Define Joint Stock Company and explain its features.

Definition of Joint Stock Company:

• As per Section 2(20) of the Companies Act, 2013: “Company means a company incorporated under this Act or under any previous company law”.
• According to Prof. H.L.Haney: “A Joint Stock Company is a voluntary association of individuals for profit, having its capital divided into transferable shares, the ownership of which is the condition of membership”.

Features of Joint Stock Company:

(i) Voluntary association: It is a voluntary association of individuals. Membership is open to all. Any person can join and leave the company subject to rules of the Articles of Association of the company.

(ii) Incorporated Association: Company is an association of persons formed and incorporated/registered under the Companies Act, 2013. Registration is compulsory. After incorporation, an association obtains the status of a Joint Stock Company.

(iii) Separate legal entity: The company enjoy a separate legal status different from its members and directors. Though the members are the owners, yet they are not liable for the actions of the company.

(iv) Artificial person: A company is a creation of law. A company does not have a physical existence, but it can conduct various activities like a human being.

E.g. enter into a contract, open a bank account, purchase or sell assets, appoint employees, etc. The company has corporate existence.

(v) Perpetual succession: A company has a perpetual succession means continuous existence. The company can enjoy a long and stable life. It is not affected by the death, insolvency, or retirement of any member.

(vi) Common seal: A company has a common seal of its own and all its activities are conducted under this seal. A company is an artificial person, its seal is the substitute for its signature. This seal is a name or any other recognition of a company.

(vii) Limited liability: The liability of members/shareholders of the company is limited. It is limited up to the unpaid part of the face value of shares held by shareholders. The personal property of a shareholder cannot be used for repayment of debts of the company.

(viii) Separation of ownership and management: As per the Companies Act, shareholders are the owners of the company, but they are unable to manage the day-to-day business activities as they are large in number, scattered and they keep on transferring shares. So, they appoint directors for management purposes. Thus, ownership and management are separate in the case of a Joint Stock Company.

(ix) Transferability of shares: The shares of a public company are transferable. They can be transferred freely whenever shareholder desires to sell. Shares of private companies are not freely transferable.

(x) Number of members: A company is owned by a large number of members. For private companies, minimum of 2 members and a maximum of 200 members are required and for the public company a minimum of 7 members and a maximum no limit.

(xi) Capital: Due to a large number of members, a huge amount of capital can be collected by the company in the form of shares, debentures, bonds, public deposits, etc. It can also borrow loans from banks and financial institutions.

(xii) Government control: There is strict control and supervision by the Government on the working of the company. The company has to follow the regulations and file Profit and Loss Account, Balance Sheet, and other financial statements with the Registrar. It should maintain all required books of accounts.