ASSIGNMENT

BUSINESS
ORGANIZATIONS AND
FINANCIAL INSTITUTIONS

Prepared By: Tayyaba Ramzan Submitted to: Sir Tariq Iqbal

Roll No: FD-19003 Course Code: BF-303
 JOINT STOCK COMPANIES
A voluntary association of persons for profit, having the capital divided into some transferable shares, and the
ownership of such shares is the condition of membership of the company.
It is a popular type of business running across the globe under different territory based rules and
regulations. The driving factors of this business type are different characteristics, including its legal entity
in the state, people’s trust, and many others. It is also a form of business like other businesses, including
public limited companies, partnerships, and sole proprietorships.

Types of Joint Stock Company:

1. Chartered Company:
The company which is incorporated by the royal order is called a chartered company. Its power, rights,
and functions are governed by the charter, issued at the time of formation. But this kind is not killed and
formed in present days. Now all companies are registered under the company ordinance.
Examples: Chartered Mercantile Bank of India, Amsterdam Stock exchange, Chartered Bank of England,
Muscovy Company.

2. Statutory Company:
This company is formed by the order of the Governor-General President or Prime Minister or by the special act of
the legislature. It is organized to carry on some business of national importance. The word “Limited” may not be
used after the name of such a company. Each can exercise its particular power which is governed by the terms of its
special Act.
3. Registered Company:
It is incorporated under the company act. In our country, there is ordinance 1984 to form and supervise the
registered company. It possesses a separate legal entity apart from its members.
The registered company may be divide into the following groups
 Unlimited company.
 Company limited by guarantee
 Company limited by Shares

3.1 Unlimited Company

The shareholders of the unlimited company are liable to pay the debts and other obligations of the business as in an
ordinary partnership.
Features of Unlimited Joint Stock Company:
It is managed by the board of directions.
It has a separate legal entity.
There may be a large number of shareholders and
Its shares may be transferred to another person.
But despite the foregoing characteristics, the public does not like to form this type of company.

3.2 Company Limited by Guarantee

Where each member gives a guarantee to contribute a specified amount to the company on its winding up, such a
company is said to be limited by guarantee. It may or may not also have share capital. If such a company has a share
capital, the amount must be mentioned in the charter of the company.
It is not formed to earn profit but the object of the company is to promote social, cultural, and scientific activities
such as clubs, chambers of commerce, welfare, and educational association.

3.3 Company Limited by Shares

Where the liability of each member is limited to the nominal amount of the shares which he holds is called company
limited by shares. If he pays the value of the shares, his liability will be nil. It is popular among different types of
joint stock companies. It may be classified into two groups
1. Private Limited Company
2. Public Limited Company

Private Limited Company: A type of company whose shares are not traded on a stock market and may
only be sold if other shareholders agree.
Public Limited Company: A company that has offered shares of stock to the general public. The buyers
of those shares have limited liability.
 Advantages of Joint Stock Company
Larger Capital – With a joint-stock company, the capital of the company is divided up and sold to
shareholders. This means that there is no limit on how much money can be raised. Unlike a corporation,
there are also no restrictions on who can buy shares in the company.

Limited Liability – With a joint-stock company, the shareholders have limited liability. The protection
and responsibility of the company are divided between its shareholders. This means that if the company
goes bankrupt and it can’t pay off its debts, the shareholders are responsible for paying back only what
they invested. Hence, they will not lose their personal assets like their home or car.

Economies of Scale – Economies of scale refers to the cost advantages that a large company has over
smaller companies. The larger the production, the lower the per-unit-cost will be. A joint stock company
offers economies of scale to their shareholders. One of the main benefits is that it can provide a steady
stream of capital for businesses with large investment requirements. The smoothing in the volatility of
earnings, and the larger pool of shareholders also help to reduce risk for each shareholder.

Scope for Growth and Expansion – Joint stock companies have the potential for growth and expansion
that is not available to other types of corporations. People can purchase shares in a joint stock company
with the expectation that the company will grow over time and make significant profits. The corporation’s
board of directors decides how much emphasis to put on growth, what sectors to expand into, where to
invest, etc.

Increased Public Confidence – A Joint Stock Company will have a board of directors who are
responsible for the company and its shareholders. They must make decisions that benefit shareholders and
not just ones that benefit themselves. There is a lower risk of fraud because records are more transparent
and it is easier to prosecute crimes in this system.

Tax Benefits – When a company is organised as a joint stock company, the shares of stock aren’t taxed
until they are sold. This type of organisation also needs less paperwork and is easier to enter into the
market because the company’s capital can be divided up among many investors.

Increased Accountability – Shareholders now have a stake in the company, which means they will want
to know that their investment is being used wisely. They can then vote on decisions, like whether to move
the company’s headquarters or divest from a certain product. This increased accountability improves
decision-making and makes it easier to assess risks.

Easily Adaptable – A joint stock company is a company that can be owned by anyone. This makes it
very adaptable as the company doesn’t need to worry about holding a specific type of stake or shares. The
shareholders are able to hold as many stocks or shares as they want and can sell them at any time. If a
shareholder buys more shares, then their percentage of the ownership increases
 Disadvantages of Joint Stock Company

Difficult to Form – Joint Stock Companies are difficult to form for a variety of reasons. One reason is
that many individuals need to approve the company’s formation. If even one person objects, the company
cannot be formed. Moreover, there are a lot of legal issues that also need to be addressed.

Lack of Secrecy – The company will have to disclose information about its operations, finances, and
other sensitive matters because they are expected to be open and transparent with their shareholders.
Another possible disadvantage is that it’s easier for outsiders (or other competitors) to get insider
information and privileges as they will have access to certain levels of information.

