Define Joint Stock Company and Explain Its Features

The registration and incorporation of a company is absolutely necessary for its incorporation. These require strict compliance with legal regulations, which must be respected by the promoters and management of the company. In addition to the initial start-up phase of a business, it is also necessary to follow the established guidelines for the preparation and presentation of its financial statements. Such legal compliances can be tedious and a hindrance in the day-to-day operations of the business. However, it can be pointed out here that a company has the aforementioned characteristics due to its inspiration or registration under the German Joint Stock Companies Act. Although a partnership – the main alternative to the company as a form of business organization – can also be registered under the Indian Partnership Act 1932, but it does not possess these characteristics. The institution most often referred to as „company” is publicly traded, which means that the company`s shares are traded on a public exchange (for example, the New York Stock Exchange or the Nasdaq in the United States), whose shares are bought and sold by companies by and to the general public. Most of the world`s largest companies are publicly traded companies. A form of company has access to a greater number of potential investors.

Thus, it can potentially raise a much larger amount of funds for its activities. There are different types of financial instruments through which a public limited company can raise funds. The management of a company must be able to cope with the complex operations of the company and achieve the ultimate goal of increasing the final result and therefore increasing the assets of the owners. If the company`s management is not able to do this, it can have disastrous consequences, even at the point of liquidation of a company. Therefore, it is important that the management of the company is competent and experienced in order to settle the affairs of the company. He can simply transfer the shares he owns to another person. As a result, the person who bought the shares becomes the partial owner of the company instead of the person who sells the shares. The Company will in no case be carried out as a result of such a transaction.

In some cases, however, there may be restrictions on the free transferability of shares. Lord Macnaghten noted in this case: „The company is legally a very different person from the drafters of the memorandum, and through them it may be that after incorporation, the company is exactly the same as before, and the same people are managers, and the same hands received the profits, the company is not legally the agency of the underwriters or trustees for them. Subscribers as members are also not liable in any form, except to the extent and in the manner provided by law. `A company is a legal person with a completely different legal personality and independent of the persons who are initially members of it. He has the right to own and transfer the property as he pleases. The shares of a public limited company are freely transferable and the partners may dispose of their shares at any time without obtaining the authorization of the company or other members. However, in a private corporation, some limitation on the right to transfer shares under paragraph 3(1)(iii) of the Act in its articles is essential, but an absolute restriction on the right of partners to transfer shares contained in the articles is void. Soon after, in 1602, the Dutch East India Company issued shares that were made tradable on the Amsterdam Stock Exchange. This invention improved the ability of public companies to attract capital from investors, as they could now easily dispose of their shares.

In 1612, it became the first „company” in intercontinental trade with „tied” capital and limited liability. Each share of the corporation is transferable, and if the corporation is public, its shares are marketed on registered exchanges. Private shares of public limited companies may be transferred from one party to another. However, the transfer is limited by the agreement and family members. In addition, anyone can buy the shares and leave the responsibility for management to the board of directors of people called directors. Since shares are freely transferred through the sale on the stock exchange, this in turn acts as an additional attraction for investors. For this reason, the form of organization of actions is well suited to the mobilization of capital. In addition, the members of the company are in large numbers and most of them cannot participate in the day-to-day management of the company`s affairs. Members elect their representatives in the form of a Board of Directors at the Company`s Annual General Meeting.

This board of directors takes care of the management of the company. Narrowly owned companies have certain advantages over listed companies. A small, tightly owned company can often make business change decisions much faster than a publicly traded company because there are generally fewer shareholders with voting rights and shareholders would have common interests. A publicly traded company is also at the mercy of the market, with a flow of capital based not only on what the company does, but also on what the market and even its competitors, large and small, do. Starting a business is a long, expensive and complicated process. It involves preparing multiple documents and complying with multiple legal requirements before it can be put into operation. Registration of a company is mandatory under the Indian Companies Act, 1956. A public limited company has a large number of shareholders at all times. You obviously cannot participate in the day-to-day affairs of a company.

Thus, members elect their representatives – known as directors – who have enough power to conduct the show independently. So there is a separation of ownership and management that allows the use of professional talents to run the show democratically and independently. For example, A is a shareholder in a company that holds 2,000 shares of 10 rupees each, to which he has already paid 7 rupees per share. Its liability for loss or non-payment of debt by the Company cannot be up to Rs 6,000 – the unpaid amount of its share capital (Rs 3 per share per share per 2,000 shares held in the Company). In addition, he is not obliged to pay anything for the debts or losses of the company. A company is a legal person and benefits from a permanent succession, which means that the retirement or death of a shareholder cannot affect the company Even the change of management or ownership or disputes over the ownership of shares or shares cannot affect the continuity of a company.