Answer the following question:
Define Joint Stock Company and explain its feature.
Define Joint Stock Company and explain its feature.
A joint-stock company is a business entity in which shares of the company's stock can be bought and sold by shareholders. Each shareholder owns company stock in proportion, evidenced by their shares. Shareholders are able to transfer their shares to others without any effects to the continued existence of the company.Features of a Joint Stock Company
1] Artificial Legal Person
A company is a legal entity that has been created by the statues of law. Like a natural person, it can do certain things, like own property in its name, enter into a contract, borrow and lend money, sue or be sued etc. It has also been granted certain rights by the law which it enjoys through its board of directors.
However, not all laws/rights/duties apply to a company. It exists only in the law and not in any physical form. So we call it an artificial legal person.
2] Separate Legal Entity
Unlike a proprietorship or partnership, the legal identity of a company and its members are separate. As soon as the joint stock company is incorporated it has its own distinct legal identity. So a member of the company is not liable for the company. And similarly, the company will not depend on any of its members for any business activities.
3] Incorporation
For a company to be recognized as a separate legal entity and for it to come into existence, it has to be incorporated. Not registering a joint stock company is not an option. Without incorporation, a company simply does not exist.
4] Perpetual Succession
The joint stock company is born out of the law, so the only way for the company to end is by the functioning of law. So the life of a company is in no way related to the life of its members. Members or shareholders of a company keep changing, but this does not affect the company’s life.
5] Limited Liability
This is one of the major points of difference between a company and a sole proprietorship and partnership. The liability of the shareholders of a company is limited. The personal assets of a member cannot be liquidated to repay the debts of a company.
A shareholders liability is limited to the amount of unpaid share capital. If his shares are fully paid then he has no liability. The amount of the debt has no bearing on this. Only the companies assets can be sold off to repay its own debt. The members cannot be made to pay up.
6] Common Seal
A company is an artificial person. So its day-to-day functions are conducted by the board of directors. So when a company enters any contract or signs an agreement, the approval is indicated via a common seal. A common seal is engraved seal with the company’s name on it.
So no document is legally binding on the company until and unless it has a common seal along with the signatures of the directors.
7] Transferability of Shares
In a joint stock company, the ownership is divided into transferable units known as shares. In case of a public company the shares can be transferred freely, there are almost no restrictions. And in a public company, there are some restrictions, but the transfer cannot be prohibited.
Features of a Joint Stock Company
1] Artificial Legal Person
A company is a legal entity that has been created by the statues of law. Like a natural person, it can do certain things, like own property in its name, enter into a contract, borrow and lend money, sue or be sued etc. It has also been granted certain rights by the law which it enjoys through its board of directors.
However, not all laws/rights/duties apply to a company. It exists only in the law and not in any physical form. So we call it an artificial legal person.
2] Separate Legal Entity
Unlike a proprietorship or partnership, the legal identity of a company and its members are separate. As soon as the joint stock company is incorporated it has its own distinct legal identity. So a member of the company is not liable for the company. And similarly, the company will not depend on any of its members for any business activities.
3] Incorporation
For a company to be recognized as a separate legal entity and for it to come into existence, it has to be incorporated. Not registering a joint stock company is not an option. Without incorporation, a company simply does not exist.
4] Perpetual Succession
The joint stock company is born out of the law, so the only way for the company to end is by the functioning of law. So the life of a company is in no way related to the life of its members. Members or shareholders of a company keep changing, but this does not affect the company’s life.
5] Limited Liability
This is one of the major points of difference between a company and a sole proprietorship and partnership. The liability of the shareholders of a company is limited. The personal assets of a member cannot be liquidated to repay the debts of a company.
A shareholders liability is limited to the amount of unpaid share capital. If his shares are fully paid then he has no liability. The amount of the debt has no bearing on this. Only the companies assets can be sold off to repay its own debt. The members cannot be made to pay up.
6] Common Seal
A company is an artificial person. So its day-to-day functions are conducted by the board of directors. So when a company enters any contract or signs an agreement, the approval is indicated via a common seal. A common seal is engraved seal with the company’s name on it.
So no document is legally binding on the company until and unless it has a common seal along with the signatures of the directors.
7] Transferability of Shares
In a joint stock company, the ownership is divided into transferable units known as shares. In case of a public company the shares can be transferred freely, there are almost no restrictions. And in a public company, there are some restrictions, but the transfer cannot be prohibited.
