Category: Commerce Notes PPT

Macroeconomics has two kinds of economies. One is the open economy and the other is the closed economy. An open economy is an economy in which trading activity takes place between all the countries. That means it allows the buying and selling of goods and securities from the neighbouring countries. It is an international activity. Whereas the closed economy is an economy in which all the trading activities have taken place within the country. It doesn’t allow foreign trade and investments.

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Exchange Rate Quotations

The exchange rate is a rate which is known as the amount of currency which we can observe when it is converted into other currency. The difference between the two currencies for the same value of money is known as the exchange rate.

Exchange rate quotations are available in two different ways. One is a direct quotation, and the other is an indirect quotation. While discussing the exchange rates, we need to learn about the fixed currency and variable currency. Let’s take two countries, the one currency which we are going to express in terms of the other country’s currency. The first currency is the fixed currency, and the currency in which we are expressing is nothing but the variable currency because it may change from time to time.

Direct Quote and Indirect Quote

A direct quote is one way of quotation in which the single unit of foreign currency is expressed in terms of our currency which is the domestic country. Then it is known as a direct quote.

On the contrary, an indirect quote is another way of quotation in which the single unit of domestic currency has been expressed in terms of foreign currency, then it is called an indirect quote.

Illustration

If we take an Indian rupee as the domestic currency, then

Direct quote is

1 USD  = 74 INR (say)

And Indirect quote is,

1 INR = 188 Rp( Indonesian rupiah)

Components of the Exchange Rate – HE

The exchange rate has two different components. One is based currency, and the other one is the counter currency. These concepts are similar to the meaning of direct quotes and indirect quotes.

The foreign currency will act as a base currency, and the domestic currency is as the counter currency while using direct quotations. In contrast, the foreign currency is the counter currency, and the domestic currency is the base currency in the indirect quotation. Also, the Indirect rate in foreign exchange means the conversion rate will be expressed in terms of foreign currency for a single rupee of Indian currency If we take India as our domestic country. Similarly, the Direct quote currency is the currency of our domestic country because we express our currency in terms of foreign currency in this case.

As of now, we have learned the two kinds of foreign exchange quotations; we also need to understand various kinds of exchange rates because the direct quote and indirect quote are available for every kind of exchange rate. So, to implement the direct quotation and indirect quotation for every kind of exchange rate, we need to understand all the types of exchange rates.

Types of Exchange Rates

We have different kinds of exchange rate systems. Let us see the basic types of exchange rates.

The name itself explains that the exchange rate is fixed and prescribed by the government of that particular country. These mostly happen in dominant countries. USD is the best example of this. It is also known as the pegged exchange rate system.

It is quite the opposite to the above one. The exchange rate of which may not be constant and keep on changes based on the market conditions. Because it is decided based on the market conditions, several countries adopted these floating exchange rate systems.

Another type of exchange rate which can be specified the exact value at present. It means the value which can be mentioned at this particular point in time is nothing but a spot exchange rate. It may change from one day to another.

It majorly happens in trading activity. If the seller is restricted to sell his goods for months on a future date to get increased conversion value, these exchange rates are known as forwarded exchange rates. And the system using these rates is nothing but the forwarded exchange rate system.

The name itself specifies that it has dual values. It means that the same good or in bond May possess one value for international trade and the other value for domestic trade. Then these rating systems are known as a dual exchange rate system.

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Conclusion

Hence, we understood that the exchange rate is a rate of conversion that occurred from one currency to another currency. It is of two types in its notations. Both direct quotation and indirect quotation have their unique advantages along with few limitations.

Goods being sold remain at the seller’s risk until the property in the goods is transferred to the one who buys the goods known as the buyer. Once this property is passed, the goods are at the buyer’s risk even if the delivery has not been made.

This is what passing of risk means in the business world. To know further, we need to dive deep into this concept of ‘passing of risk’.

We buy and also sell things on a daily basis. There is no doubt that most of us assume we become the owner of those bought goods only when we take the risk of our purchase being damaged or destroyed. In our law, the passing of ownership and passing of risk differs in their concepts. While in our day-to-day lives, they are normally the same, legally they aren’t.

