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Europa Science & Commerce Academy: Advantages of Joint Stock Company
Europa Science & Commerce Academy: Advantages of Joint Stock Company
Q. No. 9: What is a joint stock company? disadvantages of a joint stock company? ANSWER: Explain the advantages and
INTRODUCTION: Joint Stock Company is the third major legal form of business owner ship. It has entirely a different organizational structure form the sole proprietorship or partnership. The law relating to joint stock co in Pakistan has been laid in the Companies ordinance 1984 which came into force on January 1, 1985. It is a Federal law. It has 514 sections and 8 schedules. DEFINITIONS: According to L. H Haney A Company is an artificial person created by law having separate entity with a perpetual succession and common seat. Justice Lindley is of the view point that: A Company is an association of many person who contribute money and moneys worth to a common stock and employ it for some common purpose.
A joint stock company has the following merits: Limited Liability: In a joint stock company, all the shareholders have a limited liability. In case of loss to the company, the liability of the shareholders is limited to the amounts; they have invested in the company. Large Capital or More Capital: Unlike individual proprietorship or partnership, a joint stock company can arrange capital in large quantity. It can obtain capital easily and even at a lower rate of interest by floating its shares in the market. Benefits of large scale production: The company due to the increase in the size of business enjoys all the economies of large scale production. Perpetual life: The company has long life or is of more permanent nature. It does not make any difference to the company if the death of shareholder occurs or he sells his shares to another person. Shareholders may change, but the company functions normally. Easy Separation: Unlike individual proprietorship or partnership, its shareholders can separate from the company by selling their shares to others. Spread of risk: In company form of organization, the risk is distributed among large number of shareholders. From the point of view of an investor, it is a great advantage. Democratic Organization: The management of the company is carried on by the elected board of directors on behalf of and for the shareholders of the company. Thus the organization of the company is democratic. Services of Specialized Persons: Persons who dont have capital but are rich in managerial or business ability are appointed as managers, etc. Thus a company can take advantage of the services of table and efficient persons. Full Legal Cover:
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