Statutory Corporation: Definition, Features, Advantages, Disadvantages

Statutory Corporation: Definition, Features, Advantages, DisadvantagesStatutory Corporation (or Public Corporation) refers to such organizations that are incorporated under the special Acts of the Parliament/State Legislative Assemblies.

Its management pattern, its powers, and functions, the area of activity, rules, and regulations for its employees and its relationship with government departments, etc. are specified in the concerned Act.

For example, Central or State bank of any country is usually a Statutory Corporation.

Features of Statutory Corporations

The main features of Statutory Corporations are as follows:

  • It is incorporated under a particular Act of Parliament or State Legislative Assembly.
  • It is an autonomous body and is free from government control in respect of its internal management. However, it is accountable to parliament and the state legislature.
  • It has a separate legal existence. The government wholly provides its capital.
  • It is managed by the Board of Directors, which is composed of individuals who are trained and experienced in business management. Them embers of the board of Directors are nominated by the government.
  • It is supposed to be self-sufficient in financial matters. However, in case of necessity, it may take a loan and/or seek assistance from the government.
  • The employees of these enterprises are recruited as per their requirement by following the terms and conditions of recruitment decided by the board.

Advantages of Statutory Corporations

Advantages of Statutory Corporations

Statutory Corporation, as a form of organization for public enterprises, has certain advantages that can be summarized as follows:

  1. Expert Management

It has the advantages of both the departmental and private undertakings. These enterprises are run on business principles under the guidance of expert and experienced Directors.

  1. Internal Autonomy

The government has no direct interference in the day-to-day management of these corporations. Decisions can be taken promptly without any hindrance.

  1. Responsible to Parliament

Statutory organizations are responsible Id Their activities are watched by the press and the public. As such they have to maintain a high level of efficiency and accountability

  1. Flexibility

As these are independent in matters of management and finance, they enjoy adequate flexibility in their operation.

This helps in ensuring good performance and operational results.

  1. Promotion of National Interests

Statutory Corporations protect and promote national interests. The government is authorized to give policy directions to the statutory corporations under the provisions of the acts governing them.

  1. Easy to Raise Funds

Being government-owned statutory bodies, they can easily get the required funds by issuing bonds, etc.

Limitations or Disadvantages of Statutory Corporations

Having studied the merits of statutory corporations, we may now look to its limitations also.

Disadvantages of Statutory Corporations

The following limitations are observed in statutory corporations.

  1. Government Interference

The greatest advantage of a statutory corporation is indeed its independence and flexibility, but it is found only on paper. In reality, there is excessive government interference in most of the matters.

  1. Rigidity

The amendments to their activities and rights can be made only by parliament. This results in several impediments in the business of the corporations to respond to the changing conditions and make decisions.

  1. Ignoring Commercial Approach

The statutory corporations usually face lit tie competition and lack motivation for good performance. Hence, they suffer from ignorance of commercial principles in managing their affairs.

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