JOINT STOCK COMPANIES
A
company which is formed and registered under the Indian Companies Act 1956 is
known as Joint Stock Company. The peoples
who contribute capital for the business is to be considered as members. The portion
of capital to which each member is entitled as his share , for that he will get
dividend as return .the members are known as Shareholders.
Features of Joint Stock Company
F
Incorporated Association : a Joint
Stock Company is registered under the Indian Companies Act 1956.
F
Separate Legal Entity : On
incorporation Company will become a Legal person .
F
Common Seal : A common seal is used as
a signature of the company.
F
Perpetual succession : company is
created on the basis of law, so the law only can put an end to it .
F
Limited Liability : liability of
shareholders is limited to the extent of face value of shares held.
F
Separation of ownership and management
: shareholders are owners of a company. But the daily activities are controlled
by elected representatives of shareholders known as directors.
F
Extensive Membership : in a public
company there is no limit for membership
F
Transferability of Shares : shares of a
public company are freely transferable.
Advantages of Joint Stock Company
1. Huge
capital : it can collect huge amount of capital for its working.
2. Limited
liability : liability of members is usually limited.
3. Transfer
of Shares : shares are easily transferable in the case of public companies.
4. Diffused
Risk : risk of loss is spread over a large number of persons.
5. Continuity
of Existence : it has a legal entity separate from the persons.
6. Organised
Intelligence : the process of capital formation is implemented with organised
intelligence which increases efficiency of directors.
7. Tapping
Economic Resources : a joint stock company offers vast scope for turning
economic resources to the best use.
8. Greater
Scope for Expansion : with the increase of earnings and financial resources and
managerial ability helps for the expansion of the company.
9. Democratic
Management : the elected members of shareholders are responsible for all
activities.
10. Public
Confidence : they enjoys greater public confidence than sole trading and other
types of organisations.
11. Extensive
Membership : Share capital of a company is divided into a large number of
shares of small value with no maximum limit to the number of members.
12. Employment
Opportunities : it can provide a large number of job opportunities.
Disadvantages of Joint Stock Company
1. Difficulty
of formation : the formation of a company is difficult and costly.
2. Inflexibility
: the constitution of Joint Stock Company IS RIGID.
3. Impersonality
: it difficult to maintain close relation between the management and employees.
4. Fraudulent
Management : the company may be used and managed by inefficient promoters and
fraudulent directors.
5. Oligarchic
Management : actually a company is managed by a few directors ,they may ignore
the interests of shareholders.
6. Delay in decision : for making decisions there
must be meeting of all members, that may lead to delay in decision .
7. Lack
of motivation : company is managed by directors so there is not as much interest
as real owners.
8. Excessive
Regulation : management has to spend its
precious time and money in complying with the statutory requirements .
9. No
Secrecy of Business : publication of the progress of the company will reveal
all secrets .
10. Social
ill effects of large companies : companies faces some social evils such as
monopoly, pollution, exploitation of labours .
Types of Companies
1. Private
Company
2. Public
Company.
Private Company
A private company has been define as a company
which by its articles
a. Limits
the number of members to 50.
b. Restricts
the right to transfer its shares.
c. Prohibits
an invitation to public for deposits.
d. Prohibits
an invitation to public to subscribe to its shares and debentures.
e. Puts
the minimum paid up capital to rupees one lakhs.
Privileges
of A private Company
F
It can be formed with 2 members.
F
It can commence business after
incorporation.
F
It need not obtain minimum subscription
to allot shares
F
No necessary to hold statutory meeting.
F
It can issue any kind of shares.
F
Two directors are required for a
private company
F
Directors need not retire by rotation
F
It need not keep an index of its
members.
F
Only 2 members can make the quorum for
a meeting.
Public Company
A public company means a company which
is not a private company. It can have any number of members. Its shares are
freely transferable.it has a minimum paid up capital of rupees 5 lakhs.
Deemed Public Company
A
private company automatically becomes a public company , if 25% of the paid up
capital is held by a public company.
Choice of Form of Business Enterprise
{
Nature of business running.
{
Finance required for its running.
{
Degree of controlling power desire by a
person.
{
Degree of risk involved in a business.
{
Freedom from govt. regulations.
{
Duration of the business Venture.
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