In this session, we will discuss what is the joint-stock company is and its meaning, the definition of the joint-stock company, the features of the joint-stock company, the types of the joint-stock company, the importance of the joint-stock company, the advantages, and disadvantages of the joint-stock company, and joint-stock company examples, history.
What is the joint stock company?
If you are thinking of the largest company in the world, they all are proprietorships or partnerships then you are definitely thinking wrong because they all are joint-stock companies. the joint-stock company is an association or organization of many persons formed for the purpose of profit, possessing a common capital contributed by the members composing it.
Joint-stock is a type of company in which anyone can participate who have interested to buy or sell a share. because the joint-stock company only stands on share. so that let’s discuss the share of the joint-stock company. The joint-stock divides its capital into a large number of parts with each value where each part of capital is call a share. The person who holds the share is call a shareholder of the company. Also, the director and the members of the joint-stock who had to manage the company that they all are shareholders.
According to Professor Haney, “A joint-stock company is a voluntary association of persons for profit, having the capital divided into some transferable shares, and the ownership of such shares is the condition of membership of the company.”
In the session on what is a joint-stock company is, we will also discuss the features of the joint-stock company.
The features of the joint-stock company can be dedicated by the following points.
- Artificial person
- Common seal
- Perpetual succession
- Limited liability
- Distinct Legal entity
- Minimum number of members
- Transferability of shares
Artificial person: – A joint-stock company has an artificial personality that is recognized by Law. These types of personalities are invisible and intangible. It can do everything, like that own property in its name, enter into a contract, borrow and lend money, it can sue others and can be sued, etc. It has also been grante certain rights by the law which it enjoys through its board of directors.
Common seal: – The common seal is important for a joint-stock company. Why It is important that a joint-stock company must have a common seal with its name engraved on it. The common seal is fixe on any of the documents and contracts which legally bind the company by the signature of two directors and countersigne by the secretary where ever require. The common seal is keep under the custody of directors.
Perpetual succession: - We understand about the Sole Proprietorship and Partnership, the Company has continuous existence. It cannot be affecte by the death, insolvency, or insanity of any member on the continuity of any business. Most of the members come and most of the members go, but the company goes on until it is wound up according to law. Perceptual succession lends stability and long life to a company as compared to other forms of business organization.
Limited liability: – This is one of the important major characters of the difference between a joints stock company and a sole proprietorship and partnership. The liability of shareholders in a joint-stock company is limite. For example, if a person has invested Rs. 20,000 then only the personal assets of a member cannot be liquidate to repay the debts of a company. A member’s liability is limite to the amount of unpaid share capital. If the members have to pay their shares are fully then he has no liability. The amount of debt has no bearing on this. Only the joint-stock company assets can be sold off to repay its own debt. The shareholders cannot be make to pay up.
Distinct Legal entity: – A joint-stock company is that type of company that’s one is an artificial company so it has its own distinct legal entity existence apart from its shareholders. This means these types of the company can own assets, property, enter into contracts and conduct any lawful business in their “own” name. it sues or can be sued by anybody in the court by the law. The company’s shareholders are “not” the owners of the property owne. Also, its shareholders cannot be held liable for any acts of the company. (what is the joint-stock company)
Minimum number of members: – According to the public limite company, there are the maximum number of members is unlimite, and their minimum least 7 persons. And also, according to the private limite company, there are a maximum number of members is at least 2 persons are required. But the number of partners in a partnership company cannot exceed ten in the case of business and twenty in other lines of business.
Transferability of shares: – The ownership of a joint-stock company is divide into small components; we all are call shares. Their shares of the joint-stock company are transferable. According to the public company, this right of transfer is free, there are almost no restrictions. And also, according to the private company, however, there are some restrictions on the right of transfer of shares are impose through its articles.
In the session on what is a joint-stock company is, we will also discuss the types of joint-stock companies.
The types of joint-stock companies can be dedicated by the following points.
