Features of a Joint Stock Company
A Joint Stock Company is an incorporated association, which is an artificial person, having an independent legal status with a perpetual succession, a common seal, and a common capital comprised of transferable shares and carrying limited liability.
"A joint stock company is a voluntary association of individuals for profit, having its capital divided into transferable shares, the ownership of which is the condition of membership.” – Prof. H.L. Haney
Key Features at a Glance
- Artificial Person
- Incorporated Association
- Perpetual Succession
- Common Seal
- Limited Liability
- Large Membership
- Voluntary Association
Detailed Explanations
1. Artificial Person
A company is an artificial person created by law. It has a legal existence separate from its members but does not have a physical presence. It can own property, enter into contracts, and take legal action.
2. Incorporated Association
Every company in India must be registered under the Companies Act. This process of registration, or incorporation, is what gives birth to the company and grants it a separate legal identity distinct from its owners.
3. Perpetual Succession
A company has a long and stable life. Its existence is not affected by the death, insolvency, or insanity of its members. Shareholders may come and go, but the company continues to exist until it is legally wound up.
4. Common Seal
As an artificial person, a company cannot sign documents itself. The common seal acts as its official signature. Any document bearing the common seal is considered to be authenticated by the company.
5. Limited Liability
The liability of the members is limited to the value of the shares they own. If the shares are fully paid up, a member is not personally liable for the debts of the company, protecting their personal assets.
6. Large Membership
A joint stock company can have a large number of members. A private company can have from 2 to 200 members, while a public company must have at least 7 members with no maximum limit.
7. Voluntary Association
A company is formed by the choice of its members. Any person competent to enter into a contract can become a member by purchasing shares. Membership can also be terminated by transferring shares to another person.