A Joint Stock Company is voluntary association in which people contributes with capital in the forms of shares to carry on a certain type of business for earning profit”. Company operates in its own name under a common seal. It has separate body from its members.
Characteristic of Joint Stock Company
There are various characteristics of a joint stock company which are given below:-
- Voluntary Association of Person
A company is a voluntary association of persons with a common motive in the combination of joint hands.
- AN Artificial Person
A company is called an artificial person. It is a person created by law. The company being an artificial person has many of the rights. A joint stock company in Pakistan is incorporated and regulated under the Companies Ordinance, 1984.
- Separate Legal Entity
The company itself is a separate legal entity. Its reality is completely different from others. It identifies its own name and seal. In case of any loss, shareholders cannot be sued for the debts taken by the company.
- Limited Liability
One of the important characteristic of the company is its limited liability. The liability of shareholders of the company is limited against the value of the share purchased by them. In case of any loss to the company, shareholder cannot be called upon to pay more than the value of the shares held by him.
- Separation Of Ownership From Management
The share holders, who are the owners of the company, are large in number, scattered all over the world. The owner and management are two separate hands.
- Transfer-ability Of Shares
The shares of joint stock company is transferable without consulting with other shareholders.
- Common Seal
The use of common seal with the name of the company is provided by the law, which identifies the signatures of real persons.
- Perpetual Existence
One of the characteristic of a joint stock company is its long life with the comparison to other forms of business organizations. When the company is created and started business, it has then continues life. The shareholders can easily withdraw the capital by selling shares in the open market. The existence of the company is least affected by the transferability of shares.
Silent Features of Joint Stock Company Formation
The silent features of company form of organization are as under:-
A company is a corporate body. It works as a separate entity, which is distinct from its members that constitutes it. It can be set up by following the procedure laid down for this purpose under the law. The formation of a company usually passes through four stages.
A company is limited by shares raises at the time issuing of a prospectus, and general public is invited to purchase shares of the company. The company, through wide publicity, is able to collect necessary capital easily.
The shareholders of a company exercise their power to control in the annual meeting, leads to review and the prospectus of the company to give approval on important matters.
The shareholders, who are the owners of the company, cannot take part in the management of its affairs. They entrusted the Management to a board of directors elected by them.
A company enjoys continues existence. The existence of the company is not affected in case of death, transfer or insolvency of the members.
6. Double Taxation
The company is subject to double taxation. First the tax is levied on the profits of the company and secondly, the shareholders pay tax on the dividends received.
7. Irredeemable Share Capital
Share capital is the capital collected by subscription to the shares of the company. The capital is non-refundable except in the case of winding up and reduction of capital.
8. Winding Up
Continues existence of a company come to an end only through winding up, which is held through legal process.