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Joint Stock Company

Joint Stock Company
Joint Stock Company
A joint stock company is a form of business organisation wherein a group of persons form an association in order to perform business activities together. It is considered to be the most superior form of business organisation.

Features of a joint stock company
i. A joint stock company is regarded as an artificial person. Unlike human beings, a company cannot sign its documents, cannot negotiate with its customers and cannot breathe or talk. But, like human beings, a company has a life of its own that is truly independent of the lives of its members.
ii. It is considered to be a separate legal entity distinct from its members, and can, therefore, carry out business in its own name and own assets in its own name.
iii. The formation of a joint stock company requires the fulfilment of certain legal formalities that are mandatory under the Indian Companies Act, 1956.
iv. A joint stock company enjoys perpetual succession and is not affected by such situations such as the death, retirement or insolvency of any of the members of the company.
 v. The management and control are under the elected board of directors, and ownership lies in the hands of the shareholders.
vi. The liability of the owners (shareholders) is limited to the amount of capital invested by them in the business.
vii. The board of directors use the common seal (official signature of the company) on all the important official documents to validate them.
viii. Just as the profits are shared in the form of dividends, the risks are also shared jointly by the shareholders.
Merits of a joint stock company
i. The liability of the shareholders is limited to the amount paid by them for the shares purchased.
ii. A joint stock company enjoys perpetual existence and does not face closure by itself even if all its members pass away.
iii. The capital can be easily expanded by issuing fresh, new shares.
iv. Generally, a joint stock company hires professionals and specialised managers for handling its complex operations.
v. The ownership of shares is freely transferable in a company, which acts as an incentive for investors to invest in the company.
Limitations of a joint stock company
i. Its formation requires the completion of a large number of procedures and formalities, which make the procedure lengthy and expensive.
ii. It lacks secrecy because of the mandatory requirement of submission of information about its operations to the Registrar of Companies.  
iii. It has an impe…

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