A joint stock company is an organisation which is owned jointly by all its shareholders. Here, all the stakeholders have a specific portion of stock owned, usually displayed as a share.
Each joint stock company share is transferable, and if the company is public, then its shares are marketed on registered stock exchanges. Private joint stock company shares can be transferred from one party to another party. However, the transfer is limited by agreement and family members.
Related link: What is Partnership?
Features of Joint Stock Company
- Separate Legal Entity – A joint stock company is an individual legal entity, apart from the persons involved. It can own assets and can because it is an entity it can sue or can be sued. Whereas a partnership or a sole proprietor, it has no such legal existence apart from the person involved in it. So the members of the joint stock company are not liable to the company and are not dependent on each other for business activities.
- Perpetual – Once a firm is born, it can only be dissolved by the functioning of law. So, company life is not affected even if its member keeps changing.
- Number of Members – For a public limited company, there can be an unlimited number of members but minimum being seven. For a private limited company, only two members. In general, a partnership firm cannot have more than 10 members in one business.
- Limited Liability – In this type of company, the liability of the company’s shareholders is limited. However, no member can liquidate the personal assets to pay the debts of a firm.
- Transferable share – A company’s shareholder without consulting can transfer his shares to others. Whereas, in a partnership firm without any approval of other partners, a partner cannot move his share.
- Incorporation – For a firm to be accepted as an individual legal entity, it has to be incorporated. So, it is compulsory to register a firm under a joint stock company.
Also read: Importance of Partnership Agreement
Types of Joint Stock Company
The joint stock company is divided into three different types.
- Chartered Company – A firm incorporated by the king or the head of the state is known as a chartered company.
- Statutory Company – A company which is formed by a particular act of parliament is known as a statutory company. Here, all the power, object, right, and responsibility are all defined by the act.
- Registered Company – An organisation that is formed by registering under the law of the company comes under a registered company.
Students can also refer to Basic Concepts of Accounting for Partnership
Example of Joint Stock Company
Few examples are mentioned below.
- Indian Oil Corporation Ltd.
- Tata Motors Ltd.
- Reliance Industries Ltd.
- State Bank of India