet , or conducting any transaction  involving the transfer of ownership  or rights to use goods or services through a computer mediated network.

The internet economy is a broader concept than the e - commerce and the e- business . it included e- commerce and e- business



                         

 

  what are the different types of E- commerce

 

   1. business - to - business (B2B)

2. Business - to Consumer (B2C)

3. Business - to - Government (B2G)

4.   Consumer - to - Consumer  (C2C)

5.  Mobile Commerce (M - Commerce )

 

 Benefits of  E - commerce for consumer 

1. convenience to consumers less cost and time for searching sellers , less cost of transaction processing

2. customer can easily select products from different providers without moving around physically

3. freedom to make transactions at anytime and anywhere in the world .

4. disinter mediation- prices of products drops as the number of middlemen such as brokers , whole sellers , retailers are less.

5. it enables customers to choose and order products according to their personal and unique specifications - enhances the standard  of living .          

     

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Industries in sri lanka

      

    Industries in sri lanka

 The thrust of the long term industrial policy of the government is to develop a globally competitive ,dynamic and technologically safisticated Industrial sector. Industrial policy should encourage innovative and productivity improvement in the industrial goods and services.

Objectives of Industrial policy in Sri Lanka 

1. Generating job opportunities to reduce unemployment.
2.  Expand the base of the domestic industry.
3. Develop a physical and the human resources in an efficient way.
4  Promoting the Export- oriented Industries.
5. Regional Development.
6. Product Diversification.

Infrastructure facilities for the Industries in Sri Lanka

The basic requirements is to develop the Industrial Sector.

Electricity
Transport
Insurance
Banking and Technology etc. are Infrastructure facilities.

In Sri Lanka Infrastructure facilities for the industrial sector. The government provide the Infrastructure facilities through the following Government Institutions;
                            
Board of Investment    B.O.I.
Industrial Development Board   I.D.B.
Export Development Board   E,D.B.
Sri Lanka Standard     S.L.S.

The private sector also contributes the infrastructure facilities for the industrial sector in the following ways ;
B.O.O-  Build Operate Ownership
B.O.T.-  Build Operate Transfer
M.O.T.- Moderate Operate Transfer

Steps taken by the Government to Develop the Industrial Sector

1. Provide tax concessions (B.I.O.)
2. Exempted the customs duty and VAT for machineries and the Equipment.
3. Provide and Develop the Infrastructure facilities.
4. Provide new market.
5. Provide financial assistance through Government Bank.
6. Provide technical service through Government Institutions.
7. Provide management and the consultancy services.
8. Provide training for employees through Government Institutions.

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By products

By Products

A by produced could be defined as a good produced in addition to the main product with the use of waste of residue of producing the main product.
Eg.Production of tars , grease , petroleum gas etc. with the use of residue in the oil refinery.

The Objectives of the Industrial Policy of Sri Lanka

1. Propagation of export oriented industries.
2. Creating more and more employees opportunities.
3. Enhancement of personal incomes and living standards.
4. Making the balance of payments favorable.
5. Raising the living standards of the people through an distribution of income and wealth.
6. Development of industries to a higher level.
7. Raising per-capita incomes.

Strategies for Promoting Industries in Sri Lanka

1. Stabilization of the economy , control of inflation and following macro economic policies suitable for          productive economic activity.
2. Providing special incentives for investment.
3. To obtain new technology for the purpose of promoting the inflow of capital into the country. Encouragement of foreign investment in order to achieve market expansion.
4. To carry forward the policies of privatization.
5. To uplift the export oriented industries through an improvement of international competitiveness of the industries which have been provided with special incentives.
6.  Promotion of small scale industries.
7. Implementation of the human resources development program.
8. Relaxation of exchange control, import and export permits etc.
9. To accommodate foreign investors in the share market of Sri Lanka without restriction (by the removal of taxes)
10. To take action to enter the international market by maintaining relationships with internationally famed institution.
11. Enhancement of productivity.
12. Institutional support from the government sector.
13. Development of infra structure facilities.
14. Promotion of  the use of domestic raw materials.

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Division of labour

                  Division of labour / specialization

  This refers to the use of different groups of labour for different stages of production or for different parts of product. when production activities are performed by such groups of labour , the workers acquire or skills related to a particular function. it is called specialization . division of labour is applied to large scale production.

 The advantages of division labour 

- Acceleration of the production process
- efficient  management of each section
- Large scale production is mode possible
- Minimization of cost
- enhancement of the quality of products
- saving time
- the ability to supply to the market on time
- special skills acquired by the workers

  Disadvantages of division of labour

- Boredom of employment due to monotony of work arising from being engaged in the same work over a long period of time
- Exposure to mental and physical illness
- Weakening of one section effects the whole process of production
- the drop in quality in one section affects the entire  production process
- Difficulty of finding alternative employment for the worker.

                                    SPECIALIZATION

Specialization occurs when a person is engaged in an activity in which he is most efficient. one person may be able to perform a task more efficiently than another , due to education, training, division of labour , and experience. Specialization may be categorized as personal Specialization , institutional specialization , regional specialization ,national specialization and international specialization.

 

                                     Diversification

Diversification means that an institute introduces a variety to the market instead of depending on one product. This could be in the form of different kinds of goods or the same kind of goods.

Eg : Maliban , Nawaloka , Upali , John keels , Aitken Spence and Halyleys.

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