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.
- 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.
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.
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.
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.