difference between creaditors' winding up via members' winding up

CREDITORS’ VOLUNTARY WINDING UP VIS A VIS MEMBER’S VOLUNTARY WINDING UP

Winding-up / Liquidation is a legal process where a liquidator is appointed to administer an insolvent company’s affairs in order to provide a fair distribution of the Company’s assets to its creditors and members. Liquidators recover assets of the company and distribute the proceeds to its creditors. Meeting of Creditors / Members under the Companies Act can be called for a number of different reasons and at a number of different times.

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CREDITORS VOLUNTARY WINDING UP

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Voluntary winding up arises when the time limit for which the company was formed expires or the objects for which it was set up have been achieved. In such cases an ordinary resolution in the general meeting is sufficient. For every other reason, a special resolution is required. (484)

Winding up is deemed to commence when the requisite resolution is passed and from that date onwards the company shall cease to carry on its business. (486, 487)

Where the resolution for winding up has been passed, but the BOD are not in a position to give a declaration on the liability of company, they may call a meeting of creditors, for the purpose of winding up. It is the duty of the BOD to present the full statement of the company’s affairs and list of creditors along with their dues. (500)

Resolution passed by creditors to be notified to the registrar within 10 days. (501)

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Procedure

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A liquidator is appointed by the company in its general meeting and by the creditors in their meeting. They may agree on one person or if 2 names are proposed, the liquidator appointed by the creditors will act. (502)

Any director, member or creditor may approach the court, for direction that:

• Liquidator appointed in general meeting shall act, or
• He shall act jointly with liquidator appointed by creditor, or
• An official liquidator should be appointed, or
• Some other person must be appointed as liquidator. [502 (2)]

The remuneration of liquidator shall be fixed by the creditors, or by the court. (504)

On appointment of liquidator, all the power of Board of Directors shall cease. (505)

In case, the winding up procedure, takes more than one year, then liquidator will have to call a general meeting, and meeting of creditors, at the end of each year, and he shall present, a complete account of the procedure, and the status / position of liquidation (508).

The liquidator shall take the following steps when affairs of the company are fully wound up (509):

• Laying a complete picture of accounts, winding up process and method of property disposal before the general meeting and creditors meeting.
• Copy of account to be sent to the registrar and official liquidator within one week from the meeting.
• Company is deemed to be dissolved by the Official Liquidator from the date of report to the court.

Once the company is fully wound up, and assets of the company sold or distributed, the proceedings collected are utilised to pay off the liabilities. The proceedings so collected shall be utilised to pay off the creditors in equal proportion. Thereafter any money or property left may be distributed among members according to their rights and interests in the company.

MEMBERS VOLUNTARY WINDING UP

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When the members themselves decide to wind up the company’s affairs due to their inability to carry on business or inability to meet their financial obligations or any other reason, such winding up is known as member’s voluntary winding up.

The principal difference between a member’s and a creditor’s winding up is that in a member’s winding up, the board of directors have to make a declaration stating that the company has no debts. The directors shall call a board meeting and make a declaration of winding up accompanied by an affidavit stating that:

• The company has no debts to pay, or
• The company will repay its debts, if any within 3 years from the commencement of the winding up, as specified in the declaration.

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Procedure

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In a general meeting, one or more liquidators will be appointed to supervise the winding up process and the distribution of assets. Remuneration to be paid to the liquidator shall also be fixed in the same general meeting in which he was appointed. Notice of the liquidator’s appointment should be given to the registrar within 10 days of such appointment.

The power of board ceases to exist once the liquidator is appointed. This ensures that the liquidator is given a free hand in managing the final affairs of the company in a manner he deems fit. In case the winding up process takes more than a year, the liquidator is obligated to call a general meeting and present a complete account of the course of action taken and the current position of the organisation.

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Post Winding Up Provisions

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Once the winding up is complete, the following steps need to be taken:

• In a general meeting, called by advertisement, the liquidator shall lay down a complete picture of the winding up process by laying down the relevant accounts and the manner in which the properties have been disposed of.
• Within one week of the meeting, the liquidator shall send a copy of the accounts to the registrar and the official liquidator. Once of the official liquidator is satisfied that the affairs of the company are not being carried on prejudicially, the company shall be deemed to be dissolved from the date of report to the court.

