A joint stock company is an organization that is owned jointly by all its shareholders. Here, all the stakeholders have a specific portion of stock owned, usually displayed as a share.
When a group of persons divides the capital of a Company into transferable shares, a Joint-Stock Company is formed. The only way to join this ownership matrix is by purchasing shares. Private joint stock company shares can be transferred from one party to another party. However, the transfer is limited by agreement and family members.
Features of Joint Stock Company
- Separate Legal Entity: Unlike a partnership or a proprietorship firm, a Joint-Stock Company is separate from its owners. It is a separate legal entity. No single member is liable for such a Company’s activities. Alternately, such a firm will not depend on any owner or shareholder to decide its future course of action.
- Perpetual: Once a firm is born, it can only be dissolved by the functioning of law. So, company life is not affected even if its member keeps changing.
- Number of Members: For a public limited company, there can be an unlimited number of members but a minimum being seven. For a private limited company, only two members. In general, a partnership firm cannot have more than 10 members in one business.
- Limited Liability: In this type of company, the liability of the company’s shareholders is limited. However, no member can liquidate the personal assets to pay the debts of a firm.
- Transferable share: A Joint Stock Company’s members have the freedom to sell their shares to anyone they want.
- Incorporation: A Joint-Stock firm has to be incorporated. If this due process is not followed, its legal status ceases to exist. Non-incorporation is not an option.
Types of Joint Stock Company
- Chartered Company: A firm incorporated by the king or the head of the state is known as a chartered company.
- Statutory Company: A company that is formed by a particular act of parliament is known as a statutory company. Here, all the power, object, right, and responsibility are defined by the act.
- Registered Company: An organization that is formed by registering under the law of the company comes under a registered company.
- Indian Oil Corporation Ltd.
- Tata Motors Ltd.
- Reliance Industries Ltd.
- State Bank of India.