Posted: February 1st, 2023
The major characteristic of a joint-stock company include:
Artificial person – The joint-stock company is an artificial person, which means it is created by law. Joint Stock Company does not possess any physical attributes of a natural individual.
Formation – Before the operation of the joint-stock company, there are legal formalities such as preparing several documents along with compliance with other legal requirements. After the registration, the joint-stock comes into operation just like any other corporation.
Separate legal entity – The joint-stock company is independent of all of its members being an artificial person. Contracts can be made. There can also be selling and purchase and employing individuals, and conducting lawful business in the name of the company. The joint-stock company can also sue and be sued in a court of law.
Perpetual succession – The joint-stock company enjoys continuous existence. As it is established by law, it can also be dissolved by the law. Therefore, there is no death of the company unless it is wound up. The company’s existence is not affected by the end, insolvency, or lunacy of the company’s members.
Limited liability – The members of the joint-stock company have limited liability. They are liable to the extent of the amount invested by them in the company. Liability is limited to the value of shares bought by the shareholders.
Transferability of shares – The shares of the joint-stock company are transferable. Thus, the shareholders can freely transfer their stakes in the company to such other individuals. Consent of other shareholders is not required for transferring the shares.
Common seal – Common seal authorizes all the acts of a joint-stock company as the company is an artificial body and cannot act independently or sign. The joint-stock company must have a common seal of its own where the company’s name is engraved.
Benefits of Joint-Stock Company
In the joint-stock company, a potent form of business is formed and thrives in which a lot of individuals work together. The individuals who invest in the company can benefit and share the profits of the business. The shareholders own such a portion of the company as per the company’s amount invested. There are additional privileges that come along with the ownership of shares in the company. Multiple voting rights and the election of directors for managing the company on behalf of the shareholders are certain privileges that shareholders get. Without running the company, the shareholders have the right to say in everything that happens in the joint-stock company. The election for a board of directors by the shareholders is held once every year. However, the process may vary from one company to another.
The voting power of the shareholders includes electing the board of directors and consists of the vote for approving or denying annual reports, budgets, and the setting up of the account. Where the position of a director is not filled or is vacant, certain shareholders can be asked to step up into the role of such a director. It is a rare circumstance where individuals choose such a director by a consensus among them and the rest of its shareholders.
Limitations of Joint Stock Company
The following are the limitation of the joint-stock company-
Difficulty in formation – The joint-stock company’s building includes many legal formalities and compliance with government frames’ rules and regulations.
Control by the group – Directors who belong to the same family manages the joint-stock companies mostly. There is an indifferent attitude regarding the management of the company due to a wide range of shareholders. And the decisions of the company are taken by the shareholders having the majority of shares in the company.
Lack of secrecy – As approval of the board of directors is required along with the general body, where there are open public proceedings, it becomes difficult to maintain confidentiality in some issues.
Delay in the decision-making – Specific procedural formalities must be fulfilled by the joint-stock company before making decisions. Approval of the board of directors along with the general body of shareholders is also required. Therefore, certain vital decisions are delayed due to lengthy and time-consuming processes.
Social abuses – The joint-stock company has a large-scale business organization along with heavy resources. It empowers the joint-stock companies. An unhealthy condition is created in society if there is any misuse of such power, for instance, monopoly of a specific business or product in the market.
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