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MEMBERS WINDING UP VS CREDITORS WINDING UP

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S. No.	MEMBERS	CREDITORS
1.	A board of directors’ declaration is needed that the company has no debts or that it would pay the debts within 3 years, if any.	The board is not in a position to unilaterally comment upon the liability of the company and therefore a creditors meeting is called
2.	A declaration of solvency in form 149, duly notarized, is required to be filed by the directors with a verified affidavit along with e-form 62. A statement of assets and liabilities at estimated realizable value should also be prepared along with a copy of the auditor’s report on the above two documents. Statement of affairs to be filed in form 57 verified by an affidavit in form 58 within 21 days of commencement of winding up.	Form 65-A is filed which is a statutory declaration expressing the inability of the company to continue business, thereby summoning a creditors meeting.
3.	At the general meeting a special resolution needs to be passed for winding up and appointment of liquidator(s) and fixing of remuneration. The resolution notifying the liquidator’s appointment shall be published in the official gazette and in 2 newspapers (English + Regional Language).	At the creditor’s meeting, the board shall lay out the complete picture of accounts along with a list of creditors and their claims. The liquidator appointed by the creditors will act. A committee of inspection might be formed to supervise the acts of the liquidator.
4.	Form 23 is to be filed within 30 days for notifying the resolution and form 62 shall be filed within 10 days of appointment. The liquidator shall notify his appointment to the ROC within 30 days in form 152 and e-form 62 and the same shall be published in the official gazette in form 151.	The resolution passed in the meeting is to be filed with the ROC within 30 days.
5.	The final general meeting shall be called giving notice in form 155 in which a special resolution for disposal of books and dissolution shall be passed.	The liquidator shall call a final general meeting and a creditor’s meeting by advertisement, specifying the time, place and object of the meeting.
6.	The official liquidator shall check and verify all the documents submitted to him by the company’s liquidator.	The liquidator shall submit a copy of the accounts to the ROC and the official liquidator.

for detail

source:http://bsamrishindia.com/winding-up-under-companies-act-1956/

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approaches to be followed while preparing for UGC Exam

Keep your documents intact in a bag: Make sure you carry all the necessary documents to the test centres on the day of examination. For this, pack your bag a night before the exam with all the requisite documents like admit card, Photo-Id proof etc to avoid panic and unnecessary stress. Besides, don’t forget to keep pen and stationary too in the bag.

Reach on Reporting Time: Plan your journey and make allowances for traffic jam. Start early, 30 minutes or so, to reach on reporting time at the venue of test as it will decrease half of your tension of being on time in the examination hall

Stress Management: Most of the candidates get nervous and panic at the time of examination. Make friends with stress however don’t let it occupy your mind for long. Talk to people and don’t forget to have a healthy breakfast to keep your mind refresh and alert throughout the examination.

Follow Guidelines: UGC has already listed certain instruction for the examination on its website. Make sure you read the instructions prior to day of examination and strictly adhere to same during the examination. If you are not aware of the guidelines, ask assistance from the invigilators and follow the instructions given by them at all the phases of the examination. Remember, your candidature can be cancelled if any candidate found violating the guidelines.

Handle OMR sheet with Utmost Care: As the OMR sheets can not be replaced after usage, carefully handle those sheets. Do not fold, roll or wrinkle the response sheets as it will not be readable by the machine. On the completion of the examination, the answer sheets should be handed over to the invigilator.

Don’t indulge in Unfair Practice: Do not carry books, mobile phones and electronic gadgets in the examination hall as these are not permitted. Do not indulge in cheating, copying or sneaking in fellow examinee answer sheets as it will lead to disqualification.

Systematic and Selective Approach: Read the questions carefully and attempt those questions first which you are confident of solving easily and accurately. If some questions take too much time, leave that question to be solved in the last and jump to other questions. As there is no negative marking, try to attempt and mark each and every question whether you know the answer or not. Go through the answer sheet properly to check no questions are left unmarked.

Tips to clear UGC exam

Tips to clear UGC exam

Let’s have a look at some tips for preparing for UGC NET:

Take time

If you are planning to appear for the UGC NET examination, the idea is to spend time on your preparation. It is advised you spend quality time on your preparation and also regular amounts of time. You will be required to be regular on the time that you take out for preparation. Most experts will advice you somewhere between three to six months for preparing for the test.

Familiarize yourself

Over the next some months you should be able to clearly know things for what they are as far as the syllabus for the test is concerned. You should channel your preparation on the topics in the syllabus and thus plan accordingly. If you start your preparation well ahead in time then there will not be any need to skip a topic.

