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Question
Write short answer of the following.
State merits of Joint Stock Company.
Solution
The following are the merits of a joint stock company:
i. Limited liability: In a joint stock company, the liability of shareholders is limited to the amount paid by them on the shares purchased. Thus, the shareholder’s assets and funds cannot be used for the payment of debts.
ii. Perpetual existence: A joint stock company, being a separate legal entity, cannot come to an end by itself; it continues to operate even after the death of its members.
iii. Scope for expansion: A company can easily grow and expand its capital by issuing shares. In case of expansion, a company can raise additional funds by issuing new shares.
iv. Professional management: Because of its sound financial base and resources, a company can hire professionals and specialised managers for handling complex operations. This contributes to the overall growth and development of the company, as it ensures greater efficiency.
v. Sharing of risks: The risks are jointly shared by all shareholders. This reduces the burden on each shareholder.
vi. Transferability of shares: The ownership of shares is freely transferable. This acts as an incentive for investors to invest in the company
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