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.

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.

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