Joint Stock Company

Joint Stock Company is a voluntary association of different persons created by law as a separate body for specific purposes. It possesses a common capital contributed by its members such capital being divided into transferable shares. The liability of each such member is limited to the face value of the shares he holds.

LORD JUSTICE LINDELY defines. "A company is an artificial person created by law with a perpetual succession and a common seal". It has a legal entity, separate from the person composing it. It can sue and be sued In its own name.

It is formed and controlled under the Company Ordinance or of the State. It is managed by the group of persons known as Board of Directors. This form of organization is very popular in the field of large scale production and distribution due to its greater benefits.

Characteristics of Joint Stock Company

The following are the main characteristics of the joint stock company:

I. Legal Existence

Joint Stock Company is an Artificial Person created by law. As it has separate legal existence apart from its members, it can purchase the property or transfer the title of property or sue in a court of law in its own name. In our country, it is organized and supervised under the company ordinance 1984.

2. Limited Liability

The liability of the shareholder is limited to the unpaid value of the shares he holds. Private assets of the members are not liable to settle the business obligations. This is a prominent distinctive feature from other forms of business organization.

3. Number of Members

There are large numbers of members in the joint stock company. In case of Public company minimum number of members is seven and there is no restriction for the maximum number of members. In case of Private Company, minimum number of members is two and maximum is fifty.

Reading: Partnership

4. Transfer-ability of Shares

The share of the public company is transferable. This type of share may easily be purchased or sold in the stock exchange market. But members of partnership cannot freely transfer their shares to another person.

5. Object

The basic of the formation of the joint stock company is to earn profit. Whole profit is not distributed among the shareholders but some portion of profit is transferred to Reserve Fund. So that it may be used at the time of emergency.

Reading: What are different Natures of Businesses?

6. Management

Its management is conducted by the Board of Directors. But the shareholders who are the actual owners of the company are not allowed to participate directly in the management. So there is separation of ownership from control.

7. Long Life

It enjoys continued existence. The death or retirement of any member cannot affect the running life of company. Its life is apart from its members. Its business continues until it is wound up by its members or creditors so it is called perpetual succession.

8. Larger Business

As there is no limit to the maximum number of shareholders in case of Public Company, capital may be increased and large business may be commenced. But it is not possible in other form of organization due to lack of capital.

9. Trade Agreement

As joint stock company enjoys separate existence so it can join the agreement with other firm in its own name.

Reading:Characteristics of Developing Countries

10. Changing Nature of Business

In the partnership, the nature of business may easily be changed with mutual consent of partners. But object clause of the Memorandum of Association which also describes the nature of business may not be changed except the sanction of the court.

11. Chances of Increasing Funds

There are many sources by which business funds and capital may be raised in the Public Company. It increases its capital by selling its debentures, shares, other securities and by incorporate saving. But these sources are not available in partnership.

12. Loans in its own name

Company can receive loans in its own name which are payable by the company itself. But in the partnership, the loans are obtained by partners in their own personal liability. 

13. Numerous Rules

Its activities are controlled by many central or provincial departments. There are numerous rules which must have to be carried into effect by the company. It has to audit its accounts and to submit the various reports to Registrar office. It thus cannot operate freely without any interference.


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