Characteristics of Joint Stock Company

Voluntary association made by different persons under state law for specific reason is know is Joint Stock Company. It is started by collection of initial investment by each member. This capital amount is divided into transferable shares with liability of shares to its face value.

“A company is an artificial person created by law with a perpetual succession and a common seal.” – LORD JUSTICE LINDLEY

Board of director are managers of this company. They operate its function under law of country – Different Types of Joint Stock Company are most popular business form for production and business on large scale. It has its own advantages & disadvantages.

Joint Stock Company Characteristics

  1. Legal Existence

Joint stock company is an Artificial person which is created by law. As it has separate legal existence apart from its member; it can purchase property or transfer the title of property or sue in a court of law name. In our country, it is organized and supervised under the company ordinance 1984.

  1. Limited Liability

The liability of the share holder is limited to the unpaid value of the shares he holds. Private assets of the members are not liable to settle the business obligations. This is a prominent distinctive feature from other forms of business organization.

3          Numbers of Members

There are large numbers of members in the joint stock company. In case of public company minimum number of members is seven and there is no restriction for the maximum number of members. In case of private company, minimum number of members is  two and maximum is fifty.

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4          Transferability of Shares

There share of public company is transferable. This type of share may easily be purchased or sold in the stock exchange market. Partnership disadvantage is that members cannot freely transfer their shares to another person.

5          Objective

The basic object of the formation of the joint stock company is to earn profit. Whole profit is not distributed among the share holders but some portion of profit is transferred to reserve fund. So that it may be used at the time of emergency.

6          Management

Its management is conducted by the Board of Directors. But the shareholders who are the actual owners of the company are not allowed to participate directly in the management. So there is separation of ownership from control.

7          Long life

Its enjoys continued existence. The death or retirement of any member cannot affect the running life of the company. Its life is apart from its members. Its business continues until it is wound up by the provision of the Company Act. Therefore it is called as Perpetual Succession.

8          Larger Business

As there is no limit to the maximum number of shareholders in case of public company, capital may be increased and large business may be commenced. But it is not possible in other form of organization due to lack of capital.

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9          Trade Agreement

As joint stock company enjoys separates existence it may enter into trade agreements by in its own name.

10        Changing Nature of Business

In the partnership, the nature of business may easily be changed with mutual consent off partners. But object clause of the Memorandum of Association which also describes the nature of business may not be Changed except the sanction of the court.

11        Chances of Nature of Business

There are many sources by which business funds and capital may be raised in the Public Company. It increase its capital by selling its debentures, shares, other securities and by incorporate saving. But these sources are not available in partnership.

12        Loans in its own name

Company can receive loans in its own name which are payable by the company itself. But in the partnership, the loans are obtained by the partners by their own names which create various problems for them.

13        Numerous Rules

Its activities are controlled by many central or provincial departments. They are numerous rules which must have to be carried into effect by the company. It has to audit its account and to submit the various reports to Registrar office. It thus cannot operate freely without any interference.

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