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Joint Stock Company Notes

1. A joint stock company is a voluntary association of persons formed to carry out a common purpose, with its capital divided into transferable shares. 2. It has a separate legal identity from its members, with perpetual succession even if all members change. Members have limited liability, and the company is managed by elected directors rather than shareholders directly. 3. A one-person company allows sole proprietorships to take advantage of the legal benefits of a company, with a single member and director who must nominate someone to take over in case of disability. It has a separate legal identity from its owner and the owner's liability is limited.

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Muhammad Adil khan
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100 views

Joint Stock Company Notes

1. A joint stock company is a voluntary association of persons formed to carry out a common purpose, with its capital divided into transferable shares. 2. It has a separate legal identity from its members, with perpetual succession even if all members change. Members have limited liability, and the company is managed by elected directors rather than shareholders directly. 3. A one-person company allows sole proprietorships to take advantage of the legal benefits of a company, with a single member and director who must nominate someone to take over in case of disability. It has a separate legal identity from its owner and the owner's liability is limited.

Uploaded by

Muhammad Adil khan
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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CHAPTER - 7

JOINT STOCK COMPANY


MEANING OF JOINT STOCK COMPANY
 A Joint stock company is an incorporated association of persons having a
separate legal existence/entity, perpetual succession and common seal.
 Its capital is divided into shares.
[ The total capital of the company is divided into small denominations/
parts and each part is called a share
FEATURES/ CHARACTERISTICS OF A JOINT STOCK COMPANY

VOLUNTARY ASSOCIATION OF PERSONS

PERPETUAL SUCCESSION

F LIMITED LIABILITY

E COMMON SEAL
A
ARTIFICIAL LEGAL PERSON
T
1.
U2. SEPARATE LEGAL ENTITY/ EXISTENCE

R1.
SEPARATION OF OWNERSHIP & CONTROL
E
S STATUTORY REGULATION AND CONTROL

TRANSFERABILITY OF SHARES

CORPORATE FINANCE

PADMINI CHOUDHURY Page 1


1. VOLUNTARY ASSOCIATION OF PERSONS :-

 A joint stock company is a voluntary association of persons formed to


carry out a particular purpose in common.
 Members can join and leave the company at their own will.

2. PERPETUAL SUCCESSION :-

 A company is a creation of the law and only law can bring an end to
its existence.
 Its life does not depend on the life of its members.
 The death, insolvency or lunacy of members does not affect the life
of a company.
 It continues to exist even if all its members die.
 Members may come and go but the company goes on until it is
wound up.

3. LIMITED LIABILITY :-

 The members can not be held liable for the debts of the company.
 The liability of every member is limited to the nominal/ face value of
the shares bought by him or to the amount of guarantee given by
him.
 For example- if a member has purchased 100 shares of Rs.10/- each ,
his liability is limited to Rs.1000/-.
 Even if the assets of the company are insufficient to satisfy fully the
claims of the creditors, no member can be called to pay anything
more than what is due from him.

4. COMMON SEAL :-

 As a company is an artificial person, it cannot act and sign itself. The


seal is the official signature of the company.
 Therefore, all the acts of the company are authorized by its common
seal.
 The company seal is affixed on all important documents.

PADMINI CHOUDHURY Page 2


5. ARTIFICIAL LEGAL PERSON :-

 A company is an artificial person created by law.


 It is competent to enter into contracts and to own property in its own
name.

6. SEPARATE LEGAL ENTITY/ EXISTENCE :-

 A company has a distinct legal entity independent of its members.


 It can own property, make contracts and file suits in its own name.
 Shareholders are not the joint owners of the company’s property.
 A shareholder cannot be held liable for the acts of the company.
 There can be contracts between a company and its members.
 A creditor of the company is not a creditor of its members.

7. SEPARATION OF OWNERSHIP AND CONTROL :-

 Members / shareholders are the owners of the company but they


have no right to participate directly in the day-to-day management of
a company.
 They elect their representatives from amongst themselves who are
called directors, they manage the company’s affairs on behalf of its
members.
 Jointly/ collectively the directors are called as Board of Directors.
 Thus , the ownership of the company lies with the shareholders while
the management vested with the Board of Directors.

8. STATUTORY REGULATION AND CONTROL :-

 Government exercises control through company law over the


management of the companies.
 A company has to comply with several legal formalities and file
several documents to the Registrar of Companies.

PADMINI CHOUDHURY Page 3


9. TRANSFERABILITY OF SHARES :-

 The capital of a company is divided into small parts/ denominations


and each part is called a share.
 These shares are generally transferable by following the procedure
given in companies Act.
 A share holder is free to withdraw his membership from the
company by transferring his shares.

10. CORPORATE FINANCE :-

 The share capital of a company is generally divided into a large


number of shares of small value.
 These shares are purchased by a large number of people from
different walks of life.

MEANING OF ONE PERSON COMPANY


 The companies Act 2013 allows the formation of one person
company.
 An OPC has only one member.
 The sole member must nominate someone to take charge in case of
his death/ disability.
 The nominee’s written consent must be filed with the Registrar of
Companies.

FEATURES/ CHARACTERISTICS OF AN OPC


1. It is a form of Private company.
2. It has a legal entity separate from its members.
3. The liability of the member is limited to the amount of capital
contributed by him.
4. The liability becomes unlimited if the activities of the OPC are carried
out with the intention to cheat.
5. An OPC may be managed by the owner or his representative.
6. A minimum share capital may be prescribed for an OPC.
PADMINI CHOUDHURY Page 4
7. Every OPC shall have at least one director.
8. The one person shall have to indicate the name of the person who in
the event of the subscriber’s death, disability etc. becomes the
member of the company.
9. An OPC will get its annual accounts audited and file a copy of the
same with the Registrar of Companies.

****************

PADMINI CHOUDHURY Page 5

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