Joint Stock Company

Today we are going to share with you information about a Joint Stock Company. We give all information about joint-stock companies like Merits, demerits, and the formation of joint-stock companies. So if you interested to read about joint-stock company, so this is the only post which gives you all information.

STEPS FOR THE INCORPORATION OF A JOINT STOCK COMPANY

 

1. Getting Promoters Together:

The group of persons who intends to establish a “company” is known as promoters. Promoters sit together for préparing the skeleton of the company. For public company 7 members and for the private companies they should be at least two.

2. Appointment of the Advisors:

The promoters of the company must appoint the legal advisors. These advisors are appointed for preparing the Memorandum of Association and the Prospectus under the guidance and instructions of the promoters. The advisors also deal with the proceedings in the office of the registrar on behalf of the company.

3. Company’s Documents:

For the purpose of registration of the company, some documents are prepare in accordance with the requirements incorporate in the Company Law. The company can not apply for its registration prior to the preparation of these documents. These documents include Memorandum of Association, Articles of Association, and prospectus.

4. Submission of Application:

After getting all the documents complete the stage of submitting the application for registration reaches. The following documents are attached to the application of registration.

  1. Memorandum of Association
  2. Article of Association
  3. The address of the registered office
  4. The name and addresses of directors
  5. The written description of directors that all the legal proceeding has been completed.

5. Payments of Registration fee:

When the application for registration is submitted with the office of the registrar, the registration fee is also paid. The registration fee is determined in light of the size of the capital of the firm.

6. Printing of Share Certificates:

After submitting the application, the promoters make the arrangements for the printing of the share certificates so that they could be sold for collecting the finance after getting the firm registered. The share certificate indicates the proportion of ownership in the company.

7. Issue of Registration Certificate:

After having the application and the documents scrutiniz if the registrar is satisfy with the completion of legal formalities and the other documents, he Issues a certificate called “Registration Certificate”. Immediate after the Issue of this certificate, the company legally comes into being and the private company could commence the business but the public company requires another certificate for commencing the business called “Commencement Certificate”

8. Publishing of Prospectus:

After receiving the registration certificate, the promoters issue the prospectus of the through an advertisement for keeping the people informed of the company. The issue of the prospectus, in fact, is the invitation company receives finance, through the issue of the prospectus, the company becomes capable of company purchase the shares of the company. When the commence their proposed business practically.

Joint Stock Company

MERITS/ ADVANTAGES

A Joint Stock Company is advantageous on the basis of the following grounds:

1. Large Volume of Capital and Other Economies:

The capital of a company is extremely vast and huge. Since a company invites the public to purchase it shares, therefore, in this way the company receives billions of rupees as capital from the public. Apart from this the other sources of providing loans like banks and the other financial concerns also agree to offer loans by looking at the vastness and expectations of the development of the company. Therefore, it increases the company’s capital. This huge capital causes unlimited economies for a company.

2. Limited Liability:

The responsibility of the payment of loans acquired by the company is limited to the net worth of the assets of a company. If there is any amount of loan remaining after the sale of the assets, the company will be consider unaccountable and the loss of unpaid loans will have to be bear by the lender itself.

3. Ease in Expansion:

The company can expand its capital when necessary by selling it shares among the public. The company can also get the authorized capital increase by the permission of the government.

4. Perpetual Life:

In case of death, inability, retirement, and insanity of any shareholder/holders the company is not affect because its existence is perpetual. It is not affect or influence by the incoming or outgoing of the shareholder/holders.

5. Transferability of Ownership:

One of the merits of the company is easily transferability of ownership of the company, in other words, when a shareholder (owner) of the company sells his share to the other one, the ownership of the company is transfer to the extent of the value of shares sell.

6. Long Life:

Unlike the sole proprietorship or partnership, the life of a company is too long because the shareholders can transfer their shares to any other person. Even after the death of any shareholder, the shares are consider as the property of his inheritors. In this way, no negative effect sheds on the existence of the company.

7. Huge Employment:

The volume of the company is too big. A company covering a vast area of land and having thousands of machinery and equipment needs to be run by many workers. Therefore, by establishing a company, getting jobs of thousands of workers become possible and unemployment cuts short.

8. Legal Existence:

The company has a legal status. It can enter into an agreement in its own name. On the other hand, a sole proprietorship or partnership has no legal status. They cannot sue their names. Nor can they make an agreement in their own names. But a company can do so because it has a legal existence.

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DEMERITS / DISADVANTAGES

Joint Stock Company is not full of merits only but the following are also the dark aspects of it:

1. Huge expenses:

Neither the formation of a company is very easy nor running its business. A great amount of money is to be spend on its Formation. The company has to pay the registration fee according to the authorized capital of it. A fee of the promoters, the remuneration of their hard workings, the fee of the legal advisers, the expenses occurring for publishing prospectus, shares and debentures, and any kinds of expenses have to occur for the survival and daily routine of a company. Then the operating expenses of a company in the form of salaries of thousands of workers, a huge amount of advertisement, depreciation, repair, and taxes make an immense amount in the combine.

2. Difficulty in Formation:

Establishing a company is quite difficult and requires many formalities to be met, unlike sole proprietorship or partnership. The formation of the Company requires government restrictions and substantial legal requirements.

3. Lack of Secrecy:

Because the business is being run by the capital of the shareholders, therefore, according to the company law it is essential that all business information should be published in a booklet form regarding every kind of profit, sell and purchase of goods, expenses incurred by the company, liabilities and their payments, etc. These booklets are not only to be distribute to the shareholders but also provide to the registrar, members of the stock exchange, banks, and the creditors on demand. In this way, all these secrets become publicly known. Thus the competitors take advantage of the situation and prepare their strategy accordingly and give a tuff time to the concern.

4. Dual Taxation:

A company has to pay a big amount of its income to the government. The company is liable to pay provincial tax, corporate tax, and dual income tax. Income tax is levied two times. The first tax on that income is earned by the company and second on that amount which the company decides to distribute among the shareholder as dividends.

5. Lack of Personal Interest:

Since the management of the company is run by the salarie workers of the company therefore these employees have no concern with the profits and losses of the company but directly to their salaries. They have no interest in the business affairs since the company is possess by the owners or the shareholders who are not allow to take part in the affairs of the business therefore the business remains on the mercy of salary managers and workers.

6. Credit Problems:

As the liability of the shareholder’s confines to the shares in possession only, therefore, creditors hesitate to provide loans to small companies because if the company goes insolvent, they would just be able to claim to the extent of present assets of the company only. This is not sufficient and satisfactory security against the loans.

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