Prioritize

Out of the three sections in the paper, two will be on a topic of your choice while the other is a common paper which is to test you on aptitude and general awareness. While it is necessary for you to score well in the paper from your subjects, remember that if you do not clear the first paper you will not be able to clear the NET as well. So give priority to all three and spend and plan time in preparation accordingly.

Notes

Although this is not the case with only this test, taking and making your own notes will take you a long way. Get into the practice of making your own notes; this will make a huge difference when you will revise.

Past question papers

Try and collect as many past year question papers as you possibly can. These will not only set a bar when you are preparing for the examination but will also assist you during the preparation itself. There is a possibility that you are not able to solve all the questions by yourself, so it is important that you take the help of a mentor, senior, teacher to help you with the questions.

Time if of the essence

You need to be able to practice a lot to be efficient. It is only when you know what question will be solved how will you be able to manage your time, efficiently. Time yourself when you are preparing for the UGC NET. By doing this you will have a fair enough idea of how things are to be done.

Be accurate

There is no fun in being quick if you can’t be accurate. The purpose behind being quick is that you do not miss out on anything you know. Similarly there is grave importance in being quick and accurate as well. So when you are preparing, keep in mind that while you are required to achieve your daily target and study, you are also to keep a check on how accurate your answers are.

In the end keep in mind that your answers will be as confident as you are. While keeping track of reality is of the utmost importance; do not break if you are not able to clear the paper in your first attempt. It has been made difficult for a purpose.

useful sites are:

http://www.examrace.com/CBSE-UGC-NET/
http://www.ugc.ac.in/

THE ADVANTAGES AND DISADVANTAGES OF LARGE SCALE PRODUCTION/OPERATIONS

THE ADVANTAGES AND DISADVANTAGES OF LARGE SCALE PRODUCTION/OPERATIONS

 (a) Advantages of Large Scale Production:

The following are the merits of large scale production:

1. Internal Economies:

Internal economies arise within the firm because of the expansion of the size of a particular firm.

They are called the economies of scale.

2. External Economies:

External economies arise with the expansion of the industry. These are generally the result of large scale production and are associated with the advantages of localisation.

3. Division of Labour:

The large scale production is always associated with more and more division of labour. With the division of labour per worker output increases. Hence, per unit labour cost is reduced in large scale production.

4. Use of machines:

The large scale production always makes use of machines. So, all the advantages of the use of machinery are available.

5. More Production:

The large scale industries can produce more goods. For instance, a big sugar factory can use molasses to make spirits and thus can reduce the cost of production of sugar.

6. Economies of Organisation:

With an increase in the size of the firm, the cost of management is reduced.

7. Low Cost of Production:

The large scale production gives many types of economies. Suppose, there are two different factories, each producing 500 units of a commodity. For these two factories, there must be two managers. But if the scale of production is enlarged and in one factory we start producing 1000 units of the same commodity, the work can be supervised by one manager. In this way, in the large scale production, the salary of one manager is saved. So, the cost of production is reduced.

8. Cheap and Easy Loans:

A large business can secure credit facilities at cheaper rates, because these firms enjoy credit and reputation in the market due to their fixed assets. Banks and other financial institutions willingly advance loans to these enterprises at a very low rate of interest.

9. Ancillary Industries:

With the development of large scale production, there arise many small industries which use its by-products or supply inputs to it. Suppose, when the production of steel is increased, many other auxiliary industries develop. The development of auxiliary industries contributes to the industrialisation of the area and the industry itself.

10. Standard Goods:

The production of standardised goods is possible on account of the large-scale production. Only a big motor company can produce standardised motor parts. Besides, it is possible to sell and transport these goods to distant places only by big business houses.

11. Advertisement and Salesmanship:

A big concern can afford to spend large amounts of money on advertisement and salesmanship. Ultimately, they do bear fruit. The amount of money spent on advertisement per unit comes to a low figure when production is undertaken on a very large scale. The salesmen can make a careful study of the individual markets and thus acquire a hold on new markets or strengthen it on the old ones. Thus, a large scale producer has a greater competitive strength.

12. Research:

The large scale production is conducive for the development of technology also. With larger amount of capital and financial resources, the large scale firms can afford to spend more on research and experiments which ultimately lead to the discovery of new machines and cheaper techniques of production.

