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How to incorporate a joint stock company in India?

A joint stock company is a voluntary association of persons legally recognized having a name and common seal formed to carryon business for profit with capital collected through sale of shares and debentures.

Incorporation of company:

Company forms of business enjoy the status of a legal entity as it is incorporated under Indian Companies Act, 1956. For incorporation the following documents are required to be submitted:

  • Memorandum of Association which is the fundamental charter defining aims and objectives of a company.
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  • Articles of Association which contain various rules and regulations for internal management.
  • The name and address of the registered office.
  • A statement of nominal capital.
  • A list of proposed directors, their names and addresses.
  • A statutory declaration by.

Types of Companies

Joint stock companies are classified into different types a different basis.

  • On the basis of incorporation there are 3 types of companies called Chartered Company, statutory company and registered company.
  • On the basis of liability companies are classified as company having unlimited liability, company having liability limited by guarantee and company having liability limited by shares.
  • On the basis of nationality two types of companies are found called national company and multination company.
  • On the basis of transferability of shares two types of companies called private company and public company are found.
  • On the basis of ownership companies are classified as Government Company, holding company and subsidiary company.

Features:

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A close analysis of various definition of company reveals the following characteristics:

  • It is an association of at least 2 or seven persons.
  • It is a corporate form of legal entity because it is registered.
  • A company is a legal entity quite distinct.
  • It has perpetual existence as its operation is not affected by death of a shareholder.
  • The liability of shareholders is limited.

Advantages:

Joint stock Company as a type of business organization has a number of advantages to its credit. These are:

  • It has a permanent existence.
  • Shares are transferable.
  • It enjoys a number of financial advantages over other forms of organization.
  • It experiences a state of effective and better management.
  • It has enough ability to adapt with future changes.
  • As shareholders are numerous, it facilities diffusion of risks.

Disadvantages:

Despite of a number of advantages, company form of business organization is not free from limitations. The major limitations are:

  • Absence of personal touch.
  • A lot of difficulties in formation.
  • Lack of prompt and effective decision making.
  • No secrecy is maintained.
  • A lot of chances on frauds by directors.
  • It is not a bed of rose because of conflict between owners and management.
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