A Joint Stock Company is an association of people who contribute towards a joint stock of capital for the purpose of carrying on business with the view to profit.
The stock of capital is divided into many small units called shares. People who buy these shares are known as shareholders. The company is legally owned by shareholders. They elect a board of directors to manage the business. The total profit is then distributed to all shareholders. Each part of profits paid to shareholders is called dividend.
A shareholder’s liability for the debts of a joint stock company is strictly limited to the value of the shares he has agreed to buy. Once shareholders have fully paid for the shares, they have no further liability for the company’s debts.
Features of Joint Stock Companies
v It has a separate legal existence from its shareholders
v Shareholders are the owners of the company
v Company is managed by board of directors
v Shareholders have limited liability
v There must be a minimum of two shareholders
v Companies are regulated by Companies Act 1980
v Profits of the company is divided among the shareholders in the form of dividend
v A common seal is used to sign the important documents
Types of Joint Stock Companies
There are two types of Joint Stock Companies. They are;
1. Private Limited Companies