13. Economy of Buying and Selling:

A large concern usually buys things in large quantities and therefore, at low rates. It also sells things in large quantities and can secure better terms.

14. Economies of Indivisibility:

Many factors of production are not perfectly divisible. For instance, assume that one machine can produce 100 units of a commodity, but we are producing only 50 units by that machine. The machine is indivisible. If the scale of production is increased and we start producing 100 units, per unit cost will be reduced. This is the economy of the indivisible machines.

(b) Disadvantages of Large Scale Production:

The following are the demerits of large scale production:

1. Evils of Factory System:

The large scale production is accompanied by all the evils of the factory system like over-crowding, density, pollution, bad morals, etc. Dirty habits of drinking and gambling spread very easily.

2. Danger of Over-Production:

The large scale organisation results in over production at times, so demand cannot be properly estimated. At last, prices fall and depression sets in.

3. Less Supervision:

A large scale producer cannot pay full attention to every detail in various departments. Costs often rise on account of the dishonesty of workers. Thus, due to inefficient and inadequate supervision, the cost of production goes up.

4. Monopoly:

The large scale production results in the localisation of industries. As a result, the bigger fish swallows the smaller ones, and cut-throat competition and monopolies result.

5. Class Struggle:

The large scale production gives rise to class struggle, the struggle between the labourers and the capitalists. Their interests cannot go together, as they are very different from each other. As a result, there is a struggle between the two groups.

6. Dependence on Foreign Markets:

A large producer has generally to depend on the foreign markets. The foreign markets may be cut off by wars, etc. This makes the business risky.

7. Possibility of War:

The large scale production increases the possibilities of wars. Big producers make attempts to sell their goods in the foreign markets and try to capture them by fair and foul means, thereby exposing the world to wars and struggles.

8. Lack of Adaptability:

As huge capital is invested in the large scale production, it is very difficult to bring about a change in the scale of production according to the circumstances.

9. Individual Tastes Ignored:

The individual tastes and interests stand completely ignored in large scale production. Goods of uniform quality are turned out irrespective of the requirements of the individual customers. Individual tastes are not, therefore, satisfied. This results in the loss of customers to other competitors.

10. Unequal Distribution of Wealth:

All wealth and incomes of the country get concentrated in the pockets of big producers due to large scale production. There is unequal distribution of wealth and resources on account of the large scale production. The rich become richer and the poor become poorer.

THE ADVANTAGES AND DISADVANTAGES OF SMALL SCALE PRODUCTION/OPERATIONS

THE ADVANTAGES AND DISADVANTAGES OF SMALL SCALE PRODUCTION/OPERATIONS

There are many kinds of merits and demerits of the small scale production, such as:

(a) Advantages of Small Scale Production:

The following are the merits of small scale production:

1. Close Supervision:

The small producer can himself supervise the minutest details of the business.

Nobody is allowed to spoil machinery or waste materials. The master’s eye is everywhere. There can be no fraud or idleness. He will exercise utmost economy to achieve the aim of maximum profits.

2. Nature of Demand:

The small producer has an advantage over the large producer, when the demand is either small or is constantly changing. He has thus a sphere of his own where he has an advantage over the large scale producer.

3. More Employment:

In the face of large scale unemployment existing in the country, the development of cottage and small scale industries is of great help to create more employment opportunities. Small scale production is more labour-intensive i.e., there is more use of labour than machinery. Thus, many unemployed persons are employed in the newly developed small scale industries.

4. Need of small Capital:

The small scale production can be started with small capital. Where there is shortage of capital, the small scale industries are of great advantage for the development of industries.

5. Direct Relation between the Workers and the Employers:

In small scale production less workers are employed. Therefore, a close relationship exists between the employer and the workers. Because of this close relationship, the employer can look after the well-being of his employees and employees, too, consider their work as their own and the work goes on smoothly without any disputes between the two parties.

6. Direct Relation between the Customers and the Producers:

The small scale producers generally cater to the local demand. Hence, they remain in touch with their customers. A small producer personally knows his customers. Therefore, he can produce goods according to the taste and fashion of each individual customer.

7. Easy Management:

The management of small business is easy and economical. Simple accounts and a few persons can manage the job well.

8. Freedom of Work:

There is complete freedom of work in a small business organisation. Workers are more or less self-sufficient. They are not dependent on the capitalists and carry on their jobs freely.

