Tashkent financial institute department of finance from "finance"

Disadvantages of Corporate Enterprises¹¹

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  The foremost disadvantage lies in complying with the legal formalities. A number of formalities are to be complied with before incorporating a company. Several documents and certificates are to be prepared with the assistance of legal experts. Even after incorporation, the management must be carried on strictly in accordance with the provisions of the Act.
  

The National Company Law Tribunal exercises excessive control over the dealings of the company. A number of returns have to be filed with the Registrar and every failure is an offense and shall be penalized. A learned writer counts that there are 50 items in respect of which returns have to be filed. Likewise, there are 190 punishable offenses under the Companies Act¹². A sole trading concern or

a partnership firm is comparatively free from all these formalities;

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  The incorporation of a company itself is an expensive affair. This is due to the company formalities. Besides, the company has to follow several formalities in every year in complying with these formalities, the company has to incur heavy expenditure which may grab a sizable portion of the profit;
  
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  Separation of ownership from control, though constitutes a distinct feature of the company form of organization, is itself a handicap. Many companies are run by the directors only for their own benefits and their activities are focused only towards their interest ignoring the interests of the shareholders. They involve in speculative dealings and thereby conceal the actual happenings inside the company. The reports furnished by them to the shareholders also do not represent a true and fair view of the company. Hence, the shareholders are kept in complete darkness;
  
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  Due to the maladministration of a number of companies by fraudulent directors, Uzbekistan has introduced many rigid provisions in the Companies Act so as to exercise rigid control over the affairs of the companies. These provisions, though aimed to safeguard the interest of the shareholders, have become a check while conducting even the routine affairs. Quick decisions have become impossible. All these, in effect, make most of the managements inefficient and ineffective;
  
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  It is already stated that the limited liability of the members is a distinct feature of company business. But in recent years, both in India and England, company legislation has been directed towards curtailing this privilege of limited liability in certain cases, and the Court can impose unlimited liability on the shareholders, directors or any other person. In other words, the Courts are empowered to lift the corporate veil and impose unlimited liability on the directors and shareholders¹³;
  

2.