{"id":155488,"date":"2022-06-17T18:57:13","date_gmt":"2022-06-17T13:27:13","guid":{"rendered":"https:\/\/cbselibrary.com\/?p=155488"},"modified":"2022-08-19T15:34:03","modified_gmt":"2022-08-19T10:04:03","slug":"joint-stock-company-advantages-and-disadvantages","status":"publish","type":"post","link":"https:\/\/cbselibrary.com\/joint-stock-company-advantages-and-disadvantages\/","title":{"rendered":"Joint Stock Company Advantages And Disadvantages | Characteristics, Features, Definition, Types, Pros and Cons"},"content":{"rendered":"

Joint Stock Company Advantages And Disadvantages:<\/strong> Joint-stock company is an essential form of organization spread all across the world. Almost all gigantic companies on the globe are joint-stock companies. Joint-stock companies have flourished with time and solved the problems faced by organizations like sole proprietorships and partnerships.<\/p>\n

Students can also find more\u00a0Advantages and Disadvantages<\/strong><\/a>\u00a0articles on events, persons, sports, technology, and many more.<\/p>\n

What is a Joint Stock Company? Advantages and Disadvantages of Joint Stock Company<\/h2>\n

As the same suggests, a joint stock company is an organization where all the equity of the company is held by different shareholders jointly. In layman’s language, we can describe a joint stock company as an association of persons who join hands for the common motive of profit and have the capital of the company divided into transferable shares, and the ownership of such shares and stocks is the condition of membership of the organization. Who hasn’t heard about companies like Colgate, Siemens, Xerox, IBM, P&G, and Bridgestone? All these famous companies are joint stock companies. Joint stock companies have come into the picture because of the limitations of the organizations like sole proprietorships and partnerships. Let us discuss the characteristics of the joint stock company to know about it more clearly.<\/p>\n

Characteristics of Joint Stock Company<\/h3>\n

Joint Stock Company is an Artificial Legal Person<\/strong><\/p>\n

It is one of the significant features of a joint stock company. This type of organization is artificial as it is created by law and not by the process of natural birth. It is a legal entity as per the Companies Act, 2013, and has the capacity and power to perform many things that a natural person can perform. A joint stock company can own a property in its name, borrow money from other institutions or people, lend money to other institutions or people, can sue and be sued.<\/p>\n

However, there are many rights, duties, and laws that do not apply to the companies. For the companies, most of the laws are legal and not in any tangible form. Thus, it is an artificial legal person.<\/p>\n

Provides Members with Limited Liability<\/strong><\/p>\n

Limited liability of the members is one of the important characteristics of a joint stock company. When the time of the winding-up of the company comes up, it becomes an obligation for members of the company to repay its creditors and then share the profits, if any, among themselves. In a joint stock company, members have limited liability. This means that they can be held liable for the payment of debts or to the creditors only to the extent promised by them in the Memorandum of Association. Before the emergence of joint stock companies, sole proprietors and partnership firms were the only types of organizations and these organizations had the disadvantage of unlimited liability.<\/p>\n

Has a Perpetual Succession<\/strong><\/p>\n

Joint stock companies have perpetual succession. This means that a company can continue to exist forever. A joint stock company is separate from that of its members and this doesn’t depend upon its members for its existence. Even if the members leave the organization, it will continue to exist. This is why we see gigantic companies like Apple, Nike, etc, or any other company for that reason, running for years even after the discontinuance of their promoters.<\/p>\n

Joint Stock Company has a Common Seal<\/strong><\/p>\n

Although a joint stock company has many rights granted by the legal bodies, it is not bestowed with the body of a natural being. Thus, it works through the agency of its members. We can say that the common seal is the official signature of the company which is affixed to every document by the employees or the officers of the company. The latest amendment of the Companies Act, 2013 had made common seal optional.<\/p>\n

Advantages of Joint Stock Company<\/h3>\n

The following points mentioned below analyze the advantages of a Joint Stock Company.<\/p>\n

    \n
  • Larger Capital: <\/strong>In a joint-stock company, the capital of an industry is divided up into various shareholders. This signifies that there is no limit on the amount of money that is to be raised. In a corporation, there are limitations on who can buy the shares of a company. But, in a joint-stock company, there are no restrictions on who can buy a share of the company.<\/li>\n
  • Liability is Limited: <\/strong>With a joint-stock company, the shareholders have limited the liability. The security and protection of the company are divided among its shareholders. For instance, if the company goes bankrupt, it is not the responsibility of the company. The shareholders are responsible to pay off the debts and go out of bankruptcy. Therefore, in this way, they won’t lose their assets such as homes or cars. Hence, with a joint-stock company, the liability is limited.<\/li>\n
  • Scope of Growth and Expansion: <\/strong>Different types of corporations didn’t allow a company to grow and expand financially. On the other hand, the joint-stock company has the potential to grow and expand. People can buy shares in a joint-stock company with the hope that the company will make significant profits and grow more. Hence, a joint-stock company allows the scope for growth and expansion.<\/li>\n<\/ul>\n

    Disadvantages of Joint Stock Company<\/h3>\n

    The following points mentioned below analyze the disadvantages of joint stock companies.<\/p>\n

      \n
    • Decision-Making Process is Delayed: <\/strong>One of the drawbacks of a joint stock company is that the decision-making process is slowed and eventually delayed. Here, people are not flexible to compromise with their ideas. Hence, it makes it difficult to make a decision. Here, there is a high chance of internal conflict. The board members are not aligned with their ideas.<\/li>\n
    • Provides More Government Restrictions and Orders: <\/strong>The joint-stock companies are restricted heavily by the government. Before the operation, they will have to go through a lot of paperwork. There are various rules and regulations which hinder a company from making a decision. Various rules are based on foreign investment. This results in lesser profit for a joint-stock company.<\/li>\n<\/ul>\n

      \"Joint<\/p>\n

      Comparison Table for Joint Stock Company Advantages And Disadvantages<\/h3>\n\n\n\n\n\n\n
      Advantages of Joint Stock Company<\/strong><\/td>\nDisadvantages of Joint Stock Company<\/strong><\/td>\n<\/tr>\n
      Joint Stock Company provides larger capital.<\/td>\nDecision making process is delayed.<\/td>\n<\/tr>\n
      Liability is limited in the Joint Stock Company.<\/td>\nProvides more government restrictions and orders.<\/td>\n<\/tr>\n
      Scope of growth and expansion is more.<\/td>\nJoint Stock Company provides very less secrecy.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

      FAQ”s on Joint Stock Company Advantages And Disadvantages<\/h3>\n

      Question 1.<\/strong>
      \nWhat is a joint stock company as per the law?<\/p>\n

      Answer:<\/b>
      \nAccording to Professor Haney, \u201cA company is an incorporated association, which is an artificial person created by law, having a separate entity, with a perpetual succession and a common seal.\u201d<\/p>\n

      Question 2.<\/strong>
      \nWhich was the first joint stock company?<\/p>\n

      Answer:<\/b>
      \nVirginia Company was one of the earliest joint stock companies which was founded in 1606 to colonize North America.<\/p>\n

      Question 3.<\/strong>
      \nWhat is the difference between a partnership firm and a joint stock company?<\/p>\n

      Answer:<\/b>
      \nA partnership firm can be defined as an association of persons who come together for business to earn profits. On the other hand, a joint stock company is a body corporate and a separate legal entity different from that of its members with perpetual succession and a common seal.
      \n