Delays in Decision Making – One of the disadvantages of Joint Stock Company is that decision making
is usually delayed. This can be seen in the case when there are people who are not willing to compromise
on their ideas and it makes it difficult for them to make decisions. Another disadvantage of Joint Stock
Company is that there is a high chance for internal conflict between the board members when interests are
not aligned. Lastly, one more disadvantage is that decision making might be blocked by different levels of
power within the company.

More Government Restrictions and regulations – Joint Stock Companies are very restricted by the
government. They can only be formed in certain circumstances and they have to go through a lot of
paperwork and regulation before they are even able to operate. They also have to follow the same rules as
any other Corporation, with limits on the amount of foreign investment allowed for example.

Immoral / Unethical Management – Joint stock companies have numerous disadvantages, but the most
notable is how unscrupulous management can control the company. The board of directors sets their own
pay, and some managers are even able to take advantage of their employees in order to make more money
for themselves. In addition, there are conflicts of interest between executives and shareholders. There is
also a high risk of overvaluing company shares because they cannot be sold until they have been issued
by the company.

Separation between Management and Ownership – Joint stock companies have many disadvantages.
One of the major disadvantages is that the owners don’t often have a say in how their company is
managed. Instead, a board of directors or other body decides on this for them. Sometimes, this can lead to
mistakes being made that could be harmful for the company’s success.
 Banking Institution
Financial institutions, sometimes called banking institutions, are business entities that provide services as
intermediaries for different types of financial monetary transactions. Broadly speaking, there are three
major types of financial institutions.
Depository institutions – deposit-taking institutions that accept and manage deposits and make loans,
including banks, building societies, credit unions, trust companies, and mortgage loan companies.
Contractual institutions – insurance companies and pension funds
Investment institutions – investment banks, underwriters, and other different types of financial
entities managing investments

Types of Banks:
There are several different kinds of banks including retail banks, commercial or corporate banks, and
investment banks.
Retail banks deal specifically with retail consumers, though some global financial services companies
contain both retail and commercial banking divisions. These banks offer services to the general public and
are also called personal or general banking institutions. Retail banks provide services such as checking
and savings accounts, loan and mortgage services, financing for automobiles, and short-term loans such
as overdraft protection. Many larger retail banks may also offer their customers credit card and foreign
currency exchange services. Larger retail banks also often cater to high-net-worth individuals with
specialty services such as private banking and wealth management. Examples of retail banks include TD
Bank and Citibank.

Commercial or corporate banks provide specialty services to their business clients, from small business
owners to large, corporate entities. Along with day-to-day business banking, these banks also provide
their clients with credit services, cash management, commercial real estate services, employer services,
and trade finance, among other services. JPMorgan Chase and Bank of America are two popular
examples of commercial banks, though both have large retail banking divisions as well.

Investment banks focus on providing corporate clients with complex services and financial transactions
such as underwriting and assisting with merger and acquisition (M&A) activity. As such, they are known
primarily as financial intermediaries in most of these transactions. Clients commonly range from large
corporations, other financial institutions, pension funds, governments, and hedge funds. Morgan Stanley
and Goldman Sachs are examples of U.S. investment banks.

Unlike the banks listed above, central banks are not market-based and don't deal directly with the
general public. Instead, they are primarily responsible for currency stability, controlling inflation and
monetary policy, and overseeing a country's money supply. They also regulate the capital and reserve
requirements of member banks. Some of the world's major central banks include the U.S. Federal Reserve
Bank, the European Central Bank, the Bank of England, the Bank of Japan, the Swiss National Bank, and
the People’s Bank of China.
In most countries, banks are regulated by the national government or central bank.
On the basis of functions, the banks in Pakistan are categorized as follows:
 Central Bank
 Financial Bank
 Micro Finance Bank
 Islamic Bank
 Commercial Bank
 Industrial Bank
 Exchange Bank
 Saving Bank
 Investment Bank
 Development Finance Institutions

Specialized Credit Institutions in Pakistan

Specialized banks are the bank that concentrates mainly on financing specialized economic and social
activities. Specialized activities may be small and cottage industries financing. Financing the rural asset
less and landless people etc.
Loans granted by relatively long deadlines, where most of the specialized bank, employing resources in
long-term loans, and so contrary to what is the case of commercial banks.
Often focus on the achievement of economic and social development, nor is it a key profit target, so they
are owned by the state in most cases.
It is linked with a doomed, that specialized banks cannot expand in various activities, but within the limits
of its financial resources are not business such as banks can invest money customers.
Most of the loans were granted by relatively long deadlines, where most of the specialized banks employ
resources in long-term loans, contrary to the case of commercial banks, which ruled in this regard term
money deposited by customers.
Specialization in finance specific economic activity, Banks specialized as is clear from the call majoring
in finance certain activities where we find the industrial banks holds the industrial sector financing task,
agricultural banks, majoring in finance agricultural sector banks and real estate primarily finance the
construction industry, housing, and utilities or contribute.
Often focus on achieving economic and social development, nor is it a key profit target, so they are
owned by the state in most cases.

Functions of specialized banks:

Specialized banks shall win the following foremost functions

 To imagine the fixed operating rules also methods force accordance veil the cinch financial
regulation
 To comply loans to enterprises direction trade cache depict policies further plans;
 To take outermost induce rate floats within the prescribed range;
  To equal responsible considering fund management within confess system;
 To exertion clout through credits and agreement of accounts;
 To exertion cash control due to the account holding institutions in assent with making clear
regulations;
 To enterprise curb payroll pay of its account holding institutions under reciting regulations.

Specialized Banks In Pakistan:

 Industrial Development Bank
 SME Bank
 The Punjab Provincial Commercial Bank
 Zarai Taraqiati Bank Limited
 Agriculture Development Bank Of Pakistan