9. External Economies:

The small scale production secures all kinds of external economies, which are available to large units also. These economies are: better transport, electricity, and communication facilities; banking and insurance services; technical workers, etc.

10. No Evils of Large Scale Production:

The small scale production cannot fall victim to the evils of the large scale production i.e., evils of the factory system, overcrowding, etc.

11. Other Advantages:

In the small scale production, there are some important advantages over the large scale production:

(i) Whenever demand changes, the supply can be adjusted accordingly.

(ii) There are less possibilities of strike and lockouts and no moral degradation of the workers is feared.

(iii) There are no dangers of monopolistic institutions.

(b) Disadvantages of Small Scale Production:

The following are the demerits of small scale production:

1. High Cost of Production:

The cost of production per unit increases because there is a high cost of labour, a very little scope for division of labour and lesser use of machinery.

2. Wastage of By-products:

In the small scale production, it is not possible to make economic use of the by-products, as in the large scale production. By-products of the small producers generally go waste.

3. Less Use of Machines:

In the small scale production, there is less scope for the use of machines. As a result, these firms cannot take advantages of the use of the machinery.

4. Lack of Division of Labour:

In the small scale industries, the size of production is small, and there is lack of division of labour and less profits to the entrepreneurs.

5. Difficulty in Getting Loans:

It cannot enjoy the financial economies. Funds are either not available and if available, they have to pay higher rate of interest.

6. Difficult to Face Economic Crisis:

Because of the limited resources and financial weakness, the small scale producers cannot face economic crisis. The producers do not have the capacity to bear losses for long. In fact, under a small economic crisis, many small factories are closed down.

7. Costly Raw Materials:

In the small scale production, raw materials are purchased in small quantities which are available to the small producer at higher prices.

8. Lack of Standardised Goods:

The quality of goods is not standardised or upto the mark in the small scale production. It is difficult to sell goods because of their low standard and inferior quality.

9. Old Techniques:

In the small scale industries, the production is undertaken with the help of old techniques or old and obsolete machines. It is not within their capacity to bear the risk of installing new machinery.

10. Lack of Research:

The small scale industries have limited means at their disposal. They cannot spend much on research in the field of science and technology. In this way, the small scale industries are a hurdle in the way of technical research and, industrial development.

11. Difficult to Face Competition with Large Scale Producers:

If some large scale producers enter the market, the small producers find it difficult to compete with them. The small producers perish at the hands of the large scale producers.

CAUSES OF BUSINESS COMBINATION

Causes of combinations

The causes of combinations are as follows 1. Destructive Competition: destructive competition may result into the stoppage of many firms. In order to remove the fear created by strong competition, the competing firms arrive at some sort of understanding to regulate prices and eliminate overproduction. In other words, combination may be created as a means of furthering self interest by common action.  2. Economies of Large Scale: A large number of economies are achieved if a business is carried on a large scale. These economies relate to production, management, financing and marketing. Small business units may combine together to reap the benefits of large scale operations and organisation. This will reduce the cost of production and increase the profits of the business.  3. Joint Stock Enterprise: The evolution of company form of organisation has also facilitated the combination of various units by acquiring shares of various companies to control their affairs. The companies under the common control through the system of inter-locking directorship can be easily combined to get many benefits of combination. 4. Control of Market: Combinations are created to secure steady market. Sometimes, combinations are created to control the entire market and create a monopoly which is detrimental to the interest of the consumers. By controlling the market, they can sell their products at higher prices and earn huge profits. 5. Individual Ability: According to Shield, ' ' Great organising ability, strategic genius, or personal ambition on the part of one or a number of men may account in part for the rise of certain business combinations. The scarcity of business talent became one of the causes of centralisation of power in a few hands, endowed with business insight, business talent and business courage.' ' Many a time, business combination a are created due to the initiative and organising ability of an individual or a number of individuals.  6. Lust for power: Some businessmen have a lust for economic power which can be satisfied by creating industrial empires. Desires to bring up industrial regime lies at the back of many combinations. Individual ambition of becoming the pioneer member or coordinator of a huge combine is also on of the factors favoring combination.  7. Business Cycles: In uncontrolled economies, there are trade cycles. During books, firms expand to take advantage of rising demand, and during depressions, inefficient and weak firms find it difficult to survive because of lower demand. Business ups and downs generally lead to business combinations. Particularly in industries, where huge capital is employed and where demand is subject to cyclical changes, combinations occur as a revulsion against risk of burdensome overhead cost, glut, low turnover and lower process during depression.  8. Protective tariffs: Protective tariffs are used to encourage home industries. When the Government imposes import duty on certain items, the home manufacturers of such items are encouraged to form combination to develop their business and exploit the domestic market fully. Sometimes, national level combinations are formed to provide a united front to perpetuate protection.  9. Government Pressure: The Government policy may compel the weaker units to amalgamate with the stronger units so as to improve the overall efficiency of the industry. Even the Government may take over the sick units and combine them to form a viable unit and introduce rationalization in it.  10. Miscellaneous Factors:  (a) Dearth of managerial talents may lead to managerial integration of business units. Many companies have common directors which in fact means their common control.  (b) If an enterprise wants to be self sufficient, it may combine with other units. Vertical integration is the result of desire for self-sufficiency. Under this, various units producing the related raw materials and semi-finished products are combined together so that they produce the finished products at economical prices. (c) Growth of transport an communication has increased the intensity of completion not only in the national market but also in the international market. This has resulted in the formation of multinational enterprises having subsidiaries in different countries.  (d) Sometimes, firms in an industry join to avail of the benefits of patent rights of one firm.  Haney has divided the above factors or forces into three categories which are as follows:  (i) Driving or impelling forces consisting of cut-throat competition and decrease in the opportunity for speculative gains (ii) Beckoning forces which include opportunity for profits, protective tariffs and gains of over capitalization (iii) Facilitating forces comprising of joint stock enterprises and other forces.

