Characteristics of Joint Stock Company – No. 1 Best Article

The following are the characteristics of Joint Stock Company:

1. Association of Persons: A company is an association of persons joining hands with a common motive. A private limited company must have at least two persons and a public limited company must have at least seven members to get it registered. Further more, the number of shareholders should not exceed 50 in private companies but there is no maximum limit for the members in a public limited company.

2. Independent Legal Entity: The company is created under law. It has a separate legal entity apart from its members. A company acts independently of of its members. The company is not bound by the acts of its members and members do not act as agents of the company. A person can own its shares and can be its creditor too. The life of the company is independent of the lives of its members. The company can sue and be sued in its own name.

3. Limited Liability: The liability of its shareholders is limited to the value of shares they have purchased. In case the company incurs huge liabilities, the shareholders can only be called upon to pay the unpaid balance on their shares. The company being a separate legal entity can incur debts in its own name and the shareholders will not be personally liable for that. However, shareholders of a limited company have unlimited liability. The liability of members of a company limited by guarantee is limited to the guaranteed amount.

4. Common Seal: A company being an artificial person cannot put its signatures. The law requires every company to have a seal and get its name engraved on it. The seal of the company is affixed on all important documents and contracts as a token of signature. The directors must witness the affixation of the seal.

Characteristics of Joint Stock Company

5. Transferability of Shares: The shares of a company can be transferred by its members. Whenever the members want to dispose off the shares, they can do so by following the procedure

devised for this purpose. Under Articles of Association, the company can put certain restrictions on the transfer of shares but it cannot altogether stop it. However, private companies can put more restrictions on transferability of shares, virtually making it zero

6. Separation of Ownership and Management: The shareholders of a company are widely scattered. A shareholder may like to invest money but may not be interested in its management. The companies are managed by the Board of Directors. The ownership and management are in two separate hands. The shareholders do not get any right to participate in company management. The right to manage company affairs is vested in the directors who are elected representatives of the shareholders.

7. Perpetual Existence: The company has a permanent existence. The shareholders may come or may go but the company will go on forever. The continuity of the company is not affected by death, lunacy or insolvency of its shareholders. The company can be wound up only by the operation of law. The shares of the company may change hands a number of times, but the continuity of the company is not affected at all.

8. Corporate Finance: A Joint Stock Company, generally, raises large amounts of funds. The capital is divided into shares of small denomination. A large number of persons purchase shares and contribute to the capital of the company. Since there is no limit on number of maximum members in public companies, large amounts of sources can be raised from persons in different walks of life.

9. Centralized and Delegated Management: A Joint Stock Company is an autonomous and self-governed body. The shareholders being large in number cannot look after the day-to-day activities of the company. They elect Board of Directors in general body meeting for managing the company All policies of the company are decided by a majority vote. All important decisions are taken in a democratic way. The centralized management and democratic functioning brings in unity of action.

10. Publication of Accounts: A Joint Stock Company is required to file annual statements with the Registrar of Companies at the end of a financial year. The annual statements are available for inspection in the office of the Registrar.