A buyer becomes the owner of a movable good only when it is “delivered” to him. Risk is however passed to the buyer on the conclusion of the contract of sale. In other words, if the bought goods are stolen or destroyed before taking the ownership, there will be a loss of both the goods as well as the price.

Passing of Risk Section 26

Section 26 of the Sale of Goods Act, 1930 talks about this passing of risk. It is stated about the goods that they are the owner’s risk if the property has not yet been transferred to the buyer. When the property has been transferred to the buyer, the goods are at the buyer’s risk. This provision is only applicable if there are no specific provisions that have been signed by the contracting parties in their agreement regarding this. This rule is applicable irrespective of the fact that the delivery of the goods or the services has been made or not.

This means that the risk is associated with the ownership and not with the mere possession of the property. To be sure whether the risk has been passed or not, we first need to ascertain whether the ownership of the property in goods has been passed or not.

Solved Example on Passing of Risk

Question: Pit agrees to sell 50 kilograms of potatoes to Miller to be delivered after 30 days. They also agree that the delivery will be made in two parts of 25 kilograms each on the consecutive days. This will make it easier for Pit to deliver the goods. Miller accepts the delivery on the first day. However, when Pit’s delivery boy goes to deliver the second lot, Miller is not available. Further, he does not receive any phone calls too. Consequently, the potatoes became unfit for consumption. Legally who will bear the loss?

Answer: Following the terms of the contract, Pit kept his promise and attempted delivery of potatoes on two consecutive days. Since Miller defaulted on his promise of accepting the delivery, he will have to bear the loss. It is explicitly mentioned in Section 26 – ‘The duties and liabilities of the seller or the buyer as bailee of goods for the other party remain unaffected even when the risk has passed generally.’

 

Passing of Risk Commercial Law

The passing of risk is one of the most complicated legal issues related to commercial laws. The word “risk” has become a monotonous concept in commercial law. Nevertheless, the main problem is understanding the exact meaning of “passing of risk”.

When goods or services suffer any kind of loss or damage by accident in between the time of the conclusion of the contract and its performance, the seller is free from its obligation to deliver the goods that have been lost or have been destroyed. However, does the buyer’s obligation to pay the price remain the same in the mentioned situation? 

If yes, the buyer shall bear the risk of the loss or damage. In this situation, the buyer does not receive the goods as they are accidentally lost or damaged, he will only take over damaged goods. As we have seen that the seller is normally excused from the obligation to deliver other conforming goods.

 

Passing of Property and Risk

The passing of property is an important concept to determine the duties and rights of both the buyer and the seller. Once a ‘property’ is passed to the buyer, the ‘risk’ with the property also passes to the buyer and not the seller. This is true even when the goods are in the possession of the seller. The primary legal objective of a contract for the sale of goods is that – to transfer ownership from the seller to the buyer. Risk is however passed to the buyer on the conclusion of the contract of sale disregarding the fact that the good is in whose possession.

Commerce is the process of exchanging Goods and services on a large scale. Commerce is an important academic stream that imparts detailed knowledge related to economy, finance, accounting, and other topics which you can easily relate to daily lives. Specifically, the subjects included in this stream are Economics, Business Studies, Accountancy, and English along with a choice of Maths or Computer Science. It is a very important subject that will help students learn about how the Business world actually works. Since Commerce involves a lot of processes to be completed it will have to employ lots of laborers in the process, thus it easily generates various employment opportunities in other areas such as Transport and Logistics, Banking, and Retail. Commerce overall is an essential component of National development and wealth creation which highly contributes to the Economy of the Country. Commerce Education is mainly aimed at giving adequate knowledge about the Wholesale Trade, Retail, Export Trade, Import Trade, and Entire- Port Trade. Moreover, it provides some knowledge about the movement of Goods, etc., Transport, Communication Insurance, Ware-housing, Money, Banking & Finance, and Mercantile Agencies.

Explanation

Passing of Risk in Commerce mean, when Goods or digital content suffer any kind of loss or damage by accident or due to no fault of either party in the period in between the transit of the Goods or services and before the time of the conclusion of the contract and its performance, the seller is discharged from its obligation to deliver the Goods that have been lost or destroyed during the transit process. 