Advantages And Disadvantages Of Business Combination

Advantages And Disadvantages Of Business Combination

The main objective of business combination is to eliminate cut-throat competition and secure theadvantages of large scale production. Following are the advantages of business combination.

1. Competition between and among the companies will be eliminated.

2. Amount of capital can be increased by combining business.

3. Establishment and management cost can be reduced.

4. Benefits of large scale production can be secured.

5. Operating cost can be reduced by avoiding duplication.

6. Research and development facilities are increased.

7. Monopoly in the market can be achieved.

8. Bulk purchase of materials at reduced price is possible.

9. Stability of the price of goods is maintained.

Following are the disadvantages of business combination

1. Business combination brings monopoly in the market, which may be harmful for the society.

2. The identity of the old company finishes.

3. Goodwill of the old companies decrease.

4. Management of the company becomes difficult.

5. Business combination may result in over-capitalization

EASY NOTES N BUSINESS COMBINATIONS

Discuss the various Types or Kinds of Business combination

Types of Business Combination :-
It has following four types :

1. Vertical Combination.
2. Horizontal Combination.
3. Circular Combination.
4. Diagonal Combination.

1. Vertical Business Combination :-
When various departments large industrial units combine together under single management is called vertical combination. Under this combination from purchasing of raw material to selling of product all the stages are linked up by the units.For examp0le, all the business units engaged in publishing books can make vertical combination as under :


Objectives or Advantages of Vertical Business Combination :-
1. To minimize the cost per unit.
2. To eliminate competition.
3. To hire the services of experts.
4. To supply the goods at lowest price.
5. To avoid over production.
6. To use improved methods of production.
7. To achieve the benefits of large scale.
8. To find proper market for their product.
9. To supervise the management.
10. To reduce the middleman commission.
11. To earn maximum profit.

2. Horizontal Business Combination :-
It is also voluntary association which two or more than two similar nature business units combined them selves under the one management, it is called horizontal combination. For example, if four tea industrial units are at the same stage of production. The are engaged in same activity. They sell wholesale. They sell the product in the same market. Their combination will be called horizontal combination.


Objectives or Advantages of Horizontal Business Combination :-
1. To minimize the Cost per unit.
2. To eliminate competition.
3. To hire the services of experts.
4. To supply the goods at lowest price.
5. To avoid over production.
6. To use improved methods of production.
7. To achieve the benefits of large scale.
8. To find proper market for their product.
9. To supervise the management.
10. To reduce the middleman commission.
11. To earn maximum profit.


3. Circular or Mixed Business Combination :-
When different types of business units combine themselves under the one management it is called circular combination.

Example :- If a cloth industry combining with shoes industry and sugar industry is an example of mixed combination.
Objects :- The main object of mixed combination is to secure the benefits of administrative ability through common management.


