joint stock company and its basic requirements.

1. JOINT STOCK COMPANY
An association of many persons who contribute
money or money’s worth, and who share the
profit and loss.
A joint stock company is a voluntary association
of individuals for profit, having a capital divided
into transferable shares, the ownership of which
is the condition of membership.

2. CHARACTERISTICS
• 1. Association of persons :- it’s a association of persons joining
hands with a common motive. A private limited company
must have at least two members and a public limited
company must have at least seven members to get it
registered. The number of share holders should not exceed 50
in private companies but there is no maximum limit for the
members in a public limited company.
• 2. Independent legal entity :- the company is created under
law. A company acts independently of its members. The
company is not bond by the acts of its members and members
do not act as agents of the company.

3. • 3. limited liability :- the liability of its shareholders is limited to
the value of shares they have purchased. The company being
a separate legal entity can incur debits in its own name and
the shareholders will not be personally liable for that.
• 4. Common seal :- a company being an artificial person can
not put its signatures. The law requires every company to
have a seal and get its name on it. The directors must witness
the affixation of the seal.
• 5. Transferability of shares :- the shares of the company can
be transferred by its members. Whenever the members want
to dispose off the shares, they can do so by following the
procedure devised for this purpose.
• 6. Separation of ownership and management :- a shareholder
may like to invest money but may not be interested in its
management. The companies are managed by board of
directors. Management and ownership are in two separate
hands. The shareholders do not get any right to participate in
company management.

4. • 7. Permanent existence :- the company has a permanent
existence. The shareholders may come or may go but the
company will go on forever. The continuity of the company is
not affected by death of its shareholders.
• 8. Corporate finance :- A joint stock company raises large
amount of funds. A large number of persons purchase shares
and contribute to the capital of the company.
• 9. Centralized and delegated management :- the shareholders
being large in numbers can not look after the day to day
activities of the company. They elect board of directors. All
policies of the company are decided by a majority vote. All
important decisions are taken in a democratic way.
• 10. Publication of accounts :- a joint stock company is required
to file annual statements with the registrar of the companies
at the end of a financial year.