Business Studies

Answer the following question:
Define Joint Stock Company and explain its feature.   


SOLUTION
A joint-stock company is a business entity in which shares of the company's stock can be bought and sold by shareholders. Each shareholder owns company stock in proportion, evidenced by their shares. Shareholders are able to transfer their shares to others without any effects to the continued existence of the company.

Features of a Joint Stock Company

1] Artificial Legal Person

A company is a legal entity that has been created by the statues of law. Like a natural person, it can do certain things, like own property in its name, enter into a contract, borrow and lend money, sue or be sued etc. It has also been granted certain rights by the law which it enjoys through its board of directors.

However, not all laws/rights/duties apply to a company. It exists only in the law and not in any physical form. So we call it an artificial legal person.

2] Separate Legal Entity

Unlike a proprietorship or partnership, the legal identity of a company and its members are separate. As soon as the joint stock company is incorporated it has its own distinct legal identity. So a member of the company is not liable for the company. And similarly, the company will not depend on any of its members for any business activities.

3] Incorporation

For a company to be recognized as a separate legal entity and for it to come into existence, it has to be incorporated. Not registering a joint stock company is not an option. Without incorporation, a company simply does not exist.

4] Perpetual Succession

The joint stock company is born out of the law, so the only way for the company to end is by the functioning of law. So the life of a company is in no way related to the life of its members. Members or shareholders of a company keep changing, but this does not affect the company’s life.

5] Limited Liability

This is one of the major points of difference between a company and a sole proprietorship and partnership. The liability of the shareholders of a company is limited. The personal assets of a member cannot be liquidated to repay the debts of a company.

A shareholders liability is limited to the amount of unpaid share capital. If his shares are fully paid then he has no liability. The amount of the debt has no bearing on this. Only the companies assets can be sold off to repay its own debt. The members cannot be made to pay up.

6] Common Seal

A company is an artificial person. So its day-to-day functions are conducted by the board of directors. So when a company enters any contract or signs an agreement, the approval is indicated via a common seal. A common seal is engraved seal with the company’s name on it.

So no document is legally binding on the company until and unless it has a common seal along with the signatures of the directors.

7] Transferability of Shares

In a joint stock company, the ownership is divided into transferable units known as shares. In case of a public company the shares can be transferred freely, there are almost no restrictions. And in a public company, there are some restrictions, but the transfer cannot be prohibited.

View Full Answer

Its FREE, you're just one step away


Subjective Medium Published on 18th 08, 2020
Next Question
Questions 244531
Subjects 8
Chapters 125
Enrolled Students 146
Enroll Now For FREE

Realted Questions

Q1 Subjective Medium
Write the four stages in the formation of company.

Asked in: Business Studies - Forms of Business Organisations


1 Verified Answer | Published on 18th 08, 2020

View Answer
Q2 Single Correct Medium
Profit sharing among members in an HUF is done according to _______.
  • A. members status in family
  • B. amount of work done by a member
  • C. equally
  • D. according to the age of the member

Asked in: Business Studies - Forms of Business Organisations


1 Verified Answer | Published on 18th 08, 2020

View Answer
Q3 Single Correct Medium
When an employee shows dissatisfaction expressed through behaviour directed toward leaving the organisation, is called __________.
  • A. Exit
  • B. Voice
  • C. Loyalty
  • D. Neglect

Asked in: Business Studies - Forms of Business Organisations


1 Verified Answer | Published on 18th 08, 2020

View Answer
Q4 Single Correct Medium
A partner may apply to the court for dissolution of the firm on _____________.
  • A. insanity of a partner
  • B. misconduct of a partner
  • C. perpetual losses in business
  • D. all of the above

Asked in: Business Studies - Forms of Business Organisations


1 Verified Answer | Published on 18th 08, 2020

View Answer
Q5 Single Correct Medium
Ratio of 'Net sales' to 'Net Working Capital' _________________.
  • A. Liquidity ratio
  • B. Profitability ratio
  • C. Capital gearing ratio
  • D. Working capital turnover ratio

Asked in: Business Studies - Forms of Business Organisations


1 Verified Answer | Published on 18th 08, 2020

View Answer