Joint stock company
joint stock company
(JSC) is a type of business partnershipin which thecapitalis formed by
the individual contributions of a group of shareholders. Certificates of ownership or stocksare
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 onthe open market. The shares are usually few in number and are only held by the directors andCompany Secretary. The purpose of shareholding in such a company is to confer the financial protection of limited liabilityupon the owners.In contrast, a public company(sometimes known as a 'listed' company) offers its shares for saleupon the open market - they are 'listed' upon thestock exchange. In Britain, they are usuallydistinguished by the letters 'PLC' after their name. The public company can raise part of itscapital 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 acontrolling interest in the shareholding.Although not, strictly speaking, a joint stock company, a third kind of company is found inBritain. This is known as aguarantee company, and is only formed by societies andorganisations for charitable purposes (e.g. sports clubs, hobby groups etc.), as there is no waythat a profit can be distributed. No shares are issued, but a number of nameddirectors'guarantee'a specified amount of debt for which they agree to be liable. A guarantee company is usually thefirst step towards the creation of acharitable trust.
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 anannual general meeting, and vote for directors and sometimes the principal officers. Theshareholders 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 becalled, either regularly or by special resolution of either the Board or the shareholdersthemselves.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 liabilitylargely accounts for the success of this form of businessorganisation.