Statutory Bodies and Corporations

Statutory body or authority means a non-constitutional body which is set up by a parliament. Statutory bodies are authorized to pass the law and take the decision on the behalf of state or country. Statutory body has official permission for Legislation i.e process of enacting laws. Cabinet resolution should be passed to establish this body. Example of a statutory body is SEBI i.e. Securities and Exchange Board of India. SEBI is a very important regulatory body for the security market in India. Another example is the National Commission for OBCs. A statutory body does not include the corporations owned by shareholders.

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Statutory Body Meaning

Statutory body is an autonomous corporate body. An Act of Parliament or an Act of State Legislatures create a statutory body. The Act also defines the powers, objectives, and functions of the body.

Browse more Topics Under Forms Of Business Organizations

• Characteristics of an Ideal Organization
• Sole Proprietorship
• Hindu Undivided Family
• Partnership
• Company
• Statutory Bodies and Corporations
• Co-operative Societies and Trusts
• LLP

List of some important Statutory Bodies

• National Commission for Minorities.
• Armed Forces Tribunal.
• National Consumer Disputes Redressal Commission.
• National Law Commission.
• National Commission for Women.
• National Human Rights Commission.
• National Green Tribunal.
• National Commission for Backward Classes.

Public Corporation

A public corporation tries to combine a private enterprise and public ownership. A statutory corporation does not include the corporations owned by shareholders whose legal personality derives from being registered under a relevant company statute.

In simpler words, a public corporation has the power of the government and the flexibility and initiative of a private organization.

                                                                                                                                               

Features of a Public Corporation

• It is a corporate body which is established via a special Act of Parliament or State Legislature. The Act defines its powers and privileges along with its relationship with the departments and ministries of the government.
• It has a separate legal entity with a common seal and perpetual succession and can acquire property in its name. Also, it can sue and enter contracts in its name.
• The Central and/or the State governments wholly own a public corporation.
• It enjoys financial autonomy. While the government provides the initial capital, a public corporation needs to support itself. It can also borrow money from people.
• A public corporation is exempt from the rigid rules applicable to the expenditure and public funds. Also, it is not subject to any audit regulations which are generally applicable to government departments.
• In a public corporation, the government appoints the Board of Directors. However, it is not important that the employees are civil servants too.
• While the primary objective of a public corporation is public service and not private profits, it must operate like any other business.

Advantages of a Statutory Corporation

• Since the government does not interfere with the daily working of a public corporation, it can run like a regular business. It enjoys a high degree of freedom in the management of the enterprise.
• A public corporation enjoys the freedom to experiment with new lines of activity and make decisions without undue delay.
• Political changes do not affect a public corporation and it maintains continuity of policy and operations.
• Usually, a public corporation gets special privileges. Also, one can customize the law under which it is created.
• Public corporations can employ professional managers and offer them better terms than those available to a government servant.

Disadvantages of a Statutory Corporation

• Since the Parliament passes a special law to set up a public corporation, it is a time-consuming process.
• Also, to change the powers and/or objects of the corporation the Parliament or State Legislature is required to amend the special law making it inflexible.
• While theoretically, a public corporation can function as a normal business, political interference hinders the internal autonomy of the corporation.
• If the Board of Directors represents divergent interests, there are chances of a conflict arising. This hampers the functioning of the corporation. Further, a lack of incentive further reduces the profitability of such a corporation.

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Suitability

As mentioned earlier in the article, different forms of organization are better suited to certain businesses than others. A public corporation is considered appropriate for public enterprises – both industrial and commercial. This is because it represents a combination of operational autonomy and public accountability.

Therefore, for undertakings like public utilities, which require monopoly powers, a public corporation is a good option. It is also suitable for enterprises where the legislature confers the exercise of powers. Further, if an enterprise needs financing via regular grants by the State, a public corporation is a good option too.

Solved Questions on Statutory Bodies and Corporations

Q. What are the advantages of statutory bodies?

Answer:

The advantages of statutory bodies are:

• Operational Autonomy
• Flexibility in operations
• Continuity of the Policy and Operations
• Special Privileges
• Availability of better Managerial Talent

Q. What are the disadvantages of statutory bodies?

Answer:

The disadvantages of statutory bodies are:

• Time-consuming formation and amendment process
• Excessive accountability
• Clash of divergent interests