What is Porter’s Approach to Industry Analysis?

Every person in business usually does a lot of research and makes a lot of plans before starting a business. One of the most important among such aspects is to conduct an industry analysis. It can provide the entrepreneur with an idea regarding the growth of his products or services and the amount of competition he has to face from others. 

Michael Porter’s Five Forces is one such tool which can be used to evaluate the five important factors regarding the growth of the industry. It helps the entrepreneur to get to know about the environment surrounding the industry and the necessary steps to be taken to get success in this market.

Porter’s Five Forces Analysis

It is important to have firm knowledge regarding the industry before making the investments and Porter’s 5 Forces is the most effective tool for this purpose. The five forces model plays an important role to identify and analyse the primary five competitions in any industry and also provides a clear picture regarding the strengths and the weaknesses of the industry.

This can prove to be a huge difference for someone new in this sector and can help him find his feet. He can use these factors to his advantage so that he can maximise his profit. 

Porter’s Five Forces Model Consists of the Following Sections:

1. Power of Supplier

It is the power which lay in the hands of suppliers to increase or decrease the prices of certain commodities. It depends on a large number of factors like the number of suppliers present in the market, the quality of the products and if they stand out from the quality of other suppliers, etc. If the number of suppliers in that particular sector is less, then the power of the suppliers tend to increase. Then the entrepreneur has to take into account the idea of alternative suppliers, but that may be difficult due to budget constraints.

2. Power of Buyer

Buyers love to bargain and are more often successful in reducing the prices of products in the market. It also depends on a large number of factors like the number of buyers, size order, the demand of new products among buyers, prices of other alternative products and quality of the products. If the number of buyers is less, they have more control over the prices.

3. Competition with Others

It is one of the most important factors in the Porter analysis. In the industry market, the number of competitors, as well as their potential, has a major impact. If a newly launched product has a lot of competition, then it might be a problem as the buyers will have a lot of options for purchasing. But this is not the case if there are fewer options in the market. 

To get the upper hand in a competitive market, a firm opts for several methods to increase their profit-

• Changing the prices according to the competition

• Improving the quality of the products to attract more buyers

• Innovatively using channels of distribution to grab a new area

• Using the relationship with customers to good effect by satisfying their demands

4. Threat of Getting Substituted

Often customers may find an alternative way to fulfil their demands and they no longer have the necessity to buy these products or services. This can prove to be a major threat to the company. More the number of substitute products available in the market, lesser is the demand for the products. The threat of getting substituted can not only cause an impact on the prices of the products but can also raise the question of sustainability in some cases.

5. Threat Due to New Entry

Not only there is the threat of the direct rivals, but there is also the threat of new firms entering into the picture and causing a major craze in the market. This can harm the sales of products and weaken your position in the market. Free entry markets tend to suffer more in such situations and thus the need for a few entry barriers are a necessity to reduce competition with new firms.

Countering the Five Forces

A strategy can be made to counter Porter’s 5 forces model on three levels-

• Corporate level

• Business unit level

• Departmental level

The business unit level acts as an immediate context to industry rivalry. Porter came up with three generic strategies – cost leadership, differentiation and focused on gaining an advantage over the rivals. With the help of a proper generic strategy, firms can enjoy a position where they can use their strengths to good effect and combat against the effects of five competitive forces on them.

In a Perfectly competitive Market, several influential factors determine the Price of commodities. For example, if the demand is high and supply is low, then the Price will increase. During a storm or flood, you will notice that the Price of groceries rises tremendously. This is because the storm or flood has destroyed the crop, and hence the supply reduces. However, since the demand for groceries is still high, therefore, the Price automatically increases. On the other hand, if the supply is more than demand, then the Price will drop. Equilibrium of both the industry and the firm is significant in Price Determination under a Perfect Competition Market. Here, we will discuss in detail how the Price is determined under Perfect Competition and both the factors of Equilibrium, holding enough importance in Price Determination.

