A Joint Stock Company is said to be an Artificial Person create by law, having a separate entity with a perpetual succession and a Common Seat.
It is assumed that the company came into existence in the 12th century in Italy and in the 16th century in England. In India first of all the East India Company was established in 1600 A.D. In our country Indian Compånies Act was introduced in 1913 for the first time and then in 1956 amended companies act was passed but pow companies are established and dissolved under the Companies Act 2013.
Meaning of a Joint Stock company
A Joint Stock company is formed to gain profits by a group of people under the act in which the capital is not transferable and the shareholders carry limited liabilities. Any individual can file a case against a company and vice-versa. A company carries an under which it runs; its business and its entity is permanent.
Section 2 (20) of the Companies Act, 2013 defines a Company very precisely as follows
Company méans a Company incorporated under this Act or under any previous Company Law.
According to Prof. Haney
A joint-stock company is an artificial person created by law having a separate entity with a perpetual succession and a common seal.
Type of Companies
We can classify companies on several basis but the following are the main types of companies –
- Limited Liability Companies
- Unlimited Liability Companies
- Private Companies
- Public Companies
- Incorporated Companies
- Unincorporated Companies
Characteristics of a Joint Stock Company
Artificial Person Created by Law
Company is created under the law. Unlike proprietorship or partnership, It is a separate legal entity apart from its members. A Company acts independently of its members. It can sue and can be sued in its own name.
The liability of its shareholders is limited tie value of shares they have purchased. In case, the company incurs huge liabilities, the shareholders can be called upon to pay the unpaid balance of their shares. No company can hold a shareholder responsible for any amount more than the shares that he holds.
Right to keep Property
Joint Stock Companyhasthe to keep property as per law. It also has the right to sue others and to be suited.
The company has a separate entity from its creators. The company accumulates most of its capital as shares but it has a separate entity from its shareholders. The company exists even after the death of shareholders.
Once a company is formed under the Indian companies act, its entity becomes stationary. It has no effect of the death or bankruptcy of any shareholder. Every shareholder has the right to transfer his shares to any person, anytime. Induction of a new shareholder or retirement of an old shareholder does not affect a company. That is why, it is said, and “company has a perpetual life.
As a symbol of a joint-stock company, a common seal is a must. Whenever an authority of the company namely the Secretary or Managing Director signs for the company, there should always be the common seal of the company. This seal denotes the company’s personality. Without this commoh_seal, any document of the company is not valid in the eyes of law.
If any authority or management signs without this seal, then it is liable for it in its own individual capacity. That is why it is necessary to stamp each and every document with the common seal. Common Seal serves as a purpose of signature for the company.
The objectives of a company are always. defined in its Memorandum of Association but to achieve those objectives for running a company they are defined under-Article of Association. Managing Director manages the company only under the evidence of these articles.
In a joint-stock company, shareholders are not identified as agents and they cannot take part in the active management of a company. Since the company cannot run on its own, so management is done by the Directors. The officers of a company elect few persons to manage a company, who are known as Directors of the company.
Termination of Existence
A company is formed by the law and it ends also under the jaw of the Companies Act is known as winding up.