Joint Stock Company

by Alisha Jain
Meaning
It is a voluntary association
formed by some persons for
profits with a capital divided
into transferable shares,
having a corporate body and a
common seal.

According to Professor L.H.
Haney," A joint stock company
is a voluntary association of
individuals for profit, having a
capital divided into transferable
shares, the ownership of which
is the condition of
membership.
FEATURES OF JOINT STOCK
COMPANY
1. Separate legal entity:
It has an existence entirely distinct
from and independent of its
members.

2. Artificial Legal person:
Company is an artificial person
created by law. It is intangible and
invisible having no body and no soul.


3. Perpetual existence:
A company enjoys continuous
existence independent of its
members. Its life is not
affected by the death,
insolvency etc.

4. Limited liability:
The liability of the members is
limited to the extent of the
capital contributed by them in
a company.


5. Common seal:
A company being an artificial
person cannot sign itself. So law
provides the authority to sign
by using common seal.

6. Transferability of shares:
The shares of a public limited
company are freely
transferable. They can be
purchased and sold through the
stock exchange.


7. Separation of ownership and
management:
It is owned by shareholders.
These shareholders elect their
representative known as
director to manage the
company.
Merits of Joint Stock
Company
1. Limited liability:
The shareholders are liable to the
extent of the amount unpaid on the
shares held by them.

2. Transferability of shares:
The ease of transfer of ownership
adds to the advantage of investing
in a company as the share of a
public limited company can be sold
in the market
3. Continuity/Stability:
The death, insolvency and
incapacity of any member does
not affect the existence of a
company.

4. Large Amount of Capital:
A company can collect a large
amount of capital by issuing
shares to general public.
5. Scope for expansion:
As compared to the sole
proprietorship and
partnership forms of
organisation, a company has
large financial resources.
Thus there is greater scope
for expansion.
6. Professional management:
A company can afford to pay
higher salaries to specialists and
professionals. It can, therefore,
employ people who are experts in
their area of specialisations.

7. Social Responsibilities:
Large companies generally
perform social responsibilities by
opening schools, colleges,
hospitals etc.
Demerits of a Joint Stock
Company
1. Lengthy and Expensive Legal
Procedure:
The formation of a company
involves a lengthy and
complicated procedure.
Many legal formalities have
to be completed and many
documents have to be
prepared and submitted.
Companies are democratically
managed through the Board of
Directors which is followed by
the top management, middle
management and lower level
management. Communication
as well as approval of various
proposals may cause delays
not only in taking decisions
but also in acting upon them.

2. Delay in decision making:
The functioning of a company is
subject to many legal provisions
and compulsions. A company is
burdened with numerous
restrictions in respect of aspects

3. Excessive Government Control:
4. Oligarchic management:
Democratic setup of a company
exists only on paper. In practical,
the company is in the hands of
few people.
There may be conflict of interest
amongst various stakeholders of
a company. The employees, for
example, may be interested in
higher salaries, consumers
desire higher quality products at
lower prices, and the
shareholders want higher
returns in the form of dividends.
These demands pose problems
in managing the company
5. Conflict in interests: