JOINT STOCK COMPANY

MEANING

A Joint stock company is an association of many persons who contribute money or money's worth to a common stock and employ it in some trade or business, and who share the profit and loss arising therefrom.

FEATURES OF A COMPANY

1. Separate legal existence : A company has a distinct legal entity independent of its member. It can own property, make contracts and file suits in its own name . Shareholders are not the joint owners of the company's property. A shareholder cannot be held liable for the acts of the company. 

2. Perpetual succession : Perpetual succession means continued existence. A company is a creation of the law and only the law can bring an end to its existence. It's life doesn't depend on the life of its members. It continues to exists even if all its members die.

3. Limited liability : As a company has a separate legal entity, its members cannot be held liable for the debts of the company.

4. Transferability of shares : The capital of a company is divided into parts. Each part is called a share. These shares are generally transferable.

5. Common seal : The name of the company is engraved on its common seal. The common seal is the official signature of the company.

6. Separation of ownership and control : Members have no right to participate directly in the day-to-day management of a company. They elect their representative, called directors, who manage the company's affairs on behalf of the members.

7. Voluntary association : A joint stock company is a voluntary association of certain person s formed to carry out a particular purpose in common. It is an incorporated association.

8. Artificial legal person : A company is an artificial person created by law. It exists only in contemplation of law. It is competent to enter into contracts and to own property in its own name.

9. Corporate finance : The share capital of a company is generally divided into a karge number of shares of small value.

10. Statutory regulation and control : Government exercise control through company law over the management of joint stock companies.

DISTINCTION BETWEEN COMPANY AND PARTNERSHIP

1. Formation and registration : A company crated by law while partnership is the result of an agreement between the partners.

2. Number of members : The minimum number of partner in partnership firm is two and maximum is 10 in banking business and 20 in other businesses.

3. Legal status : A company has a separate legal entity independent of its members but a partnership firm has no separate legal entity different from its partners.

4. Liabilities of members : In a joint stock company, the liability of every member is usually limited. But in a partnership, partners are jointly and severally liable to an unlimited extend.

5. Winding up : A partnership can be dissolved at any time without any legal formalities. But several legal formalities have to be complied with for the winding up of a company.

OBJECTIVES OF JOINT STOCK COMPANY

1. Rapid industrialisation : Rapid industrialisation of the country is essential to achieve the objectives of the five year plans. Strong infrastructure is necessary for rapid development of industries.

2. Large Scale production : Economic progress is not possible without higher productivity and better quality goods. This requires development and use of sophisticated technology.

3. Better utilisation of resources : Corporate organisations can make better use of a country's resources with the application of modern methods of production and distribution. Optimum utilisation of natural resources is beneficial to society economically.

4. Mobilisation of idle resources : A public limited company can mobilise scattered and small savings of public. These financial resources are invested in industry. In this way corporate organisation seeks to increase the rate of capital formation in a country.

5. Employment generation : Unemployment has become a chronic problem in India. Joint stock company provides direct employment to a large number of people. It creates employment opportunities by developing ancillary industries.

MERITS OF A COMPANY

1. Large capital resources : A joint stock company has widespread appeal to investors of all types. Its capital is divided into shares of small value so that people with limited means can also buy them.

2. Limited liability : The liability of a member of a company is limited to the face value of shares held by him.

3. Continuity of existence : A joint stock company enjoys uninterrupted existence over a long period of time.

4. Efficiency management : A company can employ highly qualified experts in different areas of business management.

5. Transferability of shares : The shares of a public company are listen on the stock exchange so that a member can easily sell his shares.

6. Economies of scale : The company form of business organisation provides tremendous scope for growth and expansion.

7. Goodwill : A company enjoys a good reputation and prestige in the business world.

8. Social advantages : The company form of organisation mobilises scattered savings of the community and channelises them into productive uses.

DEMERITS OF A COMPANY

1. Legal formalities : Formation of a company is a time-consuming and expensive process.

2. Lack of motivation : The directors and other officers of a company have little personal involvement in the efficient management of a company.

3. Delay in decisions : Red tape and bureaucracy do not permit quick decisions and prompt action.

4. Economic oligarchy : The management of  a company is supposed to be carried on according to the collective will of its members.

5. Corrupt management : In a company, there is often danger of fraud and misuse of property by dishonesty management.

CAUSES OF POPULARITY OF A COMPANY

1. Accumulation of large funds : No form of organisation can accumulate as much financial resources as a joint stock company.

2. Limited Liability : The liability of a shareholder is limited to the face of shares hold by him.

3. Stability : A company is a separate legal entity. It enjoys a continuous and uninterrupted existence.

4. Transferability of shares : Shares of a public limited company are freely transferable.

5. Divided risk : Risk of loss in a company is divided among a large number of shareholders.

6. Better management : A joint stock company can employ experts to manage its business affairs.

7. Expansion and growth : Company organisation is best suited for large scale business operations.

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