Important Features of a Joint Stock Company
February 26, 2018
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Important features of a joint Stock Company
The following are the main characteristics of a joint stock company:
- Artificial person- The Company carries on its business activities in its own name. The company makes purchases, incurs expenses, sells goods, sues against other parties and is also sued. The company performs all these activities in its own name but it is not a natural person with human physical construction, so it is called artificial person. It is a distinct legal person, separate from its members.
- Created by law- Unlike sole proprietorship and partnership firm, a company has to be compulsorily registered. The company has to fulfill a lot of legal formalities for its formation, carrying out business and even for it dissolution.
- Capital divisible into transferable shares- The Company has to mention its maximum capital required at any time in the future in its memorandum of association. The capital is divided into small denominations, known as shares. These shares are transferable from one person to other person.
- Limited liability- The liability of every shareholder is limited to the face value of shares, held by him.
- Perpetual succession- The Company has got permanent life, irrespective of the death, lunacy and insolvency of its members.
- Ownership is distinct from management- The Company is owned by the shareholders, who subscribe for its shares. It is managed by the elected representatives of the shareholders- i.e. directors.
- Common seal- The Company has got a common seal, which is inscribed on its documents and important papers. The Company works under this common seal.
- Voluntary association- Persons who are willing to form a company can come together voluntarily for carrying out a business. There is no compulsion on the part of any person to join as a member in the company. Therefore, a company is a voluntary association of persons.
- Separate legal entity- A company has a separate legal entity which is distinct and separate from its members. It can hold and deal with any type of property. It can enter into contracts and even open a bank account in its own name.
- May sue or be sued- The company being an artificial person, has a separate legal existence. It can enter into contracts and enforce the contractual rights against others. Similarly, the company can be sued by others if there is a breach of contract by the company.