Joint Stock Company

What is a J.S.C. ?

A Joint-Stock Company is a business entity which is owned by shareholders. Each shareholder owns the portion of the company in proportion to his or her ownership of the company's shares (certificates of ownership).

This allows for the unequal ownership of a business with some shareholders owning a larger proportion of a company than others. Shareholders are able to transfer their shares to others without any effects to the continued existence of the company.

Reliance Industries Limited (RIL) is an Indian conglomerate holding company headquartered in Mumbai, Maharashtra, India. It is one of the largest Joint-Stock Company in India.

History of J.S.C.’s …….

The earliest joint-stock company recognized in England was the Company of Merchant Adventurers to New Lands, chartered in 1553 with 250 shareholders. Russia's Muscovy Company, which had a monopoly on trade between Moscow and London, was chartered soon after in 1555.

The much more famous, wealthy and powerful English (later British) East India Company was granted an English Royal Charter by Elizabeth I on December 31, 1600, with the intention of favouring trade privileges in India.

in 1602, the Dutch East India Company issued shares, that were made tradable on the Amsterdam Stock Exchange. This invention enhanced the ability of joint-stock companies to attract capital from investors as they now easily could dispose their shares.

The transfer letter dated 1288 through which bishop Peter of Västerås re-acquires 1/8 of Tiskasjöberg, i.e. Kopparberget. The original can be found at Riksarkivet (National Archive) in Stockholm.

Key Features of a J.S.C.

A voluntary association of persons who generally contribute capital to carry on a particular type of business.

Persons who contribute capital become members of the company

Company has a legal existence separate from its members, which means even if its members die, the company remains in existence

The total capital of a JSC is called share capital and it is divided into a number of units called shares.

Members are also called shareholders. An illustration showing the key features of a Joint-Stock Company

Formation Of a J.S.C.

Formation of a Joint-Stock Company

Promotion Stage

Incorporation Stage

Certificate of Commencement

Capital Subscription

Stage

These are the 4 most prominent stages of establishment.

Formation Of a J.S.C.

These are the 4 most prominent stages of establishment.

Formation of a Joint-Stock Company

Promotion Stage

Incorporation Stage

Certificate of Commencement

Capital Subscription Stage

Promotion Stage

Promotion is the discovery of ideas and organization of funds, property and skill to run the business for the purpose of earning income. Steps involved

Idea about Business

Investigation- make out plans as regards to the availability of resources like capital, means of transportation, labour, electricity, gas ,water, etc.

Assembling various Factors- like arrangement of licences, copyrights, employment of necessary employees, etc.

Financial Sources

Preparation of Essential Documents like Memorandum, Articles and Prospectus of company.

The promoters carryout these various activities to give the company its physical shape in the form of

Giving a name to the company

Sanctioning of Capital Issue

Incorporation Stage

The second stage for establishment

Filing of Document: Following documents are to be submitted by the promoters in the Registrar‟s office.

Memorandum of Association – indicates name, address, authorized capital etc.

Articles of Association – contains laws and rules for internal control and management of a company.

List of Directors - list of the names, occupations, addresses, along with the declaration of director

Written Consent of Directors

Declaration of Qualifying Shares- A declaration certificate showing that the directors have take n up qualifying shares and have paid up the money or pay it in near future to the registrar.

Prospectus

Statutory Declaration – stating that all legal formalities have been completed.

Incorporation Stage (Contd.)

Payment of Registration Fee - the registration fee is paid to the Registrar for

Application and documents filing fee

Registration fee

Stamp fee on Memorandum and Articles

Certificate of Incorporation - If the registrar finds all the documents right, he issues the certificate of incorporation to promoters.

Capital Subscription Stage

After getting certificate of incorporation, the next stage is to make arrangement for raising capital by issuing

Shares

Debentures

Savings CERTIFICATE OF COMMENCEMENT – requires the fulfilment of following conditions

Issue of Prospectus: Acompany has to issue prospectus for selling shares and debentures to public.

Certificate of Establishment

The Certificate of Establishment is a parchment that sates that the following company is now established as per the given date.

Within the period specified in sub- section (5), the occupier of every establishment shall send to the Chief Inspector a statement in a prescribed form, together with such fees as may be prescribed, containing the detailed information of the company.

The following is a e.g.. Of a Certificate of Establishment form Switzerland

SharesCompanies act 1956

“a share in the share capital of a company and includes stock except when a distinction between stock and shares is expressed and implied”.

Companies act 2013

“a share in the share capital of a company and Includes stock”

Equity Shares

Equity is the residual claimant or interest of the most junior class of investors in assets, after all liabilities are paid. If liability exceeds assets, negative equity exists. In an accounting context, shareholders' equity (or stockholders' equity, shareholders' funds, shareholders' capital or similar terms) represents the remaining interest in the assets of a company, spread among individual shareholders of common or preferred stock. A negative shareholders' equity is often referred to as a positive shareholders' deficit.

Preference Shares

is a type of stock which may have any combination of features not possessed by common stock including properties of both an equity and a debt instrument, and is generally considered a hybrid instrument.

Features of Equity Shares

Maturity of shares: Equity shares have permanent nature of capital. 

Right to income: Dividend paid to shareholders in the form of immediate cash flows. Retained earnings gives benefit in the form of capital gains. 

Claim on Assets: In case of liquidation, equity share holders will get payment after debt holders, preference shareholders etc. 

Right to control: Equity shares gives right to elect board directors of the company. 

Voting Rights: Shareholders have right to vote in person or by proxy. 

Limited Liability: Equity share holder's liability is limited to the investment made on equity shares.

Features of Preference Shares

Fixed Dividends: Like debt carries a fixed interest rate, preference shares have fixed dividends attached to them.

Preference over Equity: As the word preference suggests, these type of shares get preference over equity shares in sharing the income as well as claims on assets.

No Voting Rights: Preference share capital is not allotted any voting rights normally. They are similar to debenture holders and do not have any say in the management of the company.

No Share in Earnings: Preference shareholders can only claim two things. One, agreed percentage of dividend and second the amount of capital invested.

Fixed Maturity: Just like debt, preference shares also have fixed maturity date. On the date of maturity, the preference capital will have to be repaid to the preference shareholders.

Shares who do not enjoy any preference as regards payment of dividend and repayment of capital.

This share holder have right to vote And Equity share holders are owners of the company. Risk about losing money is more..

Shares which enjoy preference as regards payment of dividend and repayment of capital. 

This share holder have no right to vote And Equity share holders are Creditors of the company. 

Risk about losing money is less than equity share holders.

Equity Shares Preference Shares

Difference Between Equity and Preference Shares

Stock Exchange

A Stock exchange is a form of exchange which provides services for stock brokers and traders to trade stocks, bonds, and other securities.

Stock exchanges also provide facilities for issue and redemption of securities and other financial instruments, and capital events including the payment of income and dividends. Securities traded on a stock exchange include stock issued by companies, unit trusts, derivatives, pooled investment products and bonds. Stock exchanges often function as "continuous auction" markets, with buyers and sellers consummating transactions at a central location, such as the floor of the exchange.