A Market situation with many homogeneous product suppliers is called Perfect Competition. A single Company provides a small portion of total production and is not powerful enough to affect Market Prices. 

However big the investor is, he cannot control the Market rates which are determined by the interaction of Market supply and demand forces in an extremely competitive field. Market demand represents the sum of the quantities required by individual buyers at different Prices. The Market supply is also the sum of the quantities offered by individual companies in the sector. All sellers and buyers accept fixed Prices. Therefore, the main issue for profit maximization companies in a Perfectly competitive Market is not to determine the Price of the product, but to adjust the production to the Market Price in order to maximize the profit. 

Pricing under Perfect Competition will be considered in three different periods- 

1. Market Period

2. Short Run

3. Long Run 

Market Period

In a Market period, the time span is so Short that no one can increase its output. The Market period of the stock may be an hour, a day or a few days or even a few weeks depending upon the nature of the product.

For example, in the case of perishable stock such as vegetables, fruits, fish, eggs, baked goods the period may be limited by a day or two by quantity available or stock in a day that neither can be increased nor can be withdrawn for the next period, the entire stock must be sold away on the same day, whatever may be the Price. 

Short Run 

Short term means that amount of time is not enough to change the fixed input or the number of companies in the industry, but it is enough to change the output by changing the variable input. 

In the Short term, there are two distinct costs: (i) fixed costs and (ii) variable costs. 

Fixed costs in the form of fixed elements, i. H. Plants, machines, buildings, etc. do not change as the Company’s production changes. When a Company increases or decreases production, changes are only made to the number of variable resources such as labour and raw materials. 

In the Short term, the demand curve facing the Company is also horizontal. The number of companies in the industry remains the same since no new Company can enter nor can any Company leave. With Perfect Competition, the Company accepts the Prices of the products on the Market. The Company sells all products at current Market Prices. 

Long Run 

A Long term is a time period Long enough to allow you to change both variable and fixed factors. Therefore, in the Long run,  all factors are variable and not fixed. Therefore, in the Long run, companies can change production by increasing fixed equipment. You can modify old plants, or replace them with new ones. 

In addition, in the Long run, new companies can also enter the industry. Conversely, if needed, fixed equipment can be used up without replacement, in the Long run,  allowing existing companies to leave the industry as well. So there is no stop to companies entering or leaving.  

Conditions for Company Equilibrium  

To achieve Equilibrium, a Company must meet two conditions: 

You need to make sure that the marginal revenue is equal to the marginal cost (MR = MC). 

1. If MR> MC, the Company has an incentive to expand production and sell additional units. 

2. If MR

Only when MR = MC does the Company achieve maximum profit.

Equilibrium of the Industry in a Perfectly Competitive Market

In Economics, the industry comprises several firms. Each of the firms consists of factories or mines, as per the requirement. If the total output of the industry equals the total demand, then the Equilibrium is created. In this situation, the ongoing Price of the good is noted to be its Equilibrium cost. While determining how Equilibrium Price is determined under Perfect Competition, we will need to discuss the following theory.

Equilibrium of the Firm in a Perfectly Competitive Market

When there is profit maximization, the firm is said to be in Equilibrium. The input that provides the highest output to that particular firm, is known as the Equilibrium output. In such a state, there are no factors to increase or reduce the output. The firm is the Price taker in a competitive Market. They produce homogenous commodities. Therefore, influencing the pricing factors isn’t on the will of the firms. They strictly follow the Price structure, as stated by the industry. This is how Price and output Determination under Perfect Competition is done. Now, we will explore more on the topic of how Prices are determined under Perfect Competition. 

Price Determination in a Perfect Competition Market

In a Perfectly Competitive Market or industry, the Equilibrium Price is determined by the forces of demand and supply. Equilibrium signifies a state of balance where the two opposing forces operate subsequently. An Equilibrium is typically a state of rest from which there is no possibility to change the system. Market Equilibrium takes place when both the demand and supply balance each other, i.e., there’s no difference between these opposing forces and are at rest. The following theory will explain how Equilibrium Price is determined under Perfect Competition. 

