Question

Attempt the following:

Explain the features of the Joint Stock Company.

Answer 1

The features of Joint Stock Company are as follows:

1. Common Seal: A company being an artificial person cannot sign on its own. The law requires every company to have a seal and have its name engraved on it. The common seal is a symbol of the company’s incorporate existence. As a common seal is the signature of the company, it has to be affixed on all important documents bf the company. When the seal is used it has to be witnessed by two directors of the Company. The common seal is under the custody of the Company Secretary.
2. Registration: The registration of the Joint Stock Company is compulsory. All the companies have to be registered under the Indian Companies Act, 2013. A private limited company can start its business immediately after getting the Incorporation Certificate’ while the public limited company has to obtain. “Certificate of Commencements of Business” before it starts a business.
3. Artificial Legal Person: A company is an artificial person created by law. It has an independent legal status. It has a separate name. It can enter into contracts, buy and sell property in its name. The company is distinct from its members.
4. Membership: A company is an association of persons. A private limited company must have at least two persons and a public limited company must have at least seven persons. The maximum limit of members for private companies is 200. A public company can have unlimited members.
5. Perpetual Succession: A Joint Stock Company enjoys a long and stable life. There is continuity in existence, which means perpetual existence. The life of the company is not affected by the life of the shareholders. If a shareholder dies, becomes insolvent or insane, the company Will not be closed down. “Members may come and members may go but a company goes on forever”.
6. Separation of Ownership and Management: Persons investing in the shares of the company are called shareholders. They are the owners of the company. They receive a share in the profits of the company called “dividend”. A large number of shareholders cannot manage the business. They elect representatives who are collectively called as Board of Directors. They manage the business of the Company.
7. Registered Office: Registered office of the company is a place Where all the important documents of the company are kept e.g., Register of Members, Annual Returns, Minute Books, etc. All correspondence work of the company is done through a registered office. The address of the registered office has to be mentioned in the domicile clause of the company.
8. Transferability of Shares: Shareholders are the owners of the company. Shares of a public limited company are freely transferable. There is a high degree of liquidity involved in buying shares of the company. Members can buy or sell shares as needed. However, there are restrictions on the transferability of shares of a private company.
9. Voluntary Association: Any person can purchase shares and become a member of the company. The company is a voluntary association. No difference is made on the basis of religion, caste, creed, etc.
10. Limited Liability: The liability of shareholders is limited. It depends upon the unpaid amount of shares held by them. Shareholders cannot be held personally liable for the debts of the company.
11. Separate Legal Status: The company is created by law. It has a separate legal entity. A company acts independently. The company can take legal action against anybody in its individual capacity.