JOINT STOCK COMPANY

INTRODUCTION:-The Joint Stock Company form of organisation

is the Third in the evolution of commercial organisation. It
developed after the Industrial Revolution in 16th CE. It is
extremely popular in the present world as a company collects
huge capital for its business, manages business activities
effectively, earns huge profits & has a long & stable life.
Company is treated as the best form of organisation & is
extremely suitable for the large scale business activities.
England is the Birth place of the company form of organisation.
Joint Stock Company is an organisation in capital for business is
contributed by a large number of people. The person who
contributes the capital are known as Shareholders. They are the
owners of company, who are given shares in the profits of
company which is known as dividend. Joint Stock Company is
managed by representative elected by shareholders known as
Directors.
A joint-stock company (JSC) is a form of company or joint venture
involving two or more individuals that own shares of stock in the
business. Certificates of ownership ("shares") are issued by the
corporation in return for each financial contribution, and the
shareholders are free to relocate their ownership interest at any
time by selling their shares to others. At present, company law
the existence of a joint-stock company is often identical with
incorporation (i.e. possession of authorized personality separate
from shareholders) and limited liability (meaning that the
shareholders are only liable for the company's debts to the value
of the money they invested in the company). And as an outcome
joint-stock company is generally known as corporations or limited
companies. Some jurisdictions still provide the opportunity of
registering joint-stock companies without limited liability. In the
United Kingdom and other countries which have adopted their
form of company law, these are known as unlimited companies.
In the United States they are, to some extent confusingly known
as joint-stock companies. (Company means a company formed
and registered under this act or an existing company. – Company
Act 1994)
Meaning of Joint Stock Company:-
 According to management expert Prof. H. L. Haney-“A
company is an incorporated association which is an artificial
person created by law, having a separate legal entity, with a
perpetual succession & a common seal. ”
 According to Chief justice Marshall, company is “A person-
artificial, invisible & exists only in the eyes of law.”
Aims & Objectives of Joint Stock Company:-
 The main objective of Joint Stock Company is to
expand the activities of the company with the help of
the shareholders.
 The joint stock company is made in order to improve
the quality as well as the improvement of risk
management can be made.
 To do work of charity and service targeted at
improving health without any regard to particularly
race, religion, caste or community.
 Increase of authorized capital, raising size of own
capital.
 Constant expansion of customer base with a priority
on attracting small and micro-businesses.
 Formation of a diversified and sustainable resource
base.
 Commencement and active development of co-
operation with financial institutions and mortgage
systems.
 The increase in capitalization of the Bank.
 The introduction of international standards of
banking operations.
NEEDS & IMPORTANCE OF JOINT STOCK COMPANY

a) Compulsory registration: Registration of a company is

compulsory under Company Act. Company does not get separate
identity without registration. Legal provisions of Company Act
have been imposed upon it, which are to be implemented. To
secure incorporation, the promoter prepares and file with the
Registrar of Joint Stock Company as the necessary documents
have been compiled with.
b) Perpetual Succession: Company separate existence from its
members, which leads it to undertake all types of business
activities like a person. The company has a continuous existence
which is not interrupted by death, insolvency or retirement of any
shareholder or director. This is a characteristic which lends
stability and long life to a company as compared to other forms of
organization.
c) Voluntary membership: Company is a voluntary association of
persons who gather with a purpose to earn profit. Members may
resign voluntarily.
d) Limited liability: The liability of shareholders is limited to the
face value of shares purchase by them. If the shares are fully paid
up, there is no further liability on the part of shareholders. Thus,
If loss exceeds capital of the company the shareholders are not
liable for such losses which are incurred in the company. This
 encourages the investors to invest the savings in the Joint Stock
Company
e) Transfer of shares: As the capital of the company is divided into
small divisions i.e. shares, any member i.e. shareholder can
transfer the ownership of his shares easily. Share holder can sell
his shares in a stock exchange and any person can purchase them.
f) Common seal: As a company is an artificial person its existence
is expressed through its common seal. This seal exhibits the
identity of a company. By stamping the seal on important
contracts, documents, and certificates and in day-to-day
transactions of company documents and transactions become
official.
g) Management by representatives: As a company has no physical
existence it is managed by the representatives elected by the
shareholders. This board of directors handles the management of
company on behalf of shareholder. It means that ownership and
management are separate.
h) Voting per share: Members of company are holding right to vote
on the basis of the number of shares that they own.
i) Artificial Person: A company is a creation of law. But is has no
physical existence. So it is called an Artificial Person. It can enter
into contract with other parties, purchase, sales of assets &
property.
 PRESENTATION OF DATA OF JOINT STOCK COMPANY

