: A joint stock company (JSC) is a type of business entity: It is a type of corporation or partnership involving two or more legal persons. Certificates of ownership (or stocks) are issued by the company in return for each financial contribution, and the shareholders are free to transfer their ownership interest at any time by selling their stockholding to others. In most countries, a joint stock company offers the protection of limited liability; a shareholder is not liable for any of the company's debt beyond the face value of their shareholding. There are two kinds of joint stock company: Private and public companies. The shares of the former are usually only held by the directors and Company Secretary. The shares of the latter are bought and sold on the open market. The important features of a joint stock company are as follows 1. Separate legal existence. A company is an artificial person and has a legal entity quiet distinct from its members or owners. A shareholder can use a company and his investment as creditor has nothing to do with his investment in its share capital. As an artificial person, it enjoys all the rights enjoyed by such a natural person. Therefore, a company cannot marry, cannot take oath, cannot be sent to jail, cannot enter into partnership and cannot practice as a professional (lawyer, doctor). 2. Division of capital into shares. The capital of a company is divided into shares of small denominations which are readily transferable from one owner to another without much formality. 3. Limited Liability. The liabilities of the members is generally limited to the extent of the face value of the shares that a person has agreed to take up. For example, if a person has paid Rs. 5 on a share of Rs. 10, his liability extends up to a further sum of Rs. 5/- only. Whatever may happen to the company and whatever may be the state of solvency of the company, his total liability does not exceed the face value of the share(Rs. 10/-in our case). 4. Perpetual existence. A company has the distinct characteristic of having perpetual existence. In other words, its existence is not affected by the death, insolvency or retirement of its shareholders or directors. The shares may constantly change hand and yet the company goes on. This characteristic gives life and stability to the company form of organisation. 5. Common Seal. A company has a common seal which is substitute for tis signature as a company. Being an artificial person, it can not sign documents by itself. The name of the company is engraved on the common seal. The common seal is kept in safe custody by the secretary of the company, it is used accordingly to the directions of the Board of Directors. When this seal is affixed for the company on any document, it has to be witnessed by atleast two directors. 6. Separation of ownership from management. A we know that the entity of a company is quite distinct from that of the members or shareholders who compose it, a shareholder cannot bind the company for his acts. All the shareholders do not manage the company themselves but they leave the management into the hands of their representative and trustees, i.e,. The Board of Directors.
The essential features of a Joint Stock Company are:
1) Compulsory Incorporation: A company is a voluntary association of persons formed and incorporated under the existing Corinne law. Only when it gets certificate of incorporation it comes into existence as a body corporate.
2) Artificial person: A company is an artificial person created by law. It is created by legal process and not by natural birth. Even though it has no natural personality, it has legal personality. Therefore it can enter into contracts, sue and can be sued, own property, appoint employees and borrow money like any other natural person.
3) Common Seal: Since a company is an artificial person having no physical features like a natural person, it cannot sign. Hence every company by law must have a common seal on which its name is engraved. The common seal can serve as its signature. The common seal is affixed on all important documents and contracts which is witnessed by signature of two directors and countersigned by secretary where ever required. The common seal is kept under the custody of directors.
4) Perpetual succession: Since the company has a separate existence from its members, directors and employees, their death, insolvency or insanity will not affect its life and existence men may come and men may go but a company remains forever. It can be wound up only under the provisions of the act.
5) Limited liability: Usually the liability of members of a company is limited to the extent of uncalled or unpaid value of shares held by them. Their personal property cannot be seized to meet the company’s liability beyond the above mentioned liability.
6) Share capital: The capital required by the company is raised by issues shares. A share is a share in the share capital of the company. The member who holds the shares of a company can transfer its ownership any other person, without the company’s permission.
7) Separation of ownership and management: In company organisation the ownership and management are separated. The shareholders who are the owners do not take active part in the everyday affairs of the company. Instead, they elect their representatives known as Directors, who with the help of managers and employees manage the company. Thus, there is division of labour and specialisation.
8) Legal Entity: Since the company is created by law it has separate legal existence compared to its members. Therefore the members cannot be personally held responsible for the acts of the company.
9) Large membership: The company is owned by a larger number of members, maximum of 50 in the case of private limited company and unlimited number of members in the case of a public limited company.
A joint stock company is formed and established according to the requirements of companies' ordinance 1984. Registration of Joint Stock Company is compulsory by law. A company is registered at the office of Securities and Exchange Commission of Pakistan. Owner of the joint stock company are known as shareholders.
Joint Stock Company is a form of business organization that is owned by a large number of people. In case of private limited company minimum number of shareholders is 2 and the maximum is 50, while in case of public limited company minimum number of shareholders is 7 and there is no maximum limit.
Due to large number of owners it is not possible for each shareholder to participate in the management affairs of the business. Hence all the shareholders use their voting rights and elect a body for the management of routine affairs f the business. This elected body is known is Board of Directors. Hence board of directors are responsible to manage the affairs of the business. Profit and loss of company is divided among the shareholders according to the nominal value shares they held. Capital of the joint stock is divided into small units of nominal value. Each unit is known as a share. Shares of the public limited company are openly traded in the market. Hence company is in a position to collect maximum funds from the general public. Due to more capital and availability of skilled persons this form of business is suitable for large scale.
What is source of finance of a joint stock company?
Joint Stock Company. Joint Stock Company is a voluntary association of different persons created by law as a separate body for specific purposes. It possesses a common capital contributed by its members stop such capital being divided into transferable shares. The liability of each such member is limited to the face value of the shares he holds. LORD JUSTIC LINDELY defines. "A company is an artificial person created by law with a perpetual succession and a common seal. It has a legal entity separate from the persons composing it. It can sue and be sued in its own name.
It is formed and controlled under the company ordinance or of the state. It is managed by the group of persons known as board of directors. This form of organization is very popular in the field of large scale production and distribution due to its greater benefits.
Characteristics The following are the main characteristics of the joint stock company.
1. Legal Existence. Joint stock company is an artificial persons created by law. As it has separate legal existence a part from its members. It can purchase the property or transfer the title of property or sue in a court of law in its own name. In our country it is organized and supervised under the company ordinance 1984.
2. Limited liability. The liability of the share holders is limited to the unpaid value of the shares he holds. Private assists of the members are not liable to settle the business publications. This is a prominent distinctive feature from other form of business organization.
Four features of a joint stock company?
A joint stock company is a voluntary association formed by people to carry on a certain business for profit. People contribute their capital in forms of the shares in the company. Company works in its own name under a common seal. It has separate entity from its members.
The analysis of the various definitions of a company brings out the following features.
A company is a voluntary association of persons joining hands with a common motive. For the formation of the private company , there must be at least two & maximum fifty members limited, while in public company , minimum are seven members and maximum are no restriction. A company is called an artificial person. It is a person crested by law. The company being an article person has many of the rights of natural person. This is most important characteristic of the company that the liability of each shareholder of the company is limited up to the value of the share purchased by him. The ownership and the management of the company are two separate bodies. The shares of the company have full right to transfer their shares to any one without consulting other shareholders. A company has a long life compared to other forms of the business organizations. If any of the shareholder migrates, dies, become insolvent or lunatic, it will not affect the continuity of the life of the company. The company can, however, be wound up through compliance with the provision of companies ordinance of Pakistan, 1984.
Features of joint stock company
More capital can be raised.
It is a voluntry assosiation which a artificial person is created by law having limited liabilities of its own members and a perpetual succession with its capital divided into transferable shares and which has a common seal.
Which of the following is NOT a characteristic of Joint Stock
Select correct option:
Separate Legal Entity
Limited Liability of shareholders
pls I need answer.