What is Joint Stock Company
A joint stock company is a business that is held jointly by all of its owners. A Joint-Stock Company is founded when a group of people split the capital of a company into transferable shares.
The only way to become a part of this ownership matrix is to buy shares. In this case, each shareholder owns a specified amount of stock, which is commonly represented as a share.
Each share of a joint stock firm is transferable, and if the company is publicly traded, its shares are traded on registered stock exchanges. Shares in a private joint stock corporation can be transferred from one party to another. However, the transfer is constrained by the terms of the agreement and the presence of family members.
Features of Joint Stock Company
Following are some features of joint stock company:
Separate Legal Entity
A Joint-Stock Company is an entirely independent legal entity from its owners, unlike a partnership or a sole proprietorship. It is a distinct legal entity. No one member is personally accountable for the actions of such a Company.
Alternatively, such a company will not be influenced by any owner or shareholder in determining its future course of action.
This distinction will assist you in understanding the difference between a partnership and a Joint-Stock Company.
A Joint-Stock company must be formed. If this due process is not followed, the legal standing of the organization will be terminated. There is no way to avoid incorporation.
Unlike a sole proprietorship, which is completely dependent on its single owner, a Joint-Stock Company is not dependent on any of its members. Members come and depart; shares are purchased and sold; dividends are earned and distributed; and so on. This is closely related to its standing as a distinct entity.
Number of Members
Some regulations limit the number of members a company can have. Any public limited company must have at least seven members — there is no maximum. A private limited company must have at least two members. Similarly, a partnership business cannot have more than ten active partners.
Limitation of Liability
This is one of the primary distinctions between a corporation and a sole proprietorship or partnership. The responsibility of a company’s shareholders is restricted. A member’s personal assets cannot be liquidated to settle a company’s obligations.
The obligation of a shareholder is limited to the amount of unpaid share capital. He has no responsibility if his shares are completely paid. This has nothing to do with the quantity of debt. Only the company’s assets can be sold in order to pay off its own debt. Members cannot be forced to pay.
The ownership of a joint stock firm is split into transferable units known as shares. There are essentially no limits on the transfer of shares in the case of a public corporation. And, while there are various constraints in a public business, the transfer cannot be prohibited.
Advantages of a Joint Stock Company
- The limited liability of its members is one of the most appealing aspects of a joint stock corporation. Their obligation is restricted to the amount owed on their shares. They are encouraged to participate in joint stock businesses since their personal money is secure.
- A company’s shares are transferable. In the event of a publicly traded corporation, they may also be sold in the market and converted to cash. This simplicity of ownership is a nice bonus.
- Another benefit of a joint stock firm is perpetual succession. The death/retirement/insanity/etc of an employee has an impact on the life of a firm. The only liquidation available under the Companies Act is the closure of a business.
- A firm appoints a board of directors to oversee its operations. The board is made up of highly skilled and talented individuals, resulting in effective and efficient administration. Furthermore, a corporation typically has a lot of money, which helps them to recruit the greatest talent and expertise.
Disadvantages of a Joint Stock Company
- One downside of a joint stock corporation is the complicated and time-consuming method for forming it. This can take several weeks and is also an expensive process.
- According to the Company Act , all public companies must supply the registrar with their financial records and other associated documentation. These records are then made public, and any member of the public can view them. As a result, the company’s anonymity is completely compromised.
- Even in its day-to-day operations, a corporation must abide by a variety of rules, regulations, notices, and so on. It not only consumes time but also limits a company’s independence.
Joint Stock Company Examples
The following are some top examples of joint stock companies:
- Apple Inc.
- Microsoft Corporation
- Tesla Inc.
- Amazon.com, Inc.
- Toyota Motor Corporation
- AliBaba Group holding limited
- Pfizer Inc.
How Does A Joint Stock Company Work
A Joint-Stock Company is founded when a group of people split the capital of a company into transferable shares. A joint stock company is a form of business that is held by its shareholders.
The shareholders of a joint stock corporation can buy and sell company stock. To be considered a partial owner, shareholders must own at least one share of the company’s stock.
What Legal Documents Are Necessary For The Formation Of A Joint Stock Company?
The following legal documents are required for a joint stock company:
- Article of Association
- Memorandum of Association
Joint Stock Company Vs Company
In certain ways, a joint stock company varies from a corporate or company. A company is established by a state charter, whereas a joint stock company is established by an agreement among the members.
A joint stock company’s existence is founded on the right of individuals to negotiate with one another, and unlike a corporation, it does not require a grant of power from the state before it may establish.
Members of a company are normally not held accountable for a corporation’s obligations; but, members of a joint stock company are held liable as partners.
A company sues and is sued in its corporate name in legal action, whereas a joint stock company sues and defends in the name of a chosen officer.
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