JOINT STOCK COMPANY: MEANING AND FEATURES

·         JOINT STOCK COMPANY

·         COMPANY LAW

·         BUSINESS ORGANIZATION AND MANAGEMENT

·         BUSINESS STUDIES PLUS ONE

·         INTRODUCTION

1.      JOINT STOCK COMPANY WAS STARTED FIRST ITALY IN 13 TH CENTURY

2.       DURING 17 TH AND 18 TH CENTURIES,JOINT STOCK COMPANIES WERE FORMED IN ENGLAND UNDER THE ROYAL CHARTER OR ACTS OF PARLIAMENT

3.       THE SPECULATIVE BUSINESS OF THE COMPANIES LED TO THE PASSAGE OF BUBBLES ACT OF 1720 WHEREBY PROMOTION OF COMPANIES WAS DECLARED ILLEGAL BY ENGLAND ‘S PARLIAMENT

4.       IN 1844 THE JOINT STOCK COMPANY ACT WAS PASSED IN 1844 AND LIMITED LIABILITY WAS GRANTED ONLY IN 1855

•    IN INDIA

1.       THE FIRST COMPANIES ACT WAS PASSED IN 1850 AND THE PRINCIPLES OF LIABILITY WAS INTRODUCED ONLY IN 1857’

2.       THE APPLICATION OF THE ACT WAS EXTENDED TO BANKING AND INSURANCE COMPANIES IN 1860

3.       A COMPREHENSIVE BILL WAS PASSED IN 1956

4.       THE FIRM INCORPORATED UNDER THIS ACT ARE KNOWN AS COMPANIES

5.       THE PARLIAMENT AND STATE LEGISLATURES CAN ALSO PASS LEGISLATION'S FOR THE INCORPORATION OF THE COMPANIES,GENERALLY CALLED CORPORATIONS

6.       THE GOVERNMENT INTRODUCED  NEW COMPANY ACT 2013 ON 8^TH AUGUST,2013

•    DEFINITION OF COMPANYCOMPANIES ACT 2013

•    JAMES STEPHENSON

•    A COMPANY IS

§ AN ASSOCIATION OF MANY PERSONS WHO CONTRIBUTE MONEY OR MONEY’S WORTH TO A COMMON STOCK AND EMPLOY IT IN SOME TRADE OR BUSINESS AND WHO SHARE THE PROFIT AND LOSS AS THE CASE MAY BE ARISING THEREFROM

•    DEFINITION BY JUSTICE LORD LINDLEY

•    BY A COMPANY IS MEANT

1.       ASSOCIATION OF MANY PERSONS WHO CONTRIBUTE

2.       MONEY OR MONEY’S WORTH TO A COMMON STOCK AND EMPLOY IT FOR SOME COMMON PURPOSE

3.       THE COMMON STOCK SO CONTRIBUTED IS DENOTED IN TERMS OF MONEY AND IS CALLED THE CAPITAL OF THE COMPANY

4.       THE PERSON WHO CONTRIBUTE IT OR TO WHOM IT BELONGS ARE CALLED MEMBERS

5.       THE PROPORTIONS OF CAPITAL TO WHICH EACH MEMBER IS ENTITLED IS HIS SHARE

•    DEFINITION AS PER 

•    SECTION 2(10) OF THE COMPANIES ACT 1956 STATES THAT COMPANY MEANS COMPANY DEFINED IN SECTION 3. SECTION 3(I)(i) OF THE COMPANY FORMED AND REGISTERED UNDER THIS ACT OR AN EXISTING COMPANY. AN EXISTING COMPANY FORMED AND REGISTERED UNDER ANY OF THE FORMER COMPANY ACTS

•    SIMILARLY SECTION 2( 20 ) OF THE COMPANIES ACT,2013 ALSO STATES COMPANY INCORPORATED UNDER THE ACT OR UNDER ANY PREVIOUS LAW.

•    FEATURES OF JOINT STOCK COMPANIES

•    ASSOCIATIONS OF PERSONS :- A COMPANY IS AN ASSOCIATION OF PERSONS JOINING HANDS WITH COMMON MOTIVE, A PRIVATE LIMITED EXCEPT OPC HAVE AT LEAST TWO MEMBERS AND MAXIMUM 200 AND A PUBLIC LIMITED COMPANY AT LEAST 7 AND NO LIMIT ON MAXIMUM

•    INDEPENDENT LEGAL ENTITY : THE COMPANY IS CREATED UNDER LAW. IT HAS SEPARATE ENTITY FROM ITS MEMBERS.

