A joint stock company, also known as a corporation or a company limited by shares, is a type of business entity where ownership is divided into shares of stock. In a joint-stock company, the capital is raised by issuing shares to shareholders, who then become the owners of the company in proportion to their shareholding.
Here are some key features of joint-stock companies:
- Limited liability: One of the main advantages of a joint-stock company is limited liability. Shareholders are only liable for the debts and obligations of the company up to the amount they have invested or the value of their shares. Their personal assets are generally protected from being seized to satisfy the company’s debts.
- Separate legal entity: A joint-stock company is considered a separate legal entity from its shareholders. This means that the company can own assets, enter into contracts, sue, and be sued in its own name. It has perpetual existence, meaning it continues to exist even if the shareholders change.
- Transferability of shares: Shares in a joint-stock company are typically freely transferable, allowing shareholders to buy and sell their shares on the stock market or through private transactions. This provides liquidity and flexibility to shareholders.
- Professional management: Joint-stock companies often have a professional management structure, with a board of directors and appointed executives. Shareholders elect the board of directors, who are responsible for making strategic decisions and overseeing the company’s operations. Shareholders typically have voting rights based on their shareholding.
- Capital raising: Joint-stock companies can raise capital by issuing shares to investors. This allows them to accumulate large amounts of capital for investment and expansion. The ability to attract investors is enhanced by the limited liability feature, as it reduces the risk for shareholders.
- Regulatory requirements: Joint-stock companies are subject to various legal and regulatory requirements, such as filing annual financial statements, holding shareholder meetings, and complying with corporate governance standards. These requirements vary by jurisdiction.
- Ownership and control: Ownership and control in joint-stock companies are often separated. Shareholders own the company, but day-to-day management is typically entrusted to the board of directors and executive management. Shareholders exercise their control through voting rights, particularly in major decisions such as electing directors, approving mergers, or amending the company’s bylaws.
Joint-stock companies are commonly used for large-scale businesses that require significant capital investment and have plans for growth and expansion. They are prevalent in many industries and are often listed on stock exchanges, allowing for public trading of their shares.
It’s important to note that the specific regulations and requirements for joint-stock companies can vary from country to country. If you are considering forming or investing in a joint-stock company, it is advisable to seek legal and financial advice tailored to your jurisdiction.
PUBLIC LIMITED LIABILITY COMPANY OR JOINT STOCK COMPANY, A public limited liability company led as one which by its articles allows the public to subscribe for its shares, must have a turn of seven persons but no maximum number is prescribed, allows the shares to be transferred and the name of the public limited company must end with the abbreviation “plc”.
The word public is used to imply that any member of the public is free to purchase shares in the business when shares are advertised for sale. Public limited companies are actually led by private individuals and organisations
JOINT STOCK COMPANY IS DIFFERENT FROM ITS OWNERS
Public limited liability companies or joint stock companies are organizations which have karate legal entity. It is regarded in law as having an identity of its own. The shareholders are not personally responsible for anything that is done in the name of the organisation.
The shareholders also enjoy limited liability, and above all, it enjoys the advantage of a large number of people who through the purchase of shares become owners of the company.
Examples of public limited liability companies (or joint stock companies) are Zenith Bank Plc., and Guinness Nig. Plc., First Bank Plc., Dunlop Nig. Plc., UTC Nig. Plc. and Texaco Nig. Plc.
FEATURES OR CHARACTERISTICS OF PUBLIC LIMITED LIABILITY COMPANY OR JOINT STOCK COMPANY
- Ownership: The number of shareholders ranges from seven to infinity, i.e. owners must be at least seven but there is no maximum number.
- It is a legal entity: The joint stock company has a distinct personality from that of the owners. It can sue and be sued in its own name.
- Perpetual existence: The death or withdrawal of some shareholders will not affect the existence of the company. It enjoys continuous existence.
- It has limited liability: The liability of shareholders is limited to the amount contributed to the company. The private properties of the shareholders will not be touched in the event of liquidation.
- Formation: A public limited liability company must follow some special formalities before registration. They secure incorporation by filing the article of association and memorandum of association with the registrar of companies.
- Preparation of annual accounts: It is required by statute to keep certain prescribed books of account. The accounts must be audited and
- A specific line of business: A public limited liability company is authorised by law to carry on business specified in the object clause.
- Ownership separated from management: Ownership is separated from management. The shareholders are regarded as the owners of the company while the management is in the hand of the board of directors.
ADVANTAGES OF PUBLIC LIMITED LIABILITY COMPANY OR JOINT STOCK COMPANY
- Legal entity: Public limited liability companies have legal existence. They have a distinct personality from the owners, hence they can sue and be sued in their own name.
- Perpetual existence: There is continuity in a joint stock company. The death or withdrawal of a shareholder cannot put an end to the business.
- Limited liability: Their liability is limited to the amount invested as capital in the business; private properties will not be affected.
- Large capital: They can raise enough capital by selling more shares or debentures to the public.
- Transferability of shares: Shares of a public limited liability company can easily be transferred without having an effect on business operations.
- Loan facilities: Many banks prefer to grant loans to public limited companies than other forms of business units be there is no likelihood of default in pay
- Economies of large-scale product Public limited liability companies have sufficient capital for expansion, which: lead to the mass production of goods.
- Democracy in management: choosing the board of directors shareholders have the right to vote ( voted for at