Disadvantages of one company


Difficulties in formation :- 

The procedure of formation of company is difficult, complicated, expensive and time consuming. A number of legal formalities have to be completed before information of a company. It also requires services of expert like promotion, underwriters, Bankers, Lawyers. Certain documents such as Memorandum and Articles of association have to be drafted and filed with registrar of companies. 

Lack of secrecy :-

Sometimes the success of business depend upon top trade secrets. But in joint stock company secrecy can not be maintained because decision are taken openly. The Annual Account of company is published in newspapers. All important matter are placed before board of directors and accountant. They will use the secret information for their own benefits.

Slow decision making :-

There is often delay in decision making. In join stock company decision are taken by board of directors and top executive. But they are not free to take all decisions.

Generally the important decisions regarding the company management and business affairs are taken in the company meeting. So there is considerable delay in decision making. It affect on efficiency of business unit.

Lack of personal devotion :-

Though shareholders are real owner of company. The business is conducted by board of directors. Shareholders have no direct control over management of joint stock company. Director delegates power to various executive. They do not take interest in business and lack of personal interest leads to wastage and inefficiency.

Concentration of economic power :-

In order to avoids competitions different companies combine together. Such concentration of economic power in few hands is harmful to consumer, labourers, economy, society. So there is scope for private monopolies.

Exploitation of shareholders :-

In joint stock company there is separation of ownership from management. Thought shareholders are real ownership of company. They have no effective voice in management of company.

So a strong management can misappropriation funds and misleads shareholders.

Expensive  management :-

The company is managed by board of directors and other managerial experts. The company has to pay higher salary/remuneration and other benefits to those person. The  profession management have be very costly.

No flexibility :-

A joint stock company is not flexible organisation. So easy and quick change can not be possible in the business, affairs and policies of the company. The company has to conduct. It’s business activity strictly as per provision of Indian companion Act and memorandum of Association.

Lack of common interest :-

In joint stock company, the interest of various parties is not common. The shareholders are only interested more dividend. The director are interested in higher salary and bonus. The government is interested in taxes. The customer/public interested in better and cheaper goods at low price. It is not possible for companies to satisfies all this parties.

Excessive legal Control :-

There is excessive legal control in the formation as well as working of company. They company has to conduct it’s business according to provision of Indian companies Act. If these regulations are not followed the Govt. Charges fines or penalties.

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