(Image to be added Soon)

The figure indicates a normal shaped Market demand and Market supply curves. The demand curve DD and supply curve SS, intersect each other, and we get Equilibrium Price aLongside Equilibrium quantity. The Equilibrium Price is OP* whereas the Equilibrium quantity is OQ*. At this Price, the amount that the sellers desire to sell in the Market is exactly matched by the quantity that the consumers are willing to purchase. At this Price, both sides get satisfaction. Therefore, neither of the two parties are interested in disturbing this situation.

The Equilibrium Price OP* is described by the intersection of both the demand and supply curves. This is also termed as the “Market clearing Price” since at this cost, both the excess supply and demand remains nil. We can explain it like this. 

If the Price gets higher than OP*, like OP1, consumers desire to get P1M1, whereas sellers are willing to sell more quantity. Therefore, the situation of excess supply turns up. Sellers are not happy. Resultantly, there will be downward pressure in Price (as Competition between sellers hikes up). The Price shall be falling until it reaches OP*. Similarly, at a Price lower than OP*, like OP2, there will be an excessive demand or Shortage in the Market. Then, the buyers get dissatisfied. Competition between consumers will hike up, leading to upward pressure in Price. It continues until OP* is attained. Therefore, OP* is Equilibrium Price or Market-clearing cost. Or, all other Prices except OP* are disEquilibrium costs. The total theory indicates how Prices are determined under Perfect Competition in a Market. 

Did You Know?

Here are some amazing facts to know about Equilibrium Price Determination under Perfect Competition.

• The Perfectly competitive firm is noted to be the Price taker. 

• The Perfect Competition takes place amidst many sellers and free entry and exit of the firms from the Market.

• When both the supply and demand increase, the Equilibrium amount purchased and sold will increase too. 

• According to neoclassical economists, the concept of a Perfectly competitive Market is an abstract concept.

What are Principles of Innovation

Innovation and learning go hand in hand. It is one such attribute required to be a successful entrepreneur. Creative ideas lead to a profitable business plan. Copying concepts are risky and are prone to casualty, so innovative suggestions are best for the present-day market scenario. New ideas are easily buyable and require a lot of hard work. Innovative concepts can help an enterprise grow exponentially in a restricted time frame. The Principle of Innovations is written by Steve Jobs and must be read by every aspirant who wants to do something different in his/ her life. These principles are inscribed in his book ” The Innovation Secrets of Steve Jobs”. 

Five Principles of Innovation 

1. Spread What You Love 

According to Steve Jobs, a person with a true passion can transform society for the betterment. Innovative ideas appear to people who are passionate, persistent and hardworking. 

You can not give your hundred percent on an idea that seems monotonous while working. Innovative elements keep your business on the top of the game. The concepts and functions will differ from any established employment. 

Passion and perseverance are key to success. The problem with innovation is that it takes plenty of time and you never know when the idea will strike you.

2. Sell Dreams, Not Product

This principle refers to the innovation of marketing techniques. Keep consumer’s interests at top priority, make them feel valued. Keep upgrading your service or product according to people’s requirements. The objective of the business is to serve people with quality products that affect their lives positively.   

Steve Jobs has always seen people who buy his product as geniuses, not consumers. Your products should make your client a part of your company. 

3. No to a Thousand Things

“Jack of all trades, master of none” attitude won’t work in the business. Innovation is not about the elaboration, it is the simple approach that is organized and functional. 

Don’t stuff unnecessary elements in the product and its design. A simple approach provides optimum results, make sure to exclude processes that do not impact your business positively. 

Create Great User-Experience

Developing an expressive bond with your prospects through an innovative approach will ensure big-time user experiences for the brand and products. 

Always prioritize your prospect’s requirements and user experience. Steve Jobs delivered user-friendly products and services through the Apple Store. Apple products provide an array of customized services according to clients’ future requirements. 

1. The Combination Gives Birth to Innovation

According to Steve Jobs, creativity is always related to connecting things. This means everyone should learn things from other industries. Seeking creative approaches from other businesses helps to achieve your business objective.

The motivation for the creation needs a little momentum and can flow anywhere anytime. Steve Jobs always used ideas from other businesses and personalized them according to his purpose. He never copied a product, all he wanted was an inspiration for his upcoming innovation.

