--- title: "Change in form of ownership" subject: "Organization and Management" chapter: 4 key: "semester_7/organization_and_management:ownership-change-examples" source: https://www.bctengineer.com/q/semester_7/organization_and_management/ownership-change-examples site: BCT Engineering --- # Change in form of ownership Organization and Management · Chapter 4: Forms of Ownership - Asked in: 2073 Shrawan, 4+4 marks - Answer checked by Claude Opus 5.5 (high effort) on 2026-10-14 - Page: https://www.bctengineer.com/q/semester_7/organization_and_management/ownership-change-examples - Whole chapter: https://www.bctengineer.com/md/semester_7/organization_and_management/chapter-4 ## Question An organization may change its form of ownership. Explain this with some examples. ## Short answer Organizations change ownership forms for capital, limited liability, or growth. Examples: a sole proprietorship can become a partnership or private company, a private company can go public via IPO, a public enterprise like Nepal Telecom was converted to a public limited company, and cooperatives may become microfinance institutions. ## Answer 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. ## Check yourself The answer's key points as multiple-choice questions, with the correct option and why. 1. Why would a partnership convert into a private company? A. To end the need for any capital B. To have fewer owners C. To avoid registration D. To get limited liability and perpetual life Answer: D. A company gives limited liability and continuity independent of the owners. (Key point: Reason: capital) 2. How does a private company become a public company? A. By privatization under the Privatization Act B. By taking a partner C. By merging with a cooperative D. By issuing shares to the public through an IPO approved by SEBON Answer: D. Going public requires an IPO approved by SEBON to raise large capital. (Key point: Public company via IPO) 3. Which change is an example of privatization in Nepal? A. A shop owner taking a friend as partner B. A bank merging with another bank C. Nepal Telecom becoming a department D. Sale of stakes in Bansbari Leather and Shoe Factory Answer: D. Government stakes in firms like Bansbari were sold in the 1990s under the Privatization Act, 2050. (Key point: Privatization) 4. What change did Nepal Telecom undergo in 2004? A. Private company to cooperative B. Public company to sole proprietorship C. Government department/corporation to public limited company D. Partnership to company Answer: C. It was turned from a government body into a public limited company, with shares later sold to the public. 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