Business Studies XI Content
Characteristics of joint stock company
Characteristics of Joint Stock Company
- Compulsory incorporation:
A company is a voluntary association of persons formed and incorporated under the existing Corrine law. Only when it gets certificate o incorporation it comes into existence as a body corporate.
- Artificial person:
A company is an artificial person created by law. It is created by legal process and not by natural birth. Even though it has no natural personality, it has legal personality. Therefore, it can enter into contracts, sue and can be sued, own property, appoint employees and borrow money like any other natural person.
- Common seal:
Since a company is an artificial person having no physical features like a natural person, it cannot sign. Hence, every company by law must have a common seal in which its name is engraved. The common seal can serve as its signature. The common seal is fixed on all important documents and contracts which is witnessed by signature of two directors and countersigned by secretary where ever required. The common seal is kept under the custody of directors.
- Perpetual succession:
Since every company has separate existence from its members, directors and employees, their death, insolvency or insanity will not affect its life and existence. Men may come, and they may go but a company remains forever. It can be wound up under the provision of the act.
- Limited liability:
Usually the liability of members of a company is limited to the extent of uncalled or unpaid shares held by them. Their personal property cannot be seized to meet the company’s liability beyond the above mentioned liability.
- Share capital:
The capital required by the company is raised by the issue of its shares. The share is a document that acknowledges the ownership of the company. The members who hold the share of a company can transfer its ownership to any other person, without the company’s permission.
- Separation of ownership and capital:
In company organization the ownership and management are separate. The shareholders who are the owners do not take active part in the everyday affairs of the company. Instead, they elect their representative known as directors, who with the help of managers and employees manage the company. Thus, there is division of labor and specialization.
- Legal entity:
Since the company is created by law, it has separate legal existence compared to its members. Therefore, the members cannot be personally held responsible for the acts of company and company cannot be held liable for the acts of the members.
- Large membership:
The Company is owned by many members- maximum of 50 in the case of private limited company and unlimited number of member in the case of public limited company.