Statutory corporations are defined as autonomous corporate bodies that are created by a special act of Parliament or state legislature having predefined functions, duties, powers and immunities as defined by the act of the legislature.
Statutory corporations enjoy autonomy in case of finance and are answerable to the particular legislature under which it was formed.
Features of Statutory Corporation
The following are the features of statutory corporation:
1. Corporate Body: Statutory corporations are corporate bodies. They are artificial persons which are created by the law and are regarded as a legal entity. These corporations are managed by a board of directors who are appointed by the Government.
These corporations have the right to enter into contracts and are able to do any kind of business under the company name.
2. State Owned: Statutory corporations are fully owned by the state, the state lends full support by subscribing to the capital in whole.
3. Autonomous Employee System: The employees of the statutory corporations are not regarded as government servants although being owned by the Government. The employees are recruited and paid as per the rules laid down by the corporation.
4. Financial Autonomy: Statutory corporations have financial autonomy or independence. They are not managed under any kind of accounting, budget and audit. However, in times of need, the statutory corporations can borrow money from the government.
5. Answerable to the legislature: The statutory corporations enjoy freedom in case of internal management and running of the operations of the corporation, but are answerable to the state or government legislature that created it.
Merits of Statutory Corporation
Following are the merits of statutory corporation:
1. Expert Management: Statutory corporations are managed by directors who are very much experienced in their respective fields. This imparts professionalism in the management of the statutory corporations.
2. Autonomy in Administration: Statutory corporations enjoy autonomy in the administration of the corporation.
3. Quick decision making: Statutory corporations have significantly less file work and formalities as compared to other forms of organisations which results in quick decision making.
4. Efficient Staff: The employees of the statutory corporation are provided fair wages, facilities and proper working conditions along with developmental programs. All these contribute towards making employees motivated to perform more efficiently.
5. Ease of raising capital: As these corporations are owned by the government, fundraising is easy as they can raise funds by issuing bonds at low interest rates.
Demerits of Statutory Corporation
Following are the demerits of statutory corporation:
1. Autonomy only on paper: Although statutory corporations are autonomous, the working of these corporations are hampered by interference from ministers, political parties that impacts their autonomy.
2. Rigid laws: The statutory corporations enjoy flexibility in operations, but rigid rules and regulations make changing any of the existing rules a time-consuming process. Any amendment that needs to be made to the existing set of rules needs to be presented in parliament which makes it tedious.
3. Lacks Initiative: These corporations lack any profit motive and therefore the employees and management are not interested in taking any initiative for generating profit.
4. Clash of Interest among members: The members of board directors are selected by the government and there may exist differences of opinion among directors, which leads to a clash of interests among them.
This was all about the topic of Statutory Corporation – Features, Merits and Demerits, which is important for Commerce students. For more such interesting articles, stay tuned to BYJU’S.
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