FOUNDATION PROGRAMME - ICSI

1 ISTUDY MATERIALFOUNDATION PROGRAMMEBUSINESS ENVIRONMENTAND LAWPAPER 1 ICSI House, 22, Institutional Area, Lodi Road, New Delhi 110 003tel 011-4534 1000, 4150 4444fax +91-11-2462 6727email THE INSTITUTE OF COMPANY SECRETARIES OF INDIATIMING OF HEADQUARTERSM onday to FridayOffice Timings to Dealing TimingsWithout financial transactions to financial transactions to , Typesetting by AArushi Graphics, Prashant Vihar, New Delhi, andPrinted at MP Printers/June 2017iiiiiFOUNDATION PROGRAMME IMPORTANT NOTEThe study material has been written in lucid and simple language and conscious efforts have been made toexplain business environment, different forms and functions of organizations, basic elements of businessand mercantile laws and concept of entrepreneurship. This study material has been divided into three mainparts Part-ABusiness Environment, andPart-BBusiness LawsThere is computer based examination for the Foundatian PROGRAMME .

2 Where Students are required to answermultiple choice supplementing the information contained in the study material, students may refer to the economic andfinancial dailies, commercial, legal and management journals, Economic Survey (latest), CS FOUNDATION Coursee-Bulletin, Suggested Readings and References mentioned in the study material and relevant objective of the study material is to provide students with the learning material according to the syllabus ofthe subject of the FOUNDATION PROGRAMME . In the event of any doubt, students may write to the Directorate ofStudies in the Institute for clarification due care has been taken in preparing and publishing this study material, yet the possibility of errors,omissions and/or discrepancies cannot be ruled out. This publication is released with an understanding that theInstitute shall not be responsible for any errors, omissions and/or discrepancies or any action taken on the basisof contents of the study there be any discrepancy, error or omission noted in the study material, the Institute shall be obliged ifthe same are brought to its notice for issue of corrigendum in the e-Bulletin CS FOUNDATION 1: BUSINESS ENVIRONMENT AND LAWL evel of Knowledge: Basic KnowledgeObjective:To give orientation about different forms of organizations, functions in organizations, businessstrategies and environment, along with an exposure to elements of business laws and A: BUSINESS ENVIRONMENT (40 MARKS) EnvironmentIntroduction and Features; Concepts of Vision & Mission Statements.

3 Types of Environment-Internal tothe Enterprise (Value System, Management Structure and Nature, Human Resource, Company Imageand Brand Value, Physical Assets, Facilities, Research & Development, Intangibles, CompetitiveAdvantage), External to the Enterprise (Micro- Suppliers, Customers, Market Intermediaries; Macro-Demography, Natural, Legal & Political, Technological, Economy, Competition, Socio-cultural andInternational); Business Environment with reference to Global Integration; Comparative Analysis ofBusiness Environment: India and Other of Business OrganizationConcept and Features in relation to following business models-Sole Proprietorship; Partnership;Company; Statutory Bodies and Corporations; HUF and Family Business; Cooperatives, Societiesand Trusts; Limited Liability Partnership; OPCs; Other Forms of of BusinessMicro, Small and Medium Enterprises; Large Scale Enterprises and Public Enterprises; Trends in BusinessConcepts, Advantages and Limitations-Franchising, Aggregators, Business Process Outsourcing (BPO)& Knowledge Process Outsourcing (KPO); E-Commerce, Digital FunctionsStrategic- Planning, Budgetary Control, R&D, Location of a Business, Factorsaffecting Location,Decision Making and Government Policy; Supply Chain-Objectives, Importance, Limitations, Steps,Various Production Processes; Finance- Nature, Scope, Significance of financial Management, financial Planning (Management Decisions Sources of Funds, Investment of Funds, Distribution ofProfits).