- Chartered Company
- Statutory Company
- Registered Corporation
There are two types of the registered company
- Limited company
- Unlimited company
Also, there are two types of the limited company
- Private limited company
- Public limited company
There are two types of the public limited company
- A company limited by shares
- A company limited by guarantee
Other kinds of Joint Stock Company
- Government company
- Non-government Company
Chartered Company: – Chartered Company is that type of company which is incorporate that establishe by the royal or the king of the head of the state. These types of companies’ power, rights, and functions are governe by the charter, issue at the time of formation. Before 1845 these companies were forme. For example The Bank of England, The East India Company, The Charter Bank of India, the Charter Bank of Australia, the charter of the British South Africa Company, given by Queen Victoria.
Statutory Company: – A statutory Company is a type of company that is forme by the order of the Governor-General President or Prime Minister or the Legislative Committee or by bill of Parliament. In these types of company objects, powers, rights, and responsibilities are clearly define in the Act so that this company is operate by those laws. In our country, several such Acts have been pass. For example, Nepal Ristra Bank, Nepal Industrial Development Corporation, RNAC, Karma Chari San Chaya Kosh, municipal councils, universities, etc. (what is the joint-stock company)
Registered company: – A registere Company is that type of company that is establishe by registering in the office of a company registered under the company act 2053. If we will be discussing our country, then most of the companies have been established under the provisions of the Company Act. So that The Act contains comprehensive provisions with regard to the establishment, management, dissolution, etc. This is the example of the registered company which is in our country Himal Cement company, Bhirkuti Paper, and Plup Limited company, etc.
There are two types of registered companies which one is a limited company and the second one is an unlimited company. So that let’s discuss deeply on both companies.
Limited company: – The first type of registered company that’s one is the limited company. So limited company is that type of company whose liability of the whole member is limited to the face value of the shares held by him and the capital of the company is divided into a number of shares. For example, Charitable organizations, Financial Services Authority. These types of companies are two types which one is a private limite company and the second one is a public limite company. Then let’s discuss one by one the type of the limited company.
Private limited company: – According to the private limited company, there is a small group of the member that looks like a family and these types of the company can’t trade its shares on the stock market. In this company, there are limits of the member of shareholders to fifty only and prohibits any invitation to the public to subscribe for any shares or debentures. So, these types of companies must use the words ‘Private Limited’ (Pvt. Ltd.) in their name.
Public limited company: – Public limited company is the second type of a limited company. So, the public limite company is a type of company that is a voluntary association of at least seven or more members is require to constitute and register under the law as a separate legal entity apart from its owners who agree on the supply share and capital the losses and profits. These types of companies are two types which one is a company limite shares and the second one is a company limite guarantee. Then let’s discuss one by one the types of company limited share.
Company limite by share: – The company limite by share is that type of company in which is the whole capital of a company is divide into shares and each share has a fixed nominal value. In these types of companies, any person can be a member of the company by purchasing its shares. which the shareholder pays at a time or by installments up to Unlimited company the face value of the shares. A shareholder is not responsible beyond the face value of the shares subscribed; whatever may be the liabilities of the companies. So that these types of companies are most common in actual practice.
Company Limite by Guarantee: – According to company Limite by Guarantee that is a non-profit earning company that is mostly registere with guarantee capital. These types of a company are forme by each member who promise to pay up to a certain fixed amount of money in the event of liquidation of the company. This is one of the guarantees amounts which is call specified in the Memorandum of Association. The members of the company are require sometimes to buy a share of a fixed value and also give a guarantee for a further sum in the event of a liquidation. The liability of its members in case of need extends to be an unpaid value of the shares held by them (where there is a share) and the guarantee. (what is the joint-stock company)
Unlimited company: – An unlimited company is a type of company in which the liability of the shareholder remains unlimited as in a partnership company _If you want to get more information about the meaning of partnership business then click here.). such companies are permitte under the Companies Act but are not usually found.
In the session on what is joint-stock, we will also discuss the advantages of the joint-stock company.
The advantages of the joint-stock company can be dedicate to the following points.