Joint stock company and its characteristics

by • 06/01/2013 • GeneralComments (0)619

Q.1 Define joint stock company and explain its characteristics?

Ans: COMPANY

“A voluntary association for profit with capital divisible into transferable shares with limited Liability having a corporate body and a common seal.”

 

JOINT STOCK COMPANY

According to Companies Ordinance, 1984,

“It is an incorporated association enjoys the advantages of having a large number of members who contribute money to a common pool for running large undertakings. The Interest or share of rah member can be purchased, sold and transferred without the consent of other members.”

 

FEATURE / CHARACTERISTICS

Following are the feature of Joint Stock Company:

 

1. SEPARATE AND DISTINCT

A company has a separate and distinct personality form its members, which constitute it.

 

2. ARTIFICIAL LEGAL PERSONS

In consequence of incorporation it is an artificial legal person enjoying similar rights and similar obligations as a natural person.

 

COMMON SEAL

A company is an artificial person created by law. Therefore, company cannot sign documents for itself. The common seal which bears the name of the company is use as a substitute for its signature.

 

4. OWN AND HOLD PROPERTY

As a corporate person the company is entitled to own and hold properly as distinct from its numbers.

 

5. PERPETUAL

As a juristic person distinct from its members it has perpetual succession.

 

6. TRANSFERABLE LIABILITY OF SHARES

The shares in the share capital of the company are generally freely transferable. This makes the life of the company independent of the lives of it members.

 

7. LIMITED LIABILITY

The liability of its shareholders is limited to unpaid value of the share held by them.

 

8. NUMBER OF MEMBERS

There are large numbers of members in the joint stock company. In public limited company minimum number of members is seven (7) and no restriction for the maximum number of members. In private limited company minimum number of members is two (2) and maximum is fifty (50).

9. CONTINUITY OF LIFE

The life of a company is unlimited unless it is dissolved. The death, insolvency, retirement of any shareholder or director does not affect its life.

 

10. MANAGEMENT

The management of the company is entrusted to the Board of Directors elected by the shareholders.

 

11. OBJECT

The object of the joint stock company is to earn profit. Whole profit is not distributed among the shareholders but some portion of profit is transferred to reserve fund for the use of emergency.

 

12. FINANCIAL RESOURCES

A joint stock company right form its formation has to comply with a numerous and varied statutory requirements. It has a number of returns and reports to the government.

 

13. STATUTORY REGULATIONS

A joint stock company right form its formation has to comply with a numerous and varied statutory requirements. It has a number of returns and reports to the government.

 

14. DEMOCRATIC MANAGEMENT

A joint stock company is managed by the Board of Directors, which is elected by its shareholders through the democratic system of casting vote.

 

15. COLLECTIVE OWNERSHIP

All the shareholders to the extent of their shares do not own the company by any single person but collectively. A shareholder can neither withdraw his capital equivalent to his shares, nor can demand his shares. The most he can do is that he can sell his share or shares to another person, who becomes the shareholder or a joint owner of the company. Shares have a ready market in terms of stock and exchange market where any number of the shares can be sold or purchased at the current price.

 

16. CAPITAL BORROWING

Company can borrow capital in its own name to expand the business.

 

17. CHANGE IN BUSINESS

A company may not change the nature of business without the prior sanction or permission of court.

 

18. PAYMENT OF TAXES

A company pays double taxes to government. First of all joint stock company pays the tax on its whole profit and then shareholders pay tax on heir individual Profits/incomes.

 

19. GOVERNMNET CONTROL

A joint stock company has to comply with the rules of the government and it has to submit various types of reports to registrar from time to time.

 

20. EASY MODE OF INVESTMENT

The capital of Joint Stock Company is divided into the shares of small value, so every person can purchase these shares according to his income and saving.

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