4 Marketing- Concept, Difference between Marketing and Selling, Marketing Mix, Functions ofMarketing; Human Resources- Nature, Objectives, Significance; Services- Legal, Secretarial,Accounting, Administration, Information and Communication Technology; Social B: BUSINESS LAWS (60 MARKS) to LawMeaning of Law and its Significance; Relevance of Law to Modern Civilized Society; Sources of Law;Legal Terminology and Maxims; Understanding Citation of of Company LawMeaning and Nature of Company; Promotion and Incorporation of a Company; Familiarization with theConcept of Board of Directors, Shareholders and Company Meetings; Company Secretary; of Law relating to Partnership and LLPN ature of Partnership and Similar Organizations- Co-Ownership, HUF; Partnership Deed; Rights andLiabilities of Partners- New Admitted, Retiring and Deceased Partners; Implied Authority of Partnersand its Scope; Registration of Firms; Dissolution of Firms and of the Partnership; Limited LiabilityPartnership of Law relating to ContractMeaning of Contract; Essentials of a Valid Contract; Nature and Performance of Contract; Terminationand Discharge of Contract; Indemnity and Guarantee; Bailment and Pledge; Law of of Law relating to Sale of GoodsEssentials of a Contract of Sale; Sale Distinguished from Agreement to Sell, Bailment, Contract forWork and Labour and Hire-Purchase; Conditions and Warranties; Transfer of Title by Non-Owners;Doctrine of Caveat Emptor; Performance of the Contract of Sale.

5 Rights of Unpaid of Law relating to Negotiable InstrumentsDefinition of a Negotiable Instrument; Instruments Negotiable by Law and by Custom; Types ofNegotiable Instruments; Parties to a Negotiable Instrument- Duties, Rights, Liabilities and Discharge;Material Alteration; Crossing of Cheques; Payment and Collection of Cheques and Demand Drafts;Presumption of Law as to Negotiable of Information Technology ActCyberspace; Cyber laws; Scope of Cyber Laws; Classification of Cyber Crime; Information TechnologyAct 2000; Regulation of Certifying Authorities; of CS- Duties and Responsibilities, Areas of PracticeIntroduction; Role of Company Secretary under Companies Act, 2013- Role of Company Secretary inEmployment, Role of Company Secretary in Practice;Recognition to Company Secretary in Practiceunder Various OF RECOMMENDED BOOKS*PAPER 1 : BUSINESS ENVIRONMENT AND ShuklaA Manual of Mercantile Laws; Sultan Chand & Company, New KapoorMercantile Law; Sultan Chand & Co.

6 , New Kapoor &Business Laws and Management; Sultan Chand & KuchhalMercantile Law; Vikas Publishing House, New P. S. GognaA Textbook of Business Law; Sultan Chand & Company, New GandhiBusiness Studies; Dhanpat Rai & Company Private Limited, Studies Text Book for Class 10+ Chandra BoseBusiness Laws; PHI Learning Pvt. & MitraCommercial Law; The World Press Pvt. Ltd., Wirthington &The Business Environment; Pearson Education Ltd., KaoEntrepreneurship and Enterprises Development*This study material is sufficient from the pointofviewofsyllabus. The students may refer these books for further knowledge and studyof the A: BUSINESSENVIRONMENTLESSON 1 BUSINESS ENVIRONMENTI ntroduction3 Meaning of business environment3 Features of business environment4 Importance of business environment4 Vision and mission statement5 Internal to Organisation5 External to Organisation5 Vision Statement5 Mission Statement6 Types of business environment6 Internal environment6 Human Resource (MAN)7 financial Factors (Money)

