Joint Stock

Company
Professor & Lawyer
Puttu Guru Prasad
Senior faculty for
Management Studies- VVIT
Definition of Joint Stock Company
Company means a company formed and
registered under this Act or existing company.
(Company Act, 1994)
A joint stock company is an association of
many persons who contribute money or moneys
worth to a common stock and employ it for a common
purpose. Joint Stock Company is a new venture in
the big business area. After industrial revolution, there
must be changed in the production system.
 Definition of Joint Stock Company
Justice Marshall : A company is an artificial
being, invisible, intangible and existing only in
contemplation of law.

Justice Lindley : A company is a voluntary

association or an organization of many persons who
contribute money or moneys worth to a common stock
and employ it in some trade or business and who share
the profit or loss arising therefore
Features of a Joint Stock Company
1. Corporate personality
2. Joint capital
3. Share capital
4. Transferability of share
5. Limited liability
6. Statutory responsibility
7. Number of shareholder
8. Independent nature of management
9. Democratic norm
10.Profit distribution
11.Tax payment
12. Dissolution
Advantages of a Joint Stock Company
The power and presence of corporations in American
business suggest that this form has certain advantages
over other forms of business ownership:
High amount of capital
Limited liability
Low risk investment
Perpetual succession
Separate entity
Transferability of share
Efficient management
Credit facility
Disadvantages of a Joint Stock Company
As was true with the other forms of business organization ,
the corporation has some disadvantages. Some of the more
obvious ones follow:
1.Complexity of formation
2.Creation of monopoly business
3.Bureaucracy
4.Nepotism
5.High administrative cost
6.Overlook to the shareholder
7.Scope of fraud
8.Tide following of law
9.Expose of secrecy
Classification of Company
Joint Stock Company

Chartered Statutory Registered Others

Company Company Company Company

Limited Company Unlimited Company Special Company

Foreign Company
Unregistered
Company
Existing Company
Private limited Company Public Limited Company

Company Limited by Share Company Limited by Guarantee

Chartered company
In 1844, the first Company Act was issued in the
England . A chartered company is a company which is
incorporated by royal charter obtained from the crown. This
type of company is in vogue in England a century ago. The
examples of such companies are:
The Chartered Bank of England
Chartered Mercantile Bank of India and
East India Company.
Statutory company
A company formed and regulated by the special Act of
legislature is known as a statutory company. Usually such
companies are formed for the purpose of maintaining and
accelerating the pace of economic development in the
country. The examples of statutory companies are as follows:
Bangladesh Bank
Bangladesh Biman
BRTA
WASA
DESA
TNT
PDB
 Registered Company
A registered company means a company formed and
registered under the companies Act 1994. Broadly there are two
types of registered companies from the view point of liabilities of
members:
1 . Limited company : A limited liability company of which the
liability of each member is limited to the face value of the share
held by him and the capital of the company is divided into the
number of shares. This type of company is two types:
Private Limited Company: A private limited company
means a company which by its articles of association,
a) Restricts the right to transfer the shares
b) Limits the number of its members to fifty excluding persons
who are in the employment of the company
c) Prohibits any invitation to the public to subscribe for the
shares or debentures of the company.
 Public Limited Company: It is a voluntary Association
of at least seven or more persons, authorized and recognized
under the law as a separate legal entity apart from its owners
who agree to supply capital and share the profits or losses. A
public limited company may be of two types which are the
following:
a) A company limited by shares : It is a company,
of which the liability of each shareholder is limited to the face value of
the shares held by him. If he pays the full amount of his share, he gets
freed from any other liability.
b) A company limited by guarantee : A company
is called a company limited by guarantee, when each shareholder
undertakes to contribute a certain amount to the liability of the company
in the event of its being wound up while he is a member, In this
company which members are bearing a company limited by guarantee,
for the unpaid amount of share they are liable. If they paid full amount
of share they are free from the liability. This organization is usually
formed for furthering the cause of education or some professional cause.
2. Unlimited Company: Unlimited Liability Company is a
company of which the liability of each shareholder is
unlimited- each shareholder is liable for the debts of the
company to an unlimited extent. In other words the liability
of the member extends beyond the face value of shares held
by him to his personal properties.
Differences between Private Limited and
Public Limited Company

Particulars Private Limited Public Limited

1. Formation

2.Number of Members

3. Starting of work

4. Sales of share

5. prospectus

6. Transfer of shares
Differences between Private Limited and
Public Limited Company
Particulars Private Limited Public Limited
7. Size of capital

8. Minimum capital

9. Board of director

10.Statutory meeting

11. Right of voting

12. Articles of association

Economic Importance of Joint Stock
Company in Bangladesh
Establishment of large scale business
Proper scope of investment
Encouraging savings and forming capital
Facilities of risk distribution
Creating opportunities of employment
Use of modern technology and techniques
Observing social responsibility
Establishing international relation
Developing management profession
Method of the Formation of a Joint Stock
Company