4. Diagonal Business Combination :-
When two or more than two business units performs subsidiary services, if they combine themselves under the main industry it is called diagonal combination.

Example :- If designing and tailoring business units are combined with the garments industry it is called diagonal combination.


Objects :- The main object and advantage f this combination is that it makes the business unit very large and self sufficient.

Business Combination

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Meaning and definition of Business Combination

A business combination is essentially an event or transaction where an acquirer acquires control of either one or over one business. Further, a business can be defined as a set of integrated assets and activities which are capable of being managed and conducted with an intention of offering a return to the investing members or other participants, owners and members.  Generally, business combinationsrefer to transactions in which one company gains control, or at least controlling interest, in another company. A business combination can be aptly defined as amalgamation of the assets of two or more business entities for their consolidation as a single entity under single ownership. A business combination can be managed easily through the way of a voluntary acquisition, a merger, or a hostile takeover. In many cases, a preferred means of managing a business combination might be acquiring a controlling amount of stock.

IFRS 3 Business Combinations is about accounting at a time when the acquirer successfully acquires control of a particular business (for example, merger or acquisition). It is these kinds of business combinations that are recognized by utilizing the ‘acquisition method’ that usually requires liabilities and assets that are assumed for measurement on the basis of fair value on the date of acquisition.

A very common approach to business combinations is merger. As per this particular model, two entities operating in similar area combines their assets with an intention to set up a new entity, which is very strong and efficient in handling competition than would they could have accomplished on their own. Such a merger enables a the newly formed entity in retaining existing customers whereas it also gets an opportunity to position itself in a manner that it is able to acquire new customers.

The IFRS 3 new version was issued in the month of January in 2008 after revision and is applicable to business combinations that occur in an organization’s first annual year beginning after or on 1^st of July 2009.

TYPES OF BUSINESS COMBINATIONS

Types of Business Combinations

Types of Combinations:
Horizontal Combination : It is also known as parallel or trade unit integration. It is
affected by units engaged in manufacturing similar products or rendering similar services .It involves the brining together of competing firms under single ownership and management. For instance, if two or more sugar mills are combined under the same management, it will be a case of horizontal combination. Tata Iron and steel Ltd and associated cement company are the illustrations of horizontal combination.
The benefit of horizontal combination is as follows;
(i) It eliminates wasteful inter-firm completion in the same line of industry.
(ii) It helps in achieving economies of large scale production and distribution.
(iii) It can control supply of the product and market prices.
Horizontal combination may lead to the point of view of following evils:
(i) It creates monopoly which is harmful form the point of view of the customers.
(ii) There may be restriction of output and exploitation of customers.
(iii) It give rise to concentration of economic power

Vertical Combination : It is also known as sequence or industry or process
integration. It arises as a result of integration of those business enterprises which are engaged in different stage of production of a product. In other words, it implies combination under single control of enterprises in different stages of manufacturing the product. The aim of vertical integration is to gain self-sufficiency as regards raw materials and distribution of finished products. Two or more business units engaged in successive stages of production, or producing articles leading to the same final product, may combine together and mange all stages of production and the distribution of the final product. For example, in cotton textile industry, there may be a combination of units engaged in successive stages of cloth manufacturing. Such as spinning, weaving, bleaching and finishing of cloth. Vertical combination may result from backward or forward integration. Manufacturers at successive stages in production may integrate backward up to the sources of raw materials or they may expand through forward integration to retail selling of the finished product. Thus, the basic objective of vertical combination is either to secure an assured supply of raw materials and other requirements or to create steady market for the products manufactured. The former objective is fulfilled by backward integration and the latter is realized by forward integration.

The advantages of vertical integration are as follows:
(i) It reduces the dependence on other enterprises in the industry and helps in achieving
self-sufficiency.
(ii) It eliminates the intermediate profits and thus reduces the cost of production.
(iii)There is steady production as a result of regular supply of raw materials and regular
sales.
(iv) Products of higher quality can be obtained because of the control be achieved.
(v) Economies in storage, transport and handling of materials may be achieved.

Vertical integration may leads to the following evils:
(i) It does not eliminate competition as in case of horizontal integrations.
(ii) The size of the business may grow and it may bring grow and it may bring inflexibility of operations.
(iii) Since its processes are interdependent, a slight interruption in one process may dislocate the entire production system.
(iv) It gives rise to concentration of economic power.