1.       MEMBERS HAVE NO INSURABLE INTEREST IN THE PROPERTY OF THE COMPANY

2.       COMPANY CONTINUE TO EXIST EVEN WHEN THE MEMBERS DIE

3.       NATIONALITY OF THE COMPANY DOES NOT DEPEND UPON THE NATIONALITY OF THE MEMBER

4.       THE COMPANY CAN SUE AND BE SUED IN ITS OWN NAME

•    LIMITED LIABILITY: LIABILITY OF ITS SHAREHOLDERS IS LIMITED TO THE VALUE OF SHARES THEY HAVE PURCHASED. THE COMPANY BEING A SEPARATE LEGAL ENTITY CAN INCUR DEBTS IN ITS OWN NAME AND THE SHAREHOLDERS WILL NOT BE PERSONALLY LIABLE FOR THAT.

•    TRANSFERABILITY OF SHARES:-THE SHARES OF THE COMPANY CAN BE TRANSFERRED BY THE MEMBERS. UNDER THE AOA,THE COMPANY CAN PUT CERTAIN RESTRICTIONS ON THE TRANSFER OF SHARES BUT IT CAN NOT STOP .BUT PRIVATE COMPANIES CAN PUT MORE RESTRICTIONS ON TRANSFERABILITY OF SHARES.

•    SEPARATION OF OWNERSHIP AND MANAGEMENT: THE SHAREHOLDERS OF  A COMPANY ARE WIDELY SCATTERED. THE COMPANIES ARE MANAGED BY BOD. THE RIGHT TO MANAGE THE COMPANY AFFAIRS IS VESTED IN THE DIRECTORS WHO ARE ELECTED REPRESENTATIVES OF THE SHAREHOLDERS.

•    PERPETUAL EXISTENCE : THE COMPANY HAS  A PERMANENT EXISTENCE. THE SHAREHOLDERS MAY COME OR MAY GO BUT THE COMPANY IS NOT AFFECTED BY DEATH,LUNANCY OR INSOLVENCY OF ITS SHAREHOLDERS. THE COMPANY CAN BE WOUND BY THE OPERATIONS OF THE LAW.

•     COMMON SEAL :A COMPANY IS AN ARTIFICIAL PERSON AND IT CAN NOT SIGN ITS NAME ON CONTRACT. SO IT WORKS WITH THE HELP OF SEAL. COMMON SEALS MEANS THE SIGNATURE OF THE COMPANY. EVERY COMPANY MUST HAVE  A SEAL WITH ITS NAME ENGRAVED ON IT. W.E,F 29 THE MAY 2015, THE USE OF COMMON SEAL IS NOW OPTIONAL AND NOT MORE MANDATORY. IF THE COMPANY DOES NOT HAVE A COMMON SEAL THEN AUTHORIZATION UNDER SECTION 22(2) SHOULD BE SIGNED BY 2 DIRECTORS OR ONE BY DIRECTOR AND CS WHERE COMPANY HAS APPOINTED COMPANY SECRETARY. THE DOCUMENTS WHICH REQUIRE COMMON SEAL:-

•    POWER OF ATTORNEY TO EXECUTE DEEDS IN OR OUT OF INDIA

•    SHARE CERTIFICATE

•    SHARE WARRANT

•    DOCUMENTS AUTHORISING ANY PERSON IN A TERRITORY OUTSIDE INDIA TO AFFIX COMMON SEAL TO DEED

•    OTHER DOCUMENTS NEED NOT REQUIRE COMMON SEAL.

•    A COMPANY CAN EMPOWER ANY PERSON TO EXECUTE DEEDS UNDER HIS SEAL. AUTHORITY TO PUT COMMON SEAL CAN BE GIVEN BY RESOLUTION OR BY COMMITTEE OF BOARD

•     

•    CAPACITY TO SUE AND BE SUED :- A COMPANY CAN SUE AND BE SUED IN ITS CORPORATE NAME.

