Joint Stock Company

Introduction

Joint stock companies are the leaders in their businesses and almost all bigwigs in their respective fields that we see on TV and in magazine advertisements are joint stock companies. Joint stock companies’ prowess is so heavy that sole proprietorships or partnerships cannot challenge them in their businesses. Joint stock companies are usually large-scale enterprises that have numerous shareholders and operate around the world.

What is a Joint Stock company?

A joint stock company is a commercial firm that has joint owners. Simply put, the organization is owned jointly by its owners. The owners own the company by purchasing a part of it. This owning pattern is done in the form of shares. Therefore, joint stock companies are organizations that are owned jointly by all the shareholders

A joint stock company is the most usual type of business that may be found everywhere in the world. A joint stock company starts when a group of individuals split the company’s capital into transferable shares. Once shares are available, people can become part of the ownership network of the company by purchasing the shares.

It must be noted here that purchasing the shares of the joint stock company is the only way to be part of the owners’ network. These stocks are usually available in share markets and people can buy and sell them in a process called trading.

Features of Joint Stock companies

The characteristics of joint stock companies are as follows:

A 100% separate legal entity

Unlike partnerships and sole proprietorships, joint stock companies are completely separate legal entities. Not any single individual is answerable for a joint stock company. The company, on the other hand, is not answerable for its acts done by an individual or a group belonging to the enterprise.

This means that joint stock companies are considered as an entity that are unique and acts as a unit legally. Although it is run by individuals, the individuals are just part of the business and cannot claim ownership provided they do not have shares of the business.

Permanent succession

Unlike sole proprietorships which depend on the owner, joint stock companies do not depend on anyone for their management and succession. It is governed by affiliates who keep changing. The shares of joint stock companies are bought and sold among the members and new members can be made via the sale of shares.

The joint stock companies also divide dividends to new as well as old shareholders depending on the shareholding patterns. Therefore, joint stock companies have permanent succession and these companies keep running without having to rely upon a permanent group of owners.

This, however, does not mean that the joint stock companies do not have owners. People can have a majority stake in joint stock companies by which they can control the behavior of the company. The joint stock companies are therefore completely based on the shares which decide the various rules for running the organization generally.

Member count

The number of members that corporations can have is usually governed by several regulations. A public limited company should always have at least seven members. The upper limit is not there. A private limited corporation on the other hand should have at least two shareholders. The upper limit of shareholders is not set though. Meanwhile, partnership firms cannot have more than 10 active members.

As most joint stock companies are private limited concerns, they must have at least two shareholders to exist. The number of shareholders can be anything else above two. In fact, well-known joint stock companies have tens of thousands of members. It is often hard to tell the exact number of members of a joint stock company as their shares are bought and sold actively in the markets. However, the calculation by computers can reveal how many members a joint stock company has at a particular period of time.

Incorporation

A joint stock company must be incorporated in order to abstain from legal termination. As joint stock companies are considered separate legal entities, their incorporation is a must. In no way incorporation can be escaped by a joint stock company.

Limitation of liability

The liability in the case of a joint stock corporation is limited and members of such a corporation cannot be asked to liquidate their financial possessions to satisfy the company’s obligations.

The financial assets of shareholders in joint stock companies are therefore more secure than partnerships of sole proprietorship businesses. The financial possessions of members of a joint stock company can be done only with the permission and when it is extremely necessary.

Share transfers

It is another prominent characteristic of joint stock companies. The ownership of joint stock companies can be transferred via shares. In the case of public limited companies, there are almost no restrictions in transferring ownership. While there are some restrictions in public businesses, share transferability cannot be disallowed. This means that members can own assets of joint stock companies as and when they wish. This is also possible to sell the assets according to the will of the members. There is no rule of law that can stop share transferability.

Indefinite succession

The joint stock companies are usually created by law and their end is also brought into action by law. Therefore, joint stock companies have nothing to do with the longevity of their members. The company should run even when the member is not present and it can only stop when the rule of law tells it to do so. Indefinite succession is therefore a prime characteristic of joint stock companies.

How does a joint stock company operate?

A joint stock company’s operations are done via the shares. By buying the shares, individuals and corporations can become members of the company. In the same way, ownership can be transferred by selling the shares of the joint stock company to individuals or corporates. It must be noted that to be a partial owner of a joint stock company, members must own at least one share of the company.

Conclusion

Joint stock companies are bigwigs that manage the largest share of trade and businesses worldwide. Therefore, they are very important for the economic well-being and financial health of the nations where they operate. In India, joint stock companies offer a significant portion of GDP, and hence the country is reliant upon these companies for the welfare of the society. However, these organizations must not behave like a monopoly for the proper growth of the nation. That is why governments keep a close eye on the operation of joint stock companies.

FAQs

Q1. What is meant by a joint stock company? Briefly illustrate.

Ans. A joint-stock company is a commercial entity owned by its shareholders. The joint-stock corporation's shareholders have the allowance and ability to acquire and sell business stock.

Q2. What is the set member count in different types of business organizations according to the law in India?

Ans. A public limited company should always have at least seven members. The upper limit is not there. A private limited corporation on the other hand should have at least two shareholders. The upper limit of shareholders is not set though. Meanwhile, partnership firms cannot have more than 10 active members.

Q3. Give an example of a historic joint stock company in India.

Ans. The East India Company of the Britishers is an example of a Joint Stock company.