Lateral Combination : It refers to the integration of business units producing and
selling different but allied products. The lateral combination may be either convergent or
divergent. Convergent lateral combination arises when firms producing different products but supplying to a common user join with him. For example, brick manufacturer, stone supplier, cement supplier, and wood supplier may integrate with a construction company; Divergent lateral combination represents combination of one supplier of a common raw material with different users. The example of divergent lateral integration is provided by a flourmill supplying flour to a number of units like bakery, confectionary, and hotel. The main benefit of lateral integration is that both the supply of raw materials and availability and existence of demand are ensured to the new combination. Benefits of centralized control of various units are achieved. Under divergent integration, markets are diversified and risks are scattered.

Diagonal Combination : It means integration of a main activity or process with
ancillary activities and services. For instance, a newspaper company may integrate with
transport company to ensure quick deliver of the newspaper to different parts of the country or an automobile plant may combine with a power generating unit. Thus, diversification of activities is diagonal. The purpose of diagonal integration is to ensure smooth and timely availability of ancillary services which are essential for the continuous working of the main units.

Circular Combination : When there is integration of business units which remotely
connoted with one another in their production and sales, furculum integration is achieved.
The remote connection may be found between products requiring similar manufacturing
processes or using the same marketing or trade channels. Circular combination or created to build up big industrial empires. Business house of Tata’s, Birla’s and D.C.M. are the
illustrations in this regard. For instance, the D.C.M. group controls the units engaged in
textiles, chemicals, fertilizers, sugar, electronic goods, business machines, etc.

Associations: The term association is meant for voluntary union of traders for the
purpose of safeguarding the interest of all the members therein. Broadly speaking, association may be classified into two types namely trade associations and chambers of commerce.

Trade Associations: A trade association may be defined as an association of business
units engaged in a particular trade or industry, or a group of closely related trades. It is a
voluntary and non-profit organization of business units which are competitors. They are
formed for the promotion of the economic interest of their members. In fact, the trade
association is a combination of businessmen, engaged in a particular line of business for the promotion of their common interest, growth of friendly relations and exchange of news and views pertaining to their business activities. The name of the association is usually after natural of the business conducted by the members. The members include businessmen engaged in the same line of business in a particulars region. Some of the associations a t the all India level are: All India Manufacturers Organisation, All India Organisation of Employers, All India Marketing Association, Indian Jute Mills Association, Indian Sugar Mills Association, Indian Paper Mills Association, etc.
Trade associations at the regional level include: Bombay Mill Owners Association, Bombay Printing Press Owners Association, Ahmedabad Cotton Mill Owners Association, etc.

The trade associations perform the following functions:-

Chambers of Commerce : A chamber of commerce may be defined as an association
of businessmen which works for the benefit of its members in a particulars territory it serves. Their aim is to protect the general commercial interest of the members. Chambers of commerce is found all over the differed in their composition and character. For instance in India and England, a chamber of commerce is a voluntary association of businessmen to further their commercial interest. But in France it is a semi-official body comprising of a fixed number of representatives of the Government and the business community. The chambers of commerce perform the following functions:-
(i) They collect and disseminate important on traffic routes, trade conditions, potential
markets, etc.
(ii) They maintain statistical bureaus for providing classified information to the members.
(iii)They act as the spokesmen of the business community be commenting on government
polices affecting business or in connecting with an existing piece of legislation that obstructs business.
(iv) They make representations to the government on proposed legislations concerning some spheres of business or in connection with an existing piece of legislation that obstructs business.
(v) They arrange for the settlement of disputes arising out of trade or industry by means of
arbitration.
(vi) They introduce standard trade practices to be followed by their members.
(vii)They organise industrial fairs and exhibitions to further the interest of the business
community.
(viii) They provide & forum of exchanging views to the members by holding conference and seminars.

Distinction Between Trade Association and Chambers Commerce : Trade
Associations and Chambers of Commerce differ in regard to the following points:-
(i) A trade association is formed by those engaged in the same trade or line of
business whereas a Chamber of Commerce is an association of businessmen and /or business units from a particular region belonging to different trades.
(ii) The members of trade association are competitors whereas the members of a
Chamber of Commerce are both competitors and non-competitors.
(iii) A trade association is engaged in protecting the interest of the particular trade but
a Chamber of Commerce is engaged in the general commercial interest of the members
engaged in different trades.