Importance of English Language

Topics: Legal entities, Stock, Types of companies Pages: 6 (1551 words) Published: May 19, 2013

A joint-stock company is a business entity which is owned by shareholders. Each shareholder owns the portion of the company in proportion to his or her ownership of the company's shares (certificates of ownership).

This allows for the unequal ownership of a business with some shareholders owning a larger proportion of a company than others. Shareholders are able to transfer their shares to others without any effects to the continued existence of the company.

A voluntary organization which is an artificial person created by law, having limited liability of its members and a perpetual succession with its capital divided into transferable shares and which has a common seal.

A joint stock company is a voluntary association formed by people to carry on a certain business for profit. People contribute their capital in the forms of shares in the company. Company works in its own name under a common seal. It has separate entity from its members.

Characteristics Of Joint Stock Company:
To understand the concept of joint stock (private and public limited) companies, consider the following characteristics:

Legal formation:
No single individual or a group of individuals can start a business and call it a joint stock company. A joint stock company can come into existence only when it has been registered after completion of all the legal formalities required by the Indian Companies Act, 1984 A company is a voluntary association of persons joining hands with a common motive. For the private company formation, there must be at least two members maximum limit is fifty. For the public company formation, minimum number of members is seven and there is no restriction over its maximum number.

Artificial person:
Just like an individual takes birth, grows, enters into relationships and dies, a joint stock company takes birth, grows, enters into relationships and dies. However, it is called an artificial person as it’s birth, existence and death are regulated by law. i)a company is lifeless but it has a privilege of human being. ii)A company can sue or can be sued in its own name.

iii)A company can own and hold property in its own name.
iv)A company can enforce the contractual rights against others. v)A company can enter into contracts.

Separate legal entity:
Being an artificial person, a joint stock company has its own separate existence independent of it’s investors. This means that a joint stock company can own property, enter into contracts and conduct any lawful business in it’s “own” name. It can sue and can be sued by others in the court of law. The shareholders are “not” the owners of the property owned by the company. Also, the shareholders cannot be held responsible for any of the acts of the company.The two are two persons in the eye of law.

Common seal:
A joint stock company has a “seal”, which is used while dealing with others or entering into contracts with outsiders. It is called a common seal as it can be used by any officer at any level of the organization working on behalf of the company. Any document, on which the company's seal is put and is duly signed by any official of the company, becomes binding on the company.

For example, a purchase manager may enter into a contract for buying raw materials from a supplier. Once the contract paper is sealed and signed by the purchase manager, it becomes valid. The purchase manager may leave the company or may be removed from his job or may have taken a wrong decision, yet, the contract is valid till a new contract is made or the existing contract expires.

Perpetual existence:
A joint stock company continues to exist as long as it fulfills the requirements of law. It is not affected by the death, lunacy, insolvency or retirement of any of it’s investors. For example, in case of a private limited company having...
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