Joint Stock Company

Joint Stock Companyby Alisha Jain

Meaning It is a voluntary association formed by some persons for profits with a capital divided into transferable shares, having a corporate body and a common seal.

According to Professor L.H. Haney," A joint stock company is a voluntary association of individuals for profit, having a capital divided into transferable shares, the ownership of which is the condition of membership.FEATURES OF JOINT STOCK COMPANYSeparate legal entity: It has an existence entirely distinct from and independent of its members.

2. Artificial Legal person: Company is an artificial person created by law. It is intangible and invisible having no body and no soul.

3. Perpetual existence: A company enjoys continuous existence independent of its members. Its life is not affected by the death, insolvency etc.

4. Limited liability: The liability of the members is limited to the extent of the capital contributed by them in a company.

55. Common seal: A company being an artificial person cannot sign itself. So law provides the authority to sign by using common seal.

6. Transferability of shares: The shares of a public limited company are freely transferable. They can be purchased and sold through the stock exchange.

7. Separation of ownership and management: It is owned by shareholders. These shareholders elect their representative known as director to manage the company.Merits of Joint Stock CompanyLimited liability: The shareholders are liable to the extent of the amount unpaid on the shares held by them.

2. Transferability of shares: The ease of transfer of ownership adds to the advantage of investing in a company as the share of a public limited company can be sold in the market3. Continuity/Stability: The death, insolvency and incapacity of any member does not affect the existence of a company.

4. Large Amount of Capital: A company can collect a large amount of capital by issuing shares to general public.5. Scope for expansion: As compared to the sole proprietorship and partnership forms of organisation, a company has large financial resources. Thus there is greater scope for expansion.6. Professional management: A company can afford to pay higher salaries to specialists and professionals. It can, therefore, employ people who are experts in their area of specialisations.

7. Social Responsibilities: Large companies generally perform social responsibilities by opening schools, colleges, hospitals etc.Demerits of a Joint Stock CompanyLengthy and Expensive Legal Procedure: The formation of a company involves a lengthy and complicated procedure. Many legal formalities have to be completed and many documents have to be prepared and submitted. Companies are democratically managed through the Board of Directors which is followed by the top management, middle management and lower level management. Communication as well as approval of various proposals may cause delays not only in taking decisions but also in acting upon them.

2. Delay in decision making: The functioning of a company is subject to many legal provisions and compulsions. A company is burdened with numerous restrictions in respect of aspects

3. Excessive Government Control:4. Oligarchic management:Democratic setup of a company exists only on paper. In practical, the company is in the hands of few people. There may be conflict of interest amongst various stakeholders of a company. The employees, for example, may be interested in higher salaries, consumers desire higher quality products at lower prices, and the shareholders want higher returns in the form of dividends. These demands pose problems in managing the company5. Conflict in interests: