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Joint Stock Companies

Joint Stock Companies

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Published by Joynul Abedin
Joint-Stock Companies
Joint-Stock Companies

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Published by: Joynul Abedin on Aug 01, 2012
Copyright:Attribution Non-commercial


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Joint-Stock Companies
 joint-stock company
is a business entity which is owned by shareholders. Each shareholder owns the portion of the company in proportion to his or her ownership of the company's shares (certificatesof ownership).
This allows for the unequal ownership of a businesswith some shareholders owning a larger proportion of a company thanothers. Shareholders are able to transfer their shares to others withoutany effects to the continued existence of the company.In modern corporate law, the existence of a joint-stock company isoften synonymous with incorporation (i.e. possession of legal personality separate from shareholders) and limited liability (meaningthat the shareholders are only liable for the company's debts to thevalue of the money they invested in the company). And as aconsequence joint-stock companies are commonly knownas corporations or limited companies.Some jurisdictions still provide the possibility of registering joint-stock companies without limited liability. In the United Kingdom and other countries which have adopted their model of company law, these areknown as unlimited companies. In the United States, they are,somewhat confusingly, known as
 joint-stock companies
Joint Stock Company
 Prof. L. H. Haney
- "
A Joint Stock Company
is a voluntary associationof individuals for profit, having a capital divided into transferableshares, the ownership of which is the condition of membership."
Characteristics of Joint Stock Company
The analysis of above definitions reveals the following characteristicsof a company:
Association of persons
A company is a voluntary association of persons established for profitmotive. A private company must have at least two persons and the public limited company must have at least seven persons to get itregistered. The maximum number of persons required for theregistration in case of private company is fifty and in case of publiccompany there is no maximum limit.
Artificial person
A company is an artificial person. It is created by law. Like that of thenatural person, it can own property, incur debts, file suits, enter intocontracts with others under its own name. It can be sued and fined butcannot be imprisoned.
Separate legal entity
A company being created under law has a separate entity from itsmembers. Any of its members can enter into contracts with others. Amember cannot bind a company by his acts or dealings with the third parties. The company can file a suit against its members and itsshareholders can also sue the company. Further, a shareholder is notliable for the acts of the company even though he may be holding allthe shares of that company.
Limited liability
The liability of the members or shareholders is limited to the extent of the value of shares held or the amount guaranteed by them. Theshareholders are not personally liable for the debts of a company beyond that limit.
Transferability of shares
The shares of a public limited company are freely transferable and can be purchased and sold
through the stock exchanges. A shareholder of a public limited company can transfer his shares without the consent of other shareholders. But there are certain restrictions on transferabilityof shares in case of private limited company.
Common seal
Since a company is an artificial person, it cannot put its signature onany document. Therefore, it is statutory for every company to have aseal on which the name of the company is engraved. Affixing of seal onany document signifies the signature of the company. Of course twodirectors have to sign as witnesses in such .cases.
Separation of ownership from management
The shareholders are the owners of the company. They areheterogeneous group of people who are widely scattered throughout thecountry and abroad. The shareholders elect their representatives calleddirectors to manage the company. Thus, the company is managed bydirectors rather than the shareholders. This results in separation of ownership from management.
Perpetual succession
The company enjoys a continuous existence. Its existence is notaffected by death, lunacy or insolvency of its shareholders or directorsas the case in partnership or sole proprietorship. The company can only be dissolved by the operation of law.
Investment facilities
A joint stock company raises its funds through issue of shares togeneral public. Due to the small denomination of the shares, thecompany provides investment opportunities to all sections of peoplewho want to put their surplus money in the company's share.

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