JOINT STOCK COMPANY By- RUNA

Why Company? In a partnership we cannot exceed 20 members So there is a limit of contribution of capital, resources, wisdom etc. Also a risk of unlimited liability

MEANING OF COMPANY A company is an association of persons. It is formed for carrying out business activities It a legal statues independent of its members.

JOINT STOCK COMPANY It is a voluntary association of individuals for profit, having a capital divided into transferable shares, the ownership of which is the condition of membership.

Features 1.Artificial Person Artificial no body, soul i.e. its invisible and intangible Person it can incur debts, own property, borrow money, enter contracts etc.

Business Business Owners IN THE EYES OF LAW has own legal 2. Separate Legal Entity Business Business Owners IN THE EYES OF LAW has own legal entity Assets and Liability Assets and Liability of company of its owners Separate From

} 3. Formation time consuming expensive complicated REGISTRATION Indian Companies UNDER Act Preparation of Documents Compliance with several Legal Requirements

} 4. Perpetual Succession Never ending OR Permanent Existence Not affected by death Or the coming and going of people A BUSINESS CAN ONLY BE BROUGHT TO AN END BY LAW By procedure of WINDING UP

Exercised by Shareholders 5. Control OWNERS Ownership control Exercised by Shareholders Management Control Exercised by Board of Directors LEGAL REPRESENTATIVES

6. Liability Limited to the extent of the capital contributed Personal assets are free/safe

7. Common seal Official signature of company in the form of a Stamp(seal) with name of company engraved on it. This is a legal requirement. NEED: arises due to the company being an artificial person and not being able to sign documents

8. Risk Bearing Risk is borne by all shareholders 8. Risk Bearing Risk is borne by all shareholders. Individual risk decreases

9. Transfer of Shares The shareholders enjoy a right to transfer their shares to other persons in the open market.

Merits 1.Limited liability Limited to the extent of the capital contributed Personal assets are free/safe REDUCES RISK BORNE BY OWNERS

2. Perpetual Existence Change is ownership or management does not affect its continuity Not affected by death, retirement, insolvency or insanity of its members MAINTAINS STABILITY OF COMPANY

3. Increased resources and production capacity When 2 or more enterprises join hands Both their resources, capital, wisdom etc. are clubbed together Resources pool increases Production Capacity Increases

4. Access to new markets When 2 or more enterprises join hands Get access to each other’s market Market expands

5. Access to latest technology companyA companyB Joint Venture Local company Large MNC Benefited by Technological advancements

} 6. Scope of expansion has large financial resources CAPITAL Attracted from public Loans from banks or financial institution Reason Investors are inclined to invest in shares limited liability Transferable ownership Possibility of high returns

7. Professional Management In large scale operations Division of work Each department deals with a particular activity and is headed by an expert Management is in the hands of specialised and experiences personnel balanced and rational decision making

Demerits 1. Complexity in formation Large amount of time, effort and procedures ( i.e. legal documents preparation) According to Companies Act

2. Lack of secrecy According to the Companies Act: A company has to provide information from time-to-time to the Office of Registrar available to general public

3. Numerous Regulations Functioning Large no 3. Numerous Regulations Functioning Large no. of Of company legal formalities e.g. an audit, filing reports, obtaining certificates from agencies SUBJECTED TO { Time consuming & Reduces freedom of operations

4. Delay in decision making time consuming process Board of Directors General Meeting RESULT: Delay in decision making And execution Opportunities lost

rule by a few 5. Oligarchic Management Shareholders are scattered →disunited Not interested in company meetings B.O.D enjoy considerable freedom in exercising their power which they can use against the interest of shareholders Dissatisfied shareholders→ sell their shares & exit company

6. Conflict in Interests Clash of demands or interests e. g 6. Conflict in Interests Clash of demands or interests e.g. employees→ higher salaries consumers→ better goods in lower price shareholders→ higher dividends