Joint stock company

A joint stock company (JSC) is a type of business partnership in which the capital is formed by
the individual contributions of a group of shareholders. Certificates of ownership or stocks are
issued by the company in return for each contribution, and the shareholders are free to transfer
their ownership interest at any time by selling their stockholding to others.

In Britain, and elsewhere, there are two kinds of joint stock company. The private company
(sometimes called an 'unlisted company') is one in which the shares are not offered for sale on
the open market. The shares are usually few in number and are only held by the directors and
Company Secretary. The purpose of shareholding in such a company is to confer the financial
protection of limited liability upon the owners.

In contrast, a public company (sometimes known as a 'listed' company) offers its shares for sale
upon the open market - they are 'listed' upon the stock exchange. In Britain, they are usually
distinguished by the letters 'PLC' after their name. The public company can raise part of its
capital by a share issue, but the directors have no control over the sale or purchase of its shares.
Thus, a public company can be 'taken over' by another through the act of purchasing a
controlling interest in the shareholding.

Although not, strictly speaking, a joint stock company, a third kind of company is found in
Britain. This is known as a guarantee company, and is only formed by societies and
organisations for charitable purposes (e.g. sports clubs, hobby groups etc.), as there is no way
that a profit can be distributed. No shares are issued, but a number of named directors 'guarantee'
a specified amount of debt for which they agree to be liable. A guarantee company is usually the
first step towards the creation of a charitable trust.

Advantages
Ownership of stock confers a large number of privileges. The company is managed on behalf of
the shareholders by an elected Board of Directors. Consequently, the share owner may attend an
annual general meeting, and vote for directors and sometimes the principal officers. The
shareholders receive an annual report, and vote upon the yearly audited set of accounts. Other
resolutions upon important decisions can be put to them. There are other meetings, which may be
called, either regularly or by special resolution of either the Board or the shareholders
themselves.

Of course, individual shareholders can sometimes stand for directorships within the company,
should a vacancy occur, but this is unusual.

The shareholders are usually liable for any company debts that exceed the company's ability to
pay. However, the limit of their liability only extends to the face value of their shareholding.
This concept of limited liability largely accounts for the success of this form of business
organisation.
Ordinary shares entitle the owner to a share in the company's net profit. This is calculated in the
following way: the net profit is divided by the total number of owned shares, producing a
notional value per share, known as a dividend. The individual's share of the profit is thus the
dividend multiplied by the number of shares that they own.