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
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.