Friday, 3 June 2011

Define Joint Stock Company and explain its Characteristics and Features

Definition Of Joint Stock Company :-
A joint stock company is an artificial person recognized by law with a distinctive name, a common seal a common capital comprising transferable carrying limited liability and having a perpetual succession.

It is formed and controlled under the company ordinance of the state. It is a very popular form of organization.

Features or Characteristics of Joint Stock Company

Following are the important feature of joint stock company :

1. Separate Legal Existence :-
joint stock company has separated entity from its members. It can sue in a court of law in its own name. Every body knows only the name of the company and its address. No body knows about the share holders.

2. Long Life :-
A joint stock company has a long life as compared to the other forms of business organization. If any share holder dies or withdraws his capital there is no affect on the continuity of company life.

3. Distribution of Profit :-
The basic aim of the joint stock company is to earn profit. Some portion of the whole profit is transferred to Reserve Fund, While the remaining is distributed among the share holders.

4. Limited Liability :-
The liability of the share holders is limited to the extent to the face value of the shares they hold. There is no liability on the private property of the share holder.

5. Number of the Members :-
In case of private company minimum members should be two and maximum fifty. While in a public company minimum member should be seven but there is no restriction on the maximum members.

6. Management :-
The share holder select the Board of Directors in the annual general meting. So all the management is conducted by the Board of Directors. Shareholders are not allowed to participate directly in the management.

7. Transferability of Shares :-
A share holder holder of the company can transfer his shares easily to other persons, There is no restriction on the purchase and sale.

8. Capital Borrowing :-
Joint stock company can borrow capital in its own name and can expand the business.

9. Changing in Business :-
A joint stock company may not change the nature of business except the sanction of court.

10. Trade Agreement :-
A joint stock company may join the trade agreement with other firms in its own name. Because it has a separate existence.

11. Common Seal :-
A company cannot sign itself. So the common seal with the name of the company is used as a substitute for its signature.

12. Payment of Double Taxes :-
First of all a company pays the tax on the whole dividend. Secondly shareholders pay tax on their individual income. So a joint stock company pays double taxes to the government.

13. Government Control :-
A joint stock company has to comply the rules of the Govt. It has also to sub,it the various reports to Registrar. A company has also to audit its accounts.

14. Purchase and Sale of Property :-
A joint stock company can also purchase and sale the property in its name.

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