A Joint Stock Company is a voluntary association in which people contribute with capital in the forms of shares to carry on a certain type of business for earning profit”. The company operates in its name under a common seal. It has a separate body from its members. Below this post is all about the characteristics and features of the joint stock company. You should aware of them all.
Silent Features of Joint Stock Company Formation
The silent features of the company form of organization are as under:-
1. Formation
A company is a corporate body. It works as a separate entity, which is distinct from the members that constitute 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.
- Promotion
- Incorporation
- Subscription
- Commencement
2. Finance
A company is limited by shares raised at the time of issuing of a prospectus, and the general public is invited to purchase shares of the company. The company, through wide publicity, can collect the necessary capital easily.
3. Control
The shareholders of a company exercise their power to control in the annual meeting, leading to review and the prospectus of the company to approve important matters.
4. Management
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.
5. Duration
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 second, 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 comes to an end only through winding up, which is held through a legal process.
Characteristics of Joint Stock Company
There are various characteristics of a joint stock company which are given below:-
1. Voluntary Association of Person
A company is a voluntary association of persons with a common motive in the combination of joint hands.
2. AN Artificial Person
A company is called an artificial person. It is a person created by law. The company is an artificial person that has many rights. A joint stock company in Pakistan is incorporated and regulated under the Companies Ordinance, 1984.
3. Separate Legal Entity
The company itself is a separate legal entity. Its reality is completely different from others. It identifies its name and seal. In case of any loss, shareholders cannot be sued for the debts taken by the company.
4. Limited Liability
One of the important characteristics 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, shareholders cannot be called upon to pay more than the value of the shares held by them.
5. Separation Of Ownership From Management
The shareholders, who are the owners of the company, are large in number and scattered all over the world. The owner and management are two separate hands.
6. Transfer-ability Of Shares
The shares of the joint stock company are transferable without consulting with other shareholders.
7. Common Seal
The use of a common seal with the name of the company is provided by the law, which identifies the signatures of real persons.
8. Perpetual Existence
One of the characteristics 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 a business, it 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.
Hello everyone! This is Richard Daniels, a full-time passionate researcher & blogger. He holds a Ph.D. degree in Economics. He loves to write about economics, e-commerce, and business-related topics for students to assist them in their studies. That's the sole purpose of Business Study Notes.
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