A Joint Stock Company is a type of business that gives shareholders business ownership rights by issuing them a certificate of their shares. These shares can be bought or sold at any time by those who have already purchased them. In the United States, shareholders have unlimited liability, whereas, in Asian countries, shareholders have limited liability. In this article, we will explain everything about the different types of joint-stock company.
Features of Joint Stock Company
A Joint Stock Company is a voluntary association of individuals for profit, having a capital divided into transferable shares, the ownership of which is the condition of membership. Following are the features of different types of joint-stock company
- Separate Legal Entity – A joint-stock company is an individual legal entity from the individuals involved. It has the ability to own assets and, as an entity, it has the ability to sue or be sued. A partnership or sole proprietorship, on the other hand, has no legal existence apart from the person involved. As a result, the members of the joint-stock company are not liable to the company and are not reliant on one another for business purposes.
- Perpetual – Once a firm is born, it can only be dissolved by the functioning of law. So, company life is not affected even if its member keeps changing.
- Number of Members – A public limited company can have an unlimited number of members, with a minimum of seven. There are only two members in a private limited company, and a partnership firm cannot have more than ten members in one business in general.
- Limited Liability – The liability of the company’s shareholders is limited in this type of company. However, no member has the authority to liquidate personal assets in order to pay a firm’s debts.
- Transferable share – A company’s shareholder can transfer his shares to others without consulting anyone. A partner in a partnership firm, on the other hand, cannot move his share without the approval of the other partners.
- Incorporation – A firm must be incorporated in order to be recognized as an individual legal entity. As a result, incorporating a firm as a joint-stock company is required.
Types of Joint-stock company
There are different types of joint-stock company based on their goal, design, business model, mission, vision, roles, and stakeholders. Because of the numerous factors involved in the various business cycle stages, each has its own set of advantages and disadvantages.
1. Chartered Company
A chartered company is a company that is formed by royal order. Its powers, rights, and functions are governed by the charter issued at the time of formation. However, this type is not being killed or formed in the present day. All companies are now required to register under the company ordinance.
Examples of Chartered Companies: Chartered Mercantile Bank of India, Amsterdam Stock exchange, Chartered Bank of England, Muscovy Company
2. Statutory Company
This company is formed by the Governor-General, President, or Prime Minister’s order or by a special act of the legislature. It is set up to carry out some important national business. The word “Limited” may not appear after the name of such a company. Each can exercise its own extraordinary power, which is governed by the terms of its own Act.
3. Registered Company
It is incorporated under the Company Act. In our country, there is an ordinance 1984 that governs the formation and supervision of a registered company. It has a separate legal entity from its members. The registered company may be divided into the following groups:
– Unlimited Company
As in an ordinary partnership, the shareholders of the unlimited company are obligated to pay the business’s debts and other obligations.
Features of Unlimited Joint Stock Company:
- The board of directions manages it.
- It has a separate legal entity.
- There may be a large number of shareholders and
- Its shares may be transferred to another person.
Nevertheless, despite the foregoing characteristics, the public is opposed to forming this type of company.
– Company Limited by Guarantee
A limited by guarantee company is one in which each member guarantees to contribute a certain amount to the company upon its dissolution. It may or may not have share capital, and if such a company has a share capital, the amount must be specified in the company’s charter.
It is not formed to profit, but rather to promote social, cultural, and scientific activities such as clubs, chambers of commerce, welfare organizations, and educational associations.
– Company Limited by Shares
A company limited by shares is one in which each member’s liability is limited to the nominal amount of the shares he holds. If he pays the fair market value of the shares, his liability is null and void. It is popular among various types of joint-stock companies. The company limited by share can be of two types.
• Private Limited Company, where the number of shareholders ranges from two to fifty. The share of these companies can’t be traded in the stock market.
• Public Limited Company, where the number of shareholders ranges from seven to share limitation. The share of the public limited company is traded in the stock market.
Different types of Joint-stock company are formed to finance endeavors that would be too costly for an individual or even the government to fund. Different types of joint-stock company’s shareholders expect to share in its profits.