•    FINANCES :-CAN RAISE CAPITAL BY PUBLIC SUBSCRIPTIONS EITHER BY WAY OF SHARES OR DEBENTURES

•    PUBLICATION OF ACCOUNTS: IS REQUIRED TO FILE ANNUAL STATEMENTS WITH THE ROC AFTER THE END OF THE FINANCIAL YEAR

•    MERITS

•    ARTIFICIAL LEGAL PERSON : COMPANY IS LEGAL PERSON AND DIFFERENT FROM ITS MEMBERS.

•    LIMITED LIABILITY :THE LIABILITY OF THE SHAREHOLDERS IS LIMITED TO THE FACE VALUE OF SHARES HELD BY HIM

•    PERPETUAL SUCCESSION : AS IT IS ARTIFICIAL PERSON AND IT DOES NOT HAVE NATURAL DEATH, IT IS NOT AFFECTED BY THE  DEATH OR RETIREMENT OF THE MEMBERS.

•    TRANSFERABILITY OF SHARES : SHARES OF PUBLIC LIMITED COMPANIES ARE FULLY TRANSFERABLE

•    LARGE CAPITAL :IN MATTER OR RAISING CAPITAL JOINT STOCK COMPANY HAS DEFINITE SUPERIORITY OVER OTHER FORMS OF ORGANIZATION.  A PUBLIC COMPANY CAN HAVE ANY NUMBER OF SHAREHOLDERS AND CAN RAISE ANY AMOUNT OF CAPITAL REQUIRED

•    EXTENSIVE BORROWING CAPACITY : CAN RAISE CAPITAL THROUGH PUBLIC ISSUING DEBENTURES.

•    SEPARATE PROPERTY

•    CAPACITY TO SUE AND BE SUED

•    PROFESSIONAL MANAGEMENT : THE CORPORATE SECTOR IS CAPABLE OF ATTRACTING THE GROWING CADRE OF PROFESSIONAL MANAGERS

•    ECONOMIES OF LARGE SCALE : THE AVAILABILITY OF LARGE CAPITAL ENABLES THE COMPANY TO UNDERTAKE BUSINESS OPERATIONS ON LARGE SCALE. THE COMPANY CAN REAP THE BENEFITS OF ECONOMIES OF LARGE SCALE PRODUCTION AND DISTRIBUTION

•    ECONOMIC DEVELOPMENT : ONLY THROUGH JOINT STOCK COMPANY THAT INDUSTRIES,COMMERCE ,TRANSPORT ,COMMUNICATION,BANKING AND INSURANCE HAVE DEVELOPED ALL OVER THE WORLD

•    SOCIAL DEVELOPMENT :PROVIDED EMPLOYMENT OPPORTUNITIES AND MADE AVAILABLE GOODS AT OW PRICES

•    DISADVANTAGES

1.       FORMALITY AND EXPENSIVE : A NUMBER OF LEGAL FORMALITIES HAVE TO BE COMPILED WITH, A LOT OF EXPENDITURE HAS TO BE INCURRED ON PRELIMINARIES

2.       THE COMPANIES ACT IMPOSES PERSONAL LIABILITY ON THE DIRECTORS OR MEMBERS OF THE COMPANY IN CERTAIN CASES

3.       DELAY IN DECISION MAKING : IMPORTANT DECISIONS ARE TAKEN BY BOD AND GENERAL BODY

4.       COMPANIES ARE MANAGED BY DIRECTORS AND PAID OFFICIALS. DIRECTORS HAVE NOT MUCH PERSONAL INTEREST AS THE PROPRIETOR WOULD HAVE

5.       LACK OF SECRECY : EVERY THING IS DISCUSSED IN THE MEETING OF BOD AND GENERAL BODY

6.       EXCESSIVE STATE REGULATIONS : A LARGE NUMBER OF RULES AND REGULATIONS ARE FRAMED FOR THE WORKING OF THE COMPANIES.

7.       FRAUDULENT MANAGEMENT :  A NUMBER OF COMPANIES HAVE BEEN FORMED IN THE PAST BY FRAUDULENT PROMOTERS TO MISUSE OR MISAPPROPRIATE THE CAPITAL

8.       SPECULATION IN SHARES : THE SPECULATORS TRY TO FLUCTUATE THE PRICES OF THE SHARES ACCORDING TO THEIR SUITABILITY.