Page 1 :
JOINT STOCK COMPANY, The Industrial Revolution and introduction modern factory system etc made large scale, production possible. Large scale production required huge capital investment and, management skill. It also involved high degree of risk. The sole proprietorship and, partnership form of business have limitations such as limited managerial skill, shortage of, capital and unlimited liability. These limitations of sole trading concern and partnership, paved the way to a new form of organization called Joint Stock Company., Meaning, A joint stock company is the largest form of business organization. It is an artificial person, having separate legal existence, perpetual succession and a common seal. Companies are, compulsorily to be registered under the Indian Companies Act, 2013. A company is a, voluntary association of persons formed for some common purpose. It may be formed with, the purpose of carrying on some business for profit or carrying on some charitable activity, without profit motive. Its capital is divided into small parts called shares. The persons who, subscribed shares are known as shareholders. The company is owned by share holders. It is, managed by Board of Directors, the elected representatives of share holders. In this way,, management and ownership is practically different. The liability of a shareholder is limited, to the face value of shares held by him, so every public limited co add the word “Ltd” at the, end of its name.For example Reliance Industries Ltd,South Indian Bank Ltd ,Kitex Ltd etc., Features of a Joint Stock Company, 1. Large members, Minimum number of members to form a Private Ltd. Company is 2 and 7 in case of Public, Ltd. The maximum number of members in a private Ltd company is limited to 200 and in, Public Limited Company it is unlimited., 2. Created by Law, A company is formed by registered under Indian Companies Act 2013.Formation of a, company involves lengthy and complicated procedures., 3. Separate Legal Existence, A company has separate legal existence apart from its members. It can carry on business in, its own name, own property, lend and borrow money etc in its own name. It can open bank, accounts, sue and be sued in its own name. A company can legally behave like a human, being but it is actually not a natural person, so it is called an artificial person. It has to, depend upon directors, managers, etc.for getting its works done.

Page 2 :
4. Perpetual succession (Permanent life), Its existence not affected by the death, insolvency or change of ownership through sale of, shares by shareholders. Members may come and go, but the company can go forever. (All, the members of a private Ltd company sitting in a general meeting were killed by a bomb., But it was held that the company survived. Not even a hydrogen bomb could have, destroyed it., 5. Limited liability, The liability of a shareholder is limited to the extent of the face value of shares held by him., So the creditors of a company have no right to realize the amount due to them out of the, personal property of the members.(For example,suppose Kannan, a shareholder, holding, 1,000 shares of Rs.10 each on which he has already paid Rs.8 per share. In the event of loss, or company failure to pay debts, his liability can be only up to Rs.2, 000 (i.e.1000 X 2)), 6. Transferability of shares, Shares of a public company are freely transferable. Members can transfer their shares, without the consent of other members. Therefore, a person can become a member at any, time by purchasing shares and cease to be a member by selling his shares., 7. Common seal, Common seal is the official signature of a company. Every company has common seal. Every, document of the company must bear this seal, otherwise it is valueless., 8. Separation of ownership and management, The company is owned by share holders. But it is managed by Board of Directors, the, elected representatives of share holders. As an artificial person it has to depend upon, directors, managers etc for getting its works done. In this way there is separation of, ownership and management., 9. Compulsory Registration, All companies are compulsorily to be registered under the Indian Companies Act, 2013., , Advantages of a Joint Stock Company, 1. Huge Capital, A company can raise huge capital through issue of shares and debentures because there is, no limit to the maximum number of members in a public company. Thus, there is greater, scope for growth and expansion., 2. Limited Liability

Page 3 :
The liability of a shareholder of a company is limited to the face value of shares held by him., His personal property can't be attached even if the company is unable to meet its creditors, claim. This reduces the degree of risk, 3. Transferability of Shares, Shares of a public company are generally listed in stock exchanges so that a member can sell, his share at any time. There is no need to get permission from other members for this. It, provides liquidity to their investment. However, it is restricted in the case of private, company., 4. Economies of Large Scale, Huge capital and professional management facilitate large scale operations. Therefore, a, company can fully secure the advantages of large scale production, purchase, marketing etc., 5. Efficient Management, A company can afford to pay higher salaries to professional managers. It will increase the, efficiency of management., 6. Public Confidence, A company enjoys public confidence and good reputation in the business world. It has to, disclose its results and follow all legal regulations. Its activities are subject to scrutiny by, auditors and the government. Therefore, people have trust in a public company, 7. Long term projects, A company is the only form organization with continuous stability. The funds invested in, the company by shareholders are not withdrawal until it is wound up. So company can, undertake long term projects and attract further investments in business., 8. Perpetual Existence, Being a separate legal entity, existence of a company is not affected by death, resignation or, insolvency of a member., 9. Greater Scope for Expansion, Retained earnings and vast financial resources and managerial ability help a company to, expand its business., , Disadvantages of a Joint Stock Compa, 1. Difficulty of formation

Page 4 :
Formation of a company is time consuming and expensive process. It involves preparation of, several documents fulfilling several legal formalities. Registration of a company is, compulsory under the Indian Companies Act, 2013., 2. Delay indecision making, Control and management of the company is subject to provisions of Companies Act 2013., There are certain matters which can be decided only in Board meetings. More important, matters require approval of shareholders in their meeting. This results in unavoidable delay, in decision making., 3. Lack of Secrecy, Everything about a company is required to discuss in board meeting. A company is required, to publish its annual accounts and other reports. It is available to the general public also.So, trade secret can't be maintained., 4. Excessive regulation of law, A company is required to file a number of returns and reports with various authorities. It, involves considerable time and money., 5. Lack of flexibility, A company should undertake its business only within the objective already stated in the, objective clause of Memorandum of Association. So it can't divert its business activities, according to the changing conditions without altering its memorandum., 6. Development of monopoly, The joint stock form of organization creates large scale business with a huge capital base., This might lead to concentration of economic power and monopoly in the economy., 7. Unhealthy Speculation, The directors have all information about the functioning of the company; they can use it for, their personal advantage. For example, the director can easily speculate the price of a share, by knowing the ups and downs in the profit of the company.