1. Promoting state : In the first stage, few persons

involve with the generating idea about the
formation of a company. The persons who involve
with the formation of company is called promoter.
In the initial state the promoters take decision
about the following:
Taking necessary decision
Collecting name clearance
2. Preparation of documents: In this stage, the
promoters prepare two important documents which
as follows:
a)Memorandum of association :Memorandum
of association is a charter which contains the
fundamental conditions upon which the company is
incorporated. It includes companys name, address,
amount of capital, objectives, rights and duties of
shareholders.
b)Articles of association : Articles of
association refers to the document which contains
rules and regulations for the internal administration
of the business.
 c) Certificate of incorporation collection: In
this stage, the promoters collect registration form from the
registration office and submit it within thirty days with some
important documents. The important documents are as
follows:
A copy of memorandum of association
A copy of article of association
The name, address and profession of the promoters who
want to be director
A sign with declaration for obeying the duty as a
director
A agreement for collecting share of competence
A declaration of obeying all the rules and regulations for
promoting the company by a lawyer.
4. Certificate of commence collection: In this
stage, the promoters of a public limited company
prepare a prospectus. The company wants to collect
capital by issuing share to the pubic by taking
permission from the Security and Exchange
Commission. For collecting the certificate of
commencement, the promoters submit few
documents with application which are as follows:
Minimum capital is collected and the directors
are collected the share in cash.
Prospectus or like declaration for collecting
shares from the public.
5. Commence collection : After getting letter of
commencement the company start the work.
Definition of Minimum Subscription
Minimum subscription is the amount of
money is to be collected share subscription for
starting a joint stock company . The minimum
amount of money is collected by the promoters of
the company in the articles of association and
prospectus according to the companies act.
Meaning of Prospectus
Prospectus is an appeal to the public to subscribe
shares or debentures offered to the public. The main
objective of prospectus is to persuade the people to
purchase shares and to give all necessary information to
guide the potential investors.
According to the Companies Act-1994, Section-
142, Document containing offer of shares or debentures
for sale to be deemed a prospectus.
A public limited company, after its registration,
issues the prospectus to the public with a view to draw
their attention and creating confidence in their minds for
subscribing shares or debentures on behalf their company.
Contents of Prospectus
Name of the company
Address of the registered office
Objectives of the company
Name, address and profession of the promoters
Short description of memorandum of association
Short description of articles of association
Name, address and profession of board of directors
and managing director
Name, address and profession of profession
Salaries and compensation of the directors
Authorized capital of the company
Signature of the directors
Contents of Prospectus
Classification of share and amount of capital involved
with the each share
Name and address of the bank, broker, auditor and
accountant
Rules of inspection of accounts
Description about the contract with the other company
Preliminary expenses for forming the company
Reserve fund and way of converting fund to capital
Profit-loss and final accounts for the existing company
Time and date for receiving application for subscribing
shares and debentures
Date of issue of prospectus
Specimen copy of applications of share and debenture
Definition of Share
Share means small parts of total capital of a company.
The company collect big amount of capital by issuing
shares to the public.

According to the Companies Act-1994, Section-2(1) :

Share means a share in the capital of the company, and
includes stock except when a distinction between stock
and shares is expressed or implied.
 Debenture
Any instrument under seal evidencing a deed ,
the essence of it being the admission of indebtedness.
Debenture includes debenture stock , bonds and
any other securities of a company , whether
constituting a charge on the assets of company or
not.
Underwriting / Underwriter
The term underwriter means any person who
has purchased from an issuer with a view to , or
sells for an issuer in connection with .
Underwriter means a financial institution ,
usually an issuing house or merchant bank that
guarantees to buy a proportion of any unsold shares
when a new issue is offered to the public .
Pattern of Company Management
Shareholder

Board of Director

Managing Director

General Manager

Divisional Mgt
Divisional Mgt Divisional Mgt Divisional Mgt
Purchase
Sales HRM Finance
Modes of winding up
There are three methods of winding up a Company :
1.Compulsory winding up by Court.
2.Voluntary winding up by members themselves
or by the creditors .
3.Voluntary winding up under the supervision of
the Court.
 Compulsory winding up
Compulsory winding up takes place when a Company is
directed to be wound up by an order of Court
A company may be wound up by the court under the
following circumstances :
1. Special Resolution of the Company
2. Default
3. Not Commencing or Suspending the Company (within
the incorporation )
4. Reduction of members
5. Inability to pay debts
6. The just and equitable clause (incorporation fail ,
exercise power unfairly , illegal business)
Voluntary winding up by members
themselves or by the creditors
Voluntary winding up means winding up by the
members themselves without the intervention of the court . A
company can be wound up voluntarily under the following
cases :
1. By an Ordinary Resolution of the members passed in a
general meeting
Company duration fixed - Expired duration
Any event - event occurred.
2. By a Special Resolution passed by the members in all
other cases. (private cases )
Voluntary winding up under the
supervision of the Court
At any time after a company has passed a
resolution for Voluntary winding up , the court may
make an order that the voluntary winding up shall
continue but subject to supervision of the Court.
The supervision order is usually made for the
protection of the creditors and contributories of the
company.
Thank You