The joint stock type of organization which facilitated the full

utilization of technical and other innovations brought in by
the industrial revolution. The joint stock organization was
already known when the industrial revolution took place, but
it was considered less efficient then the partnership form of
organization.

TYPES OF COMPANY:

CLASSIFICATIO FROM INCORPORATION VIEWPOINT:

1) Chartered company: Company incorporated under the special
order of ruler or by charter is known as chartered company. E.g.
East India Company. This type of company cannot be
incorporated in India.
2) Registered company: Companies incorporated by registering
under company law are known as registered companies.
 3) Company created under special law: Companies incorporated
through special law of Parliament or legislative assembly, e.g.
State Trading Corporation.

Types of registered company:

1) Classification according to number of members viewpoint:

a) Private Company: The Company is known as private company
which has minimum two and maximum fifty members, the
transfer of shares of which is restricted and which has been
prohibited to invite public to subscribe for its shares. ‘Private
Limited’ words are inserted at the end of the name of such
company.
b) Public Company: The Company which is not a private is a
public company. There are seven and limitless-unlimited-
members in this company. The company is known as public
company of which shares can be transferred freely and which can
invite public to subscribe for shares. The (Limited) word has to be
inserted at the end of its name.
2) Classification according to liability viewpoint:
a) Company limited by shares: The company is known as
company limited by share capital of which members’ liability is
limited by the amount of shares subscribed by shareholders.
b) Company limited by guarantee: The company is known as
company limited by guarantee of whose members’ liability
remains limited by the amount of guarantee given by them at the
time of its incorporation. The liability to pay the guarantee
amount arises at the time of its liquidation.
c) Limited liability: The liability of shareholders is limited to
the face value of shares purchase by them. If the shares are fully
paid up, there is no further liability on the part of shareholders.
Thus, If loss exceeds capital of the company the shareholders are
not liable for such losses which are incurred in the company. This
encourages the investors to invest the savings in the Joint Stock
Company.
BASIC COMPANY DOCUMENTS:
The memorandum of association:- Memorandum of Association is
the constitution of a company. Memorandum of Association is a
fundamental document of a company. Basic conditions of
establishment of a company are included into memorandum of
association. Memorandum of Association states the authority of the
company and it determines the boundary of authority of the company.
So, third party relies on the provisions of memorandum of association
while entering in to the relation with the company. Any work done
above the preview of memorandum of association is Ultra Vires. Thus,
thirds party gets idea of company and its limitations through
memorandum of association.
It is compulsory to make following provisions in the memorandum
of association according to Act:
1) Name 2) Registered office clause 3) Object clause 4) Capital
clause
a) Name Clause: the name of the company is mentioned in this
clause. The company is known by the name inserted in this clause
and its administration is also run in this name
b) Registered Office Clause: The company has to register the address
of its registered office with the Registrar within the time-period
stipulated by the Act. So, the Registrar and public will get
information of the company address. The address indicated in this
should be written in all the documents and correspondence.
c) Objects Clause: Information of the objects for which the company
has come into existence and for which the business will be done b
the company available through this clause. The objects of company
are to be stated very clearly in this clause and clarification has to be
made about the main and the subsidiary objects.
d) Capital Clause: the information of the authorized capital of the
company and its division into equity and preference shares is given
in this clause.
ADVANTAGES OF JOINT STOCK COMPANY:-

1 .Limited Liability:-The liability of shareholders of a company is limited to

the face value of shares held. They are personally liable for the debts of
the company. This attracts people to incest in the joint stock company.

