Question

Long answer type question.

Define Joint Stock Company and explain its features.

Answer 1

Features of Joint Stock Company?

Introduction: - A Joint stock company is a separate entity formed by a number of persons contributing a fixed capital in the formation of shares (sharing the ownership of the company) with liability of each share holder being limited to his investment in the company only. The management of the company is done professionally by experts who are the representatives of the shareholders are called the board of Directors.

Definition: - “A joint stock company is a voluntary association of individual for profit, having its capital divided into transferable shares, the ownership of which is the condition of membership.”Defined by.............. PROF. (H.L.Haney)

The following are some of the features of a Joint Stock Company

1. Artificial Legal Person: - A company is artificial person created by law. It has a separate name and uses a common seal as a substitute for its signature; it doesn’t have a physical existence because it is not a natural person. However it can enter into contracts with third parties e.g. it can buy and sell property, borrow money, etc.
2. Separate Legal Entity: - A Joint stock company is created by law and enjoys an independent legal status different from its members. Therefore, the company’s liabilities are its own i.e. share holders are not liable for the debts of the company.
3. Limited Liability: -The most important advantages of a Joint stock company is limited liability to the extent of unpaid amount on shares held by them. They cannot be held liable for debts of the company.
4. Common seal: -A company is an artificial person, and as such, it has to sign   documents and other papers. However, it cannot sign as a human being and, therefore, the common seal serves as its signature. The common seal remain in the custody of the Board of Directors.
5. Registration: - The registration of Joint Stock Company is compulsory. Every Indian company should be registered with the Registrar of Companies as per Indian Companies Act, 1956.
6. Transferability of Shares: - The ownership capital of the company is divided into shares, the ownership which is the pre-condition on membership. These shares are freely transferable in a public company. However the shares of private limited company are cannot be transferred freely.
7. Separation between ownership and management: - The shareholder in the company is large and they are spread all over the country. Therefore, they cannot take part in the day to day routine business of the company. Therefore, the management of the company is done professionally by experts who are the representatives of the shareholders are called the board of Directors.
8. Membership: -A joint stock company enjoys large membership. This is because, in a private company, the minimum members are two maximum members can be fifty. In a Public company, the minimum members are Seven and there is no Maximum limit. 

Answer 2

A joint stock company refers to an organisation wherein a group of persons forms an association to perform business activities together. It is a separate entity that is managed by a group of members known as the board of directors. Main features of a joint stock company:
i. Artificial person: Unlike human beings, a company, as an artificial person, cannot sign its documents, negotiate with its customers and breathe and talk. Like human beings, a company does have its own life, which is independent of the life of its members. That is why a company is regarded as an artificial person.
ii. Separate legal entity: It implies that a company is created as a separate legal entity by law and is a juristic person. In other words, a company, from the day of its incorporation, is given a separate legal status distinct from its members. A company can carry out a business in its name and own assets.
iii. Formation: The formation of a company requires the fulfilment of a set of legal formalities. This makes the formation of a company expensive and time-consuming. Also, the registration of a company is mandatory under the Indian Companies Act 1956.
iv. Perpetual succession: A company, being a separate legal entity, cannot come to an end by itself; it continues to operate even after the death of its members. Death, retirement or insolvency of any of its members cannot cease its existence.
v. Control: The management and ownership lie in the hands of different individuals. The company is owned by the shareholders, while its management and control lie in the hands of the elected members (board of directors). This board of directors, in turn, appoints the top management officials who manage the day-to-day operations of the business.
vi. Liability: In a joint stock company, the liability of all shareholders is limited to the amount of capital invested by them in the business. The personal property of the shareholders cannot be used for paying off the liabilities of the company. However, the shareholders can be asked to pay the amount of money that remains unpaid on the shares held by them.