What Is a Joint Stock Company

Share holders who obtain the shares can transfer the ownership of their shares, if they need money.  They can even sell the shares to others if they wish to obtain cash or profit.  Sometimes, Joint Stock Company seems like incorporation.  There are several advantages of this Joint Stock Company.  The company is managed on behalf of the shareholders by some Board of directors who are elected by all the share holders during Annual General Meeting.  There exists voting facility for all the share holders as they can accept or reject the annual report and audited accounts.  At some times, even individual share holders can hold the position of directors of the company.  

The share holders are having right to share the profits and losses of the company.  They are even liable for company debts when the company could not able to pay such debts. Thus their liability will be limited according to the face value of shares.  The concept of limited liability encourages many people to hold the shares for a particular period and to let the company fall in the success of business organization.

Generally profits of the company also be shared against all the shareholders.  Net profits are calculated according to various principles.  Net profit divided by total number of shares returns the value of profit per share. This is called dividend in the financial jargon. A joint stock company will have some features of partnership also.

A joint stock company will have certain characteristics.  The first one of all is Legal formation.  Group of individuals join together to start a business and they call it as joint stock company.  It shall be registered with companies act, 1956 and shall have filled all the formalities of legal binding.  They are the artificial persons having birth, existence and death and indirectly represent the company.  Their corporation is regulated by law and it does not have the attributes like a normal person.  They have separate legal entity and it can own property by entering into contracts for conducting lawful business on their own name. The common feature of this joint stock company is that it can sue others and can be sued by others.  Another important feature is that they have common seal to deal with others.  The common seal can be used by any shareholder on behalf of the company.  The seal of the company will be duly signed by the officials of the company.    Another most important feature of this Joint Stock Company is perpetual existence. As long as it continues to fulfill the obligations of law, it can exist continuously.  Death, lunacy, insolvency or retirement will not affect any of its members.  In case of death, the share holders rights will be transferred to their legal heirs and their holding continues to exist.

 

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