Breakthroughs usually occur by synthesizing hypotheses from various realms. Some eminent researchers like Einstein, Watson and Crick had combined two theories to unleash the cascade of innovations. 

The Apple ecosystem is an example of the present-day market. Steve Jobs brought up the iPod when the market had many digital music players. However, he combined his music player with iTunes, which made the content more accessible and pleasing to music firms. He kept up his innovation and introduced the iPhone, iPad and Siri to the international market.

2. Think Small

A small idea gives birth to a huge business. Your thought process should contain simple and apt ideas that are easy to structure and design. Every big thing has started small, Microsoft started with the software, when it was an inconsequential sector and at present, it is one of the most influential tech giants. 

The survival of the fittest is best suited for Apple. Steve Jobs transformed creative ideas into a user-friendly approach. By thinking small, you can risk downfall, but the loss will be sustainable and will encourage you to thrive in the next ordeal.

A clear vision and well-planned strategy is the key to innovation. Every business needs a touch of creativity to strive. However, the principles of innovation state the value of innovation in the long run.

Creative advertisement strategies, simple modifications to the product and slight changes in design will help you to keep up with the innovation game.

A Company when formed requires a head start in regard to finance and resources, in this view the Company Needs to be promoted. So, the entire process involved in this method of Promotion by the promoters of the Company is known as ‘Promotion of a Company’. 

In simple words, Promotion means spreading information about any goods or services offered by a Company.

In terms of marketing, the term means making people aware of any particular brand, product, or service.

General Promotion includes,

However, Promotion for marketing includes,

• Sales Promotion- It is the process of increasing the sales of products. It includes advertising, campaigning, etc.

• Personal Selling- In this selling, a salesperson persuades customers to purchase a product.

• Non-personal Selling- It includes marketing and selling strategies like advertising, direct selling, product placement, guerilla marketing (a technique in which products are sold without meeting customers).

• Direct Selling-  In direct selling, a distributor can earn money either by selling the products directly to the customers (single-level marketing ) or by multi-level marketing in which a seller earns money both by direct selling and appointing new direct sellers and commission on their sales.

• Product Placements- This strategy refers to providing a space in a television program or a movie so the information of the product can reach a large audience at a single time. 

Also, Promotion can happen when a marketing Company provides coupons and discounts on the products to create brand awareness.

Promotion is an integral part of a Company that differentiates a business from its competitors. Every business needs to promote its products to create a brand identity and reach its target sales. 

Students who want to become an entrepreneur in the future and want to establish their companies are required to grasp this content to know the details about the formation of a Company, as Promotion is a crucial step in the formation and structuring of a Company Moreover, an extra detailed study is also required to be invested here. 

Idea Behind the Formation of Company

With the entire process by which a company is brought into existence, the birth of a Company and determining the purpose of its Formation is too studied vividly, and the persons who conceive the Idea of the Formation of the Company and invest their initial funds in the growth of the Company are known as the promoters for that particular Company. 

The promoters enter into the preliminary contracts with legal personalities and make arrangements, advertisement and the circulation of the Company’s prospectus is also done at the expenses and the efforts of the promoters. 

Define Promoters of a Company

Promoter is a person who conceives or catches the idea, studies the prospects of the business critically and analytically, chalks out a scheme for the organization, brings together the required workforce, materials, machinery, finance, and managerial ability, and then launches the enterprise.

Promoter is a firm or a person who does the preliminary work which is incidental to the formation of a Company, incidental works include – promotion, incorporation, floatation also the Promoters encourage the investors to invest their funds in the Company at the time of their promotion. 

 

Role of a Promoter

The role of a Promoter can be performed by an investment banker, underwriter, or even by a stock Promoter, who can perform the role in full or partially. 

• Promoters owe a duty of utmost good faith, so as to not mislead the potential investors. 

• They disclose all material facts about the Company’s business.

• Promoters have a fiduciary relationship with the Company and the investors or the shareholders of the Company, they must not hold any type of conflicts in decisions and. 