2. Transferability of Shares:-This transferability of shares brings about the

liquidity of investment. It encourages many people to invest. It also helps a
company in tapping more resources.

3. Flow of Risk:- In sole proprietorship and in the partnership business, the

risk is shared by few persons. But in the company, the number of
shareholders is large so many persons share risk.

4. Social Importance:-The company provides an opportunity to mobilize

scattered savings of the community. It also creates employment
opportunities. Due to large-scale production consumers get cheaper
goods. The society is supplied with enough quantity of goods. The
government gets income in the form of taxes.

5. Public confidence:-A company enjoys high public confidence. It is

required to publish its audited financial statements. It keeps the public
informed. It is accountable not only to owners but to public and
government. This helps to gain goodwill and reputation among public.

6. Professional management:-A company is owned by shareholders but it

is managed by professional managers. Such managers are accountable to
the board of directors. A company can attract talented and competent
persons as managers.
7. Artificial legal person:-A company is a formulation of authority and is
described as an artificial person. It subsists only in the anticipation of law,
and therefore, has no visible form.

8. Common Seals:-Requires that a company must have a common seal

with its name engraved on it. Any document bearing the common seal of
the company, and signed by two directors, legally binds the company.

DISADVANTAGES OF JOINT STOCK COMPANY:-

1. 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. High taxation: Joint stock companies have to pay tax at higher rates
compared to other forms of organizations.
3. Excessive government controls: A company has to submit many
statements and returns to the government. There are many inspections
and formalities of submission of records, especially in the case of
manufacturing companies. Excessive government control leads to waste
of time, money and loss of freedom.

4. Lack of secrecy: Maintaining secrecy is the most difficult part in any

Joint Stock Company. Every matter has to be discussed in the board of
directors’ meeting or in the annual general meeting of shareholders.
5. Evils of large scale business: The company is a large scale enterprise, so
it naturally inherits the demerits of the large scale enterprise. There
would be problems in coordination and control. Any failure of a
company would affect a large number of shareholders, creditors,
suppliers and employees.

6. Delay in decisions: In a Joint Stock Company, there would be many

levels of hierarchy. Approval has to be obtained at different levels and
different departments before a final decision can be taken. There will
be great delay in making decisions. As a result, profitable opportunities
may be missed.

7. Social evils: Joint Stock Company system has encouraged the growth of
monopolies. In many cases monopolies have exploited consumers,
workers and suppliers.
 CONCLUSION

From the above discussion of the merits and drawbacks of the corporate
form of organization, it may be concluded that the advantages of this form
of organization outnumber its weaknesses. Most of the evils enumerated
above arise either from management or from the misuse of this otherwise
desirable form of organization. It is also clear that despite its weaknesses
the company form of organization is best suited to those lines of business
entity which require huge capital outlay and maximum stability. For those
lines of business that call for prompt decisions, personal interest and
initiative on the part of the proprietor or proprietors and do not require
very large investment for long periods, individual proprietorship and
partnership will generally be more suitable. In fact it is this which accounts
for the fact that these forms of organizations co – exist with the company
organization even though the latter is undoubtedly superior to them.

SUGGESTION

Joint stock company is a business entity in which shares of a company’s

stock can be bought and sold by shareholders. Each shareholder owns
company stock in proportion, evidenced by their shares (certificates of
ownership). Shareholders are able to transfer their shares to others
without any effects to the continued existence of the company. In
modern-day corporate law, the existence of a joint-stock company is often
synonymous with incorporation and limited liability. Therefore, joint-stock
companies are commonly known as corporations. Some jurisdictions still
provide the possibility of registering joint-stock companies without limited
liability. In the United Kingdom and other countries that have adopted its
model of company law, they are known as unlimited companies. In
the United States they are known simply as joint-stock company.

REFERENCES/BIBLIOGRAPHY
www.google.com

www.slideshare.com

www.wikipedia.org

www.investopedia.com