Question

Write short note on the following:
Features of Joint Stock Company.

Answer 1

(1) Voluntary Association: A company is a voluntary association of persona. Any person, irrespective of caste, religion, creed competent to enter into a contract can become its member. A person at his own wish can become or leave membership of the company.

(2) Incorporated Association: A company is an association of persons formed and registered under the Indian Company Act. Registration or incorporation is compulsory. After the certificate of incorporation, a company comes into existence.

(3) An Artificial Person: A company is a creation of law. A company does not have a physical existence, but it can conduct various activities like any other human being. It can file a suit against third parties and can be sued in a court of law. A company has corporate existence.

(4) Independent Legal Status: A company has legal entity (recognition) i.e. it enjoys a separate legal status. Its existence is different from its members and directors. Though the members are the owners yet they are not liable for the act of their company.

(5) Perpetual Succession (Continuous Life): A company has a perpetual succession means continuous existence. The company can enjoy long, stable life as death, insolvency of the shareholder does not affect the working of a company.

(6) Common Seal: A company has a common seal of its own and all its activities are conducted under this seal. A company being an artificial person, its seal is the substitute for its signature. This seal is a name or, any other recognition of a company engraved in a particular manner.

(7) Limited Liability: The liability of members or shareholders of a Joint Stock Company is limited only to the extent of capital they invest in a public company i.e. the face value of shares which they invest into. The shareholders of a company are not liable for the debts of a company.

(8) Separation of Ownership and Management: As per the provision of the Companies Act, 1956, a company is not managed by its owners (shareholders) but by the representative of shareholders (Directors). So, shareholders need not manage a company, and directors need not be the owners of a company.

(9) Transferability of Shares: The shares of a public company are transferable. They can be transferred freely or with some restrictions. Transferability of shares brings about liquidity (conversion into cash) to the investment

(10) Large Membership: A company is owned by a large number of members. For a private company, maximum membership is 50 (minimum 2) and for a public company, there is no limit over a maximum number of members (minimum 7).

(11) Huge Capital: Due to a large number of members, a huge amount of capital can be collected by the company in the form of shares, debentures, bonds, public deposits, etc. It can also obtain loans from banks and financial institutions.

(12) Strict Government Control: There is strict control and supervision by the Government on the working of the company. The company has to follow all rules and regulations of the Government Various fines and penalties are provided for the violation of legal provisions.

(13) Separate Property of Company: The property of a company is different from the property of their shareholders. The shareholders are the owners of the company but they cannot own the property of the company as the company has separate legal status.

(14) Scope of Activities: The management of business activities of the company is based on Memorandum of Association and Articles of Association. The aims and objectives of the company are given in Memorandum, while the Articles include rules and regulations for the internal administration of the company. Thus, the business of the Company is regulated by these documents.