• Any gain they acquire from the property of the Company must be submitted to the Company only. 

• The Promoters are cautious and abandon themselves from the unfair advantage of their position as a Promoter. 

• A Promoter can be a shareholder in a particular Company. If the Promoter is the only shareholder, the Company may have to disclose such information prior to selling shares in compliance with the Securities and Exchange Rules

Function of Promoter

The function of a Promoter can be that of an investor as well as of a shareholder and also of the sole task of a Promoter who personally put the Company in action. The functions of the Promoter are listed below:

The Promoter conceives the idea of forming the Company. This is the initial step towards the formation of a Company.

The Promoter, after generating an idea, has to make a thorough and detailed investigation of the prospects and the capability of the business which is to be done with the sources of supply, nature of demand, the extent of competition, and the capital requirements.

The Promoter also is required to verify the reports made by the experts are free from bias. 

After verifying the idea, the Promoter needs to launch the projected Company.

At this stage, the Promoter needs to plan about setting out the mode of getting the required finance, negotiate with the vendors, check the availability of loans, etc.  

After making necessary arrangements and modes of raising the required finance, he needs to print the documents like the Memorandum and file with the registrar and then kick start their publication, all this has to be done in accordance with the provisions of the Companies Act.

Define Legal Consultants of a Company

Though legal consultants are not promoters “technically”, they play a major role during business setup and promotion. A legal consultant is a person who gives professional and expert legal advice to a business or individual on a contractual basis. A legal consultant works with a law firm and is a part of a legal counsel team and gets hired by an enterprise to look after its legal matters. Usually, the CEO or Company leaders take legal suggestions from them before taking any step for the Company’s advantage.

Role of a Legal Consultant

A lawyer can be a legal consultant for any enterprise. He can work for a business either full-time or part-time. His roles are 

• Overseeing Contracts- Legal advisors look for all vendor and client contracts. These consultants help companies to know and understand law-related formalities. In terms of brand promotion, they help clients to know the risks, advantages, and some financial related issues associated with it.

• Provide Cost-Effective Legal Suggestions- A legal consultant gives commercially sensible and cost-effective suggestions for the effective legal management of promotional contracts.

• Drafting- A legal consultant is responsible for reviewing previous promotional contracts and drafting new contracts for their clients. They are well aware of the terms and conditions associated with different promotional contracts.

• Damage claims- When the sentiments of a Company get hurt by its competitor during brand promotion, it can claim compensation for the same from the competitor. This involves a hectic legal procedure that is handled by a legal consultant of the Company. He drafts the necessary documents for the financial losses faced by the enterprise due to defamation.

 

Functions of a Legal Consultant

The functions of a legal consultant involve managing and operating the legal activities in a Company. He makes every legal process simple, so the business owner can focus on other perspectives such as finances, marketing, etc. Further, he assists enterprise owners to draft a promotional plan with minimum legal faults. His functions include,

• Provide Legal Defense- Legal consultants defend the companies from legal proceedings. For example, if a competitor Company demands a claim for its defamation due to brand promotion, he stands against the prosecution and defends his client.

• Legal Correspondence- These legal experts handle the legal communications with the promotion team in the case of marketing.

• Resolving Disputes- Legal experts also solve disputes between two parties. They can solve these problems without making anyone go to court. 

 

Promotion Stage of Company Formation

There is a defined stage to the promotion of Company’s formation, the stages include as hereunder:

1. Stage 1. Promotion Stage:

Promotion is the foremost stage in the formation of a Company. He performs aggregated activities to design and to bring an enterprise to operate as a business. 

2. Stage 2. Incorporation:

This is a registration stage, where the registration of the Company brings it to existence. A Company is correctly constituted only when this is duly registered under the Act.

3. Stage 3. Capital Subscription Stage:

This ‘capital subscription stage’ and ‘commencement of business stage’ are only relevant in the case of a public company having a share capital. In this stage, necessary capital is to be acquired for the Company. 

4. Stage 4. Commencement of Business Stage:

After receiving the certificate of incorporation, a private company can start its business, while a public Company can start its business after getting the ‘certificate of commencement of business.