7 7 Marketing Resources7 Physical Assets and Facilities7 Management Structure and Nature7 Miscellaneous Factors7 External environment8 Micro environment8 Macro environment10 Review questions12 Global integration and business environment12 Liberalisation13 Privatisation13 Globalisation14 Reasons for Globalisation15 New Markets15 New Rules and Norms15viiiPageComparative Analysis of Business Environment India and Other Countries16 LESSON ROUND UP20 GLOSSARY21 SELF-TEST QUESTIONS22 LESSON 2 FORMS OF BUSINESS ORGANISATIONI ntroduction26 Characteristics of an ideal form of organization26 Forms of business organisation27 Sole proprietorship28 Characteristics28 Advantages of Sole Proprietorship29 Disadvantages of Sole Proprietorship30 Meaning31 Characteristics31 Advantages of Joint Hindu Family Business31 Disadvantages of Joint Hindu Family Business32 Suitability of Joint Hindu Family Business32 Partnership32 Meaning32 Characteristics32 Advantages of Partnership Firm33 Disadvantages of Partnership Firm34 Suitability of Partnership Firm35 Company35 Meaning35 Characteristics36 Forms of Company36 Private Company36 Public Company36 One Person Company37 Advantages of Company37ixPageDisadvantages of Company38 Suitability of Company39 Statutory bodies and corporations39 Meaning39 Features39 Advantages of a Statutory Corporation40 Disadvantages of a Statutory Corporation40 Suitability41Co-operatives.

8 Societies and trusts41 Meaning41 Characteristics42 Advantages of Co-operatives43 Disadvantages of Co-operatives44 Suitability of Co-operatives45 Limited liability partnership45 Meaning45 Characteristics of LLP46 Advantages of LLP47 Disadvantages of LLP48 Association of Persons48 Body of Individuals48 Self Help Groups49 Advantage of AoP/BoI49 Association of Person as Special Purpose Vehicle49 Differences between various forms of business organisation51 Partnership and Association of Persons51 Sole Proprietorship and Partnership51 Joint Hindu Family Business and Partnership52 One person company v. Sole proprietorship52 Partnership vs. LLP53 Partnership and Company53 Limited Company v. Limited Liability Partnership54 Company and Co-operative Society55xPageChoice of an appropriate form of business55 Other corporation classifications56 Domestic and Foreign Corporations56 Public and Private Corporations56 Non-profits Corporation57 Professional Corporations57 LESSON ROUND UP58 GLOSSARY58 SELF-TEST QUESTIONS59 LESSON 3 SCALES OF BUSINESSI ntroduction64 Micro enterprises64 Small scale enterprises65 Meaning and Concept of Small Scale Industry65 Definition of Small Enterprise65 Definition of Medium Enterprise65 Classification of MSME Industry66 Role of Small Scale Industries in the Indian Economy66 Large scale enterprises67 Public enterprises67 Meaning of Public Enterprises68 Characteristics of Public Enterprises68 Organisation of Public Enterprises69 Development of Public Enterprises

9 In India69 Performance of Industry74 Multinational Corporations (MNCs)75 Why the drive for MNCs?76 Merits of multinational companies78 Advantages of the MNC s to the Host Countries78 Advantages of Multinationals to Home Countries78 Demerits of multinational companies79xiPageLESSON ROUND UP80 GLOSSARY80 SELF-TEST QUESTIONS81 LESSON 4 EMERGING TRENDS IN BUSINESSF ranchising84 Meaning84 Features of Franchising84 Advantages of Franchising84 Disadvantages of Franchising85 Difference between Franchising/ Distributorship/ Agency86 Aggregator86 Types of Aggregators86 Key Factors Driving the Rise of Web Aggregators87 Key challenges for the aggregators in the future?88 Business process outsourcing (BPO)88 Meaning88 Need for Outsourcing of Services89 Advantages of BPO89 Disadvantages of BPO90 Knowledge process outsourcing91 Meaning91 Scope and Future of KPO91 Types of KPO92 Benefits of KPO93E-commerce93 Meaning93 Classification of E-Commerce94 Advantages of E-Commerce94 Disadvantages of E-Commerce95 Digital economy96 Consumer in Digital Economy96xiiPageMerits of Digital Economy96 Demerits of Digital Economy97 Concept of incubators, asset lite models97 LESSON ROUND UP98 GLOSSARY99 SELF TEST QUESTIONS99 LESSON 5 BUSINESS FUNCTIONSB usiness functions104 Meaning of Strategy104 Strategy at Different Levels of a Business104 Planning105 Meaning of Planning105 Budgetary Control105 Research and Development (R&D)

10 107 Location of Business107 Factors affecting Location of Business107 Decision Making108 Government Policy108 Difference b