Company Form of Business Organization: Meaning and Characteristics of Joint Stock Company

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Joint Stock Company or simply a company is a voluntary association of persons generally formed for undertaking some big business activity.

  • Established by law and dissolved by law.

  • Separate legal existence.

  • Its members contribute money for some common purpose.

  • Capital of the company is divided into small units called shares.

  • Members invest their money by purchasing the shares of the company known as shareholders.

  • Capital of the company is known as share capital.

  • joint stock companies are governed by the Companies Act, 1956

Meaning

  • A Joint stock company means ‘a company formed and registered under this Act or an existing company’.

  • An existing company means a company formed and registered under any of the previous Companies Acts.

Example of Joint Stock Company

  • Steel Authority of India Limited (SAIL)

  • State Bank of India (SBI)

  • National Thermal Power Corporation (NTPC)

  • Grasim Industries Limited (GIL)

  • Reliance Industries Limited (RIL)

  • Tata Steel Limited

Characteristics of Joint Stock Company

Characteristics of Joint Stock Company

Characteristics of Joint Stock Company

Artificial Person

  • Created by law and does not possess physical attributes of a natural person.

  • legal status like a natural person

Formation

  • Time consuming

  • Involves preparation of several documents and compliance of several legal requirements.

  • Company comes into existence only when it is registered under the Indian Companies Act.

Separate Legal Entity

  • A company exists independent of its members.

  • Make contracts, purchase and sell things, employ people and conduct any lawful business in its own name.

  • Shareholder cannot be held responsible for the acts of the company.

Common Seal

  • No physical existence.

  • All contracts entered by them shall have to be under the common seal of the company.

  • Common seal is the official signature of the company.

Perpetual Existence

  • Company enjoys continuous existence.

  • Death, lunacy, insolvency or retirement of the members does not affect the life of the company

Limited Liability of Members

  • The liability of a member is limited to the extent of the number of shares he holds.

  • a shareholder can be held liable only to the extent of the face value of the shares he holds

Transferability of Shares

  • Members of the company (Public company) are free to transfer the shares held by them to others as and when they like.

  • Not need the consent of other shareholders to transfer their shares.

Membership

  • Minimum of two members and maximum 50 members are required in private limited company.

  • Minimum Seven members and no maximum limit in public limited company.

Democratic Management

  • People of different categories and areas contribute towards the capital of a company.

  • Not possible for them to look after the day-to-day management of the company.

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