Question

Features of Joint Stock Company?

Answer 1

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.