Joint Stock Company (Cntd…)
Features of a Joint Stock Company
1] Artificial Legal Person
A company is a legal entity that has been created by the statues of law. Like a natural person, it
can do certain things, like own property in its name, enter into a contract, borrow and lend money,
sue or be sued, etc. It has also been granted certain rights by the law which it enjoys through
its board of directors.
2] Separate Legal Entity
Unlike a proprietorship or partnership, the legal identity of a company and its members are
separate. As soon as the joint stock company is incorporated it has its own distinct legal identity.
So, a member of the company is not liable for the company. And similarly, the company will not
depend on any of its members for any business activities.
3] Incorporation
For a company to be recognized as a separate legal entity and for it to come into existence, it has
to be incorporated. Not registering a joint stock company is not an option. Without incorporation,
a company simply does not exist.
4] Perpetual Succession
The joint stock company is born out of the law, so the only way for the company to end is by the
functioning of law. So, the life of a company is in no way related to the life of its members.
Members or shareholders of a company keep changing, but this does not affect the company’s
life.
5] Limited Liability
This is one of the major points of difference between a company and a sole
proprietorship and partnership. The liability of the shareholders of a company is limited. The
personal assets of a member cannot be liquidated to repay the debts of a company.
A shareholders liability is limited to the amount of unpaid share capital. If his shares are fully paid
then he has no liability. The amount of debt has no bearing on this. Only the company’s assets can
be sold off to repay its own debt. The members cannot be made to pay up.
6] Common Seal
A company is an artificial person. So, its day-to-day functions are conducted by the board of
directors. So when a company enters any contract or signs an agreement, the approval is indicated
via a common seal. A common seal is engraved seal with the company’s name on it.
So no document is legally binding on the company until and unless it has a common seal along
with the signatures of the directors.
7] Transferability of Shares
In a joint stock company, the ownership is divided into transferable units known as shares. In case
of a public company the shares can be transferred freely, there are almost no restrictions. And in
a public company, there are some restrictions, but the transfer cannot be prohibited.
Features of a Joint Stock Company
1] Artificial Legal Person
A company is a legal entity that has been created by the statues of law. Like a natural person, it
can do certain things, like own property in its name, enter into a contract, borrow and lend money,
sue or be sued, etc. It has also been granted certain rights by the law which it enjoys through
its board of directors.
2] Separate Legal Entity
Unlike a proprietorship or partnership, the legal identity of a company and its members are
separate. As soon as the joint stock company is incorporated it has its own distinct legal identity.
So, a member of the company is not liable for the company. And similarly, the company will not
depend on any of its members for any business activities.
3] Incorporation
For a company to be recognized as a separate legal entity and for it to come into existence, it has
to be incorporated. Not registering a joint stock company is not an option. Without incorporation,
a company simply does not exist.
4] Perpetual Succession
The joint stock company is born out of the law, so the only way for the company to end is by the
functioning of law. So, the life of a company is in no way related to the life of its members.
Members or shareholders of a company keep changing, but this does not affect the company’s
life.
5] Limited Liability
This is one of the major points of difference between a company and a sole
proprietorship and partnership. The liability of the shareholders of a company is limited. The
personal assets of a member cannot be liquidated to repay the debts of a company.
A shareholders liability is limited to the amount of unpaid share capital. If his shares are fully paid
then he has no liability. The amount of debt has no bearing on this. Only the company’s assets can
be sold off to repay its own debt. The members cannot be made to pay up.
6] Common Seal
A company is an artificial person. So, its day-to-day functions are conducted by the board of
directors. So when a company enters any contract or signs an agreement, the approval is indicated
via a common seal. A common seal is engraved seal with the company’s name on it.
So no document is legally binding on the company until and unless it has a common seal along
with the signatures of the directors.
7] Transferability of Shares
In a joint stock company, the ownership is divided into transferable units known as shares. In case
of a public company the shares can be transferred freely, there are almost no restrictions. And in
a public company, there are some restrictions, but the transfer cannot be prohibited.
