"Joint Stock Company"

* Meaning :-

                    A joint-stock company is a business entity which is owned by shareholders. Each shareholder owns the portion of the company in proportion to his or her ownership of the company's shares (certificates of ownership). This allows for the unequal ownership of a business with some shareholders owning a larger proportion of a company than others. Shareholders are able to transfer their shares to others without any effects to the continued existence of the company.

                    In modern corporate law, the existence of a joint-stock company is often synonymous with incorporation (i.e. possession of legal personality separate from shareholders) and limited liability (meaning that the shareholders are only liable for the company's debts to the value of the money they invested in the company). And as a consequence joint-stock companies are commonly known as corporations or limited companies.Some jurisdictions still provide the possibility of registering joint-stock companies without limited liability. In the United Kingdom and other countries which have adopted their model of company law, these are known as unlimited companies. In the United States, they are known simply as joint-stock companies.

* Definition :-

                   According to Prof. L. H.Haney: “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”. In other words of Kimball and Kimball: A corporation is by nature an artificial person created or authorized by the legal status for some specific purpose.”

                    The Nepalese Company Act, 2053(1997) has not given any comprehensive definition and simply mentions that “Company means any company incorporated under this act”. This does not make anything clear. We can define company indicates all the essential features in this way: “Company is an artificial person recognized by law with a distinctive name, a common seal, a common capital comprising transferable shares of fixed value carrying limited liability and having a perpetual succession”.

A careful analysis of the above mentioned definitions reveal the following important characteristic feature of a Joint Stock Company.

"Characteristic of A Joint Stock Company" 

1. An artificial person: -

                   The company enjoys all the rights as a citizen of a country would enjoy. It 'can own properties, enter into contracts etc.

2. Legal formation: -

                 The formation of a Joint Stock Company is governed by the rules and regulations laid down in the Companies Act, 1956.

3. Voluntary organization: -

                 It is formed by members voluntarily joining the organization and contributing money or money's worth for the business.

4. Separate legal entity: -

               The Company has a separate legal existence. The owners are different from the people who manage the business. The management is however headed by owners who are elected directors. The company is separate from the persons who own it. The company cannot be held responsible for any misdeeds of the members.

5. Perpetual succession: -

                Unlike Sole proprietorship and Partnership, the Company has continuous existence. The continuity of the business is not affected by the death, insolvency or insanity of any member. "Men may come and men may go, but a company will go until it is wound up."

6. Limit to liability: -

              The liability of the members of a company is restricted to the extent of the unpaid value of the shares held by him. The personal asset of a shareholder cannot be used to pay the company's liabilities.

7. Large capital: -

                 A Joint Stock Company can generate huge amount of money towards capital, because the number of persons contributing towards capital are more in number when compared to Sole Proprietorship or Partnership organization.

8. Large scale operation: -

                 Since huge amounts are collected as capital, the operation of the business will generally be on a large scale basis.

9. Transferability of shares: -

                The shares of a Joint Stock Company are easily transferable from one person to another, since it is a Public Limited Company. The shares of a Private Limited Company or Government Company are not transferable.

10. Common seal: -

                The company, being an artificial being, cannot affix its signature on the documents on its own. The common seal is used in place of a signature.