Disadvantages of joint stock company

Costly and difficult to form: Number of legal formalities must be observed by the promoters of the
company. To observe these legal formalities, promoters have to spend much time and money.

2. Scope for dishonest and unscrupulous management: The directors manage the company with the
help of paid officers. If the directors are dishonest, they may make personal gain at the expense of the
company. They may misuse their power and position.

3. Management oligarchy: A few rich persons may secure control over the affairs of the company. Thus,
the management of a joint stock company might become oligarchic in character.

4. Nepotism: Directors and managing agents may appoint their own relatives as the important officers of
the company. Merit may not be given importance.

5. Speculation: A few individuals may corner the shares to gain control over the company.

6. Lack of interest: The officers of the company do not have incentive to work hard. They are not usually
inclined to take risks. They lack initiative