Thursday, April 15, 2010

CHARACATERSTICS OF JOINT STOCK COMPANY

Sanan-technology
The important characteristics of Joint Stock Company are discussed below.

(1) Artificial Person : A company is an artificial person created by law. So it has a separate existence of its own. It enjoys almost all the privileges of a natural person doing business. Like ordinary person it has power to set or purchase the property on its own name. It can hold property, incur debts and enter into contracts. It can be sued too. As it has no body, no soul, and conscience, it is regarded s artificial person.

(2) Legal Entity : A company is created by law. It has the separate legal entity apart from its shareholders. It acts independently. So shareholders are not liable for the acts of the company even though they are the owners. Similarly a company cannot be held liable for the acts of the company even though they are the owners. A creditor of the company is not the creditor of its members. Similarly a company cannot be held liable for the action of its members. Thus, a company can file a suit against its shareholders and the shareholders can sue the company.]

(3) Limited Liability : A basic feature of the company is that the liability of its owners is limited to the value of shares they have purchased. As the debts of the company are the debts or a separate legal person, shareholders are not personally liable for the company. In a company limited by shares, the liability of shareholders is limited to the unpaid values of shares held by them.

(4) Transferable Shares : The capital of a company is divided into shares. The shares of the company are freely transferable except in case of private companies. Every shareholder of a public limited company is free to transfer the shares to anybody.

(5) Perpetual Existence : The company has a permanent existence. The death, lunacy or bankruptcy of its member does not affect its existence. Its old shareholders may go by selling their shares and new shareholders may come, but it does not affect the existence of the company. The company can be dissolved only by law.

(6) Common Seal : The company being an artificial person cannot sign any document. Therefore the law requires that every company should have a common seal. The common seal of a company is affixed in all important documents as a token of the company’s approval. It is the official signature of the company.

(7) Share Capital : A company is incorporated with a fixed share capital. It is known as Authorized or Registered capital. The capital is divided into shares of fixed face value. The membership of the company is obtained by purchasing the shares.

(8) Ownership and Management : Shareholders are the owners of the company. The number of shareholders is generally large and widely scattered. They have no right to participate in company management but they have the right to elect ‘Board of Director’. The directors are the agents and trustees of the company. They manage and control the company. Hence, the ownership and management are in two different hands, shareholders and directors. Directors are the legal representatives of the shareholders.

(9) Right to Sue : All the activities of the company are preformed in the name of the company. Company is an artificial person having separate legal entity. Thus, company can sue other in its own name and the others can sue in the name of the company.

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