Change in form of ownership

Organizations change their form of ownership as they grow, as their needs change, or as policy changes. A form of ownership is the legal status of the owners: sole proprietorship, partnership, company, cooperative or public enterprise.

Reasons for change

• Need for more capital for expansion.
• Need to limit the owners' liability.
• Need for professional managers and skills.
• Succession problems (owner's death or retirement).
• Government policy such as privatization or tax and legal changes.
• Public confidence and listing opportunities.

Examples

1. Sole proprietorship to partnership: A small shop owner takes a friend as a partner for capital and skills.
2. Partnership to private company: A family firm registers under the Companies Act, 2063 to get limited liability and perpetual life. Many Nepali trading houses grew this way.
3. Private company to public company: A firm issues shares to the public through an IPO approved by SEBON to raise large capital. Many Nepali banks and hydropower companies went public.
4. Public (government) enterprise to private ownership (privatization): In the 1990s Nepal sold public enterprises such as Bansbari Leather and Shoe Factory and Harisiddhi Brick and Tile Factory to private owners under its privatization policy (later backed by the Privatization Act, 2050).
5. Cooperative to company or bank: A large savings and credit cooperative converts to a microfinance company or bank to expand services under Nepal Rastra Bank rules.
6. Public corporation to company: Nepal Telecom, formerly a state-owned corporation (Nepal Telecommunications Corporation), was converted into a public limited company (Nepal Doorsanchar Company Limited) in 2004, and some of its shares were later sold to the public.
7. Merger and acquisition: Many Nepali banks merged under NRB's capital rules, producing new larger entities.

Thus the form of ownership is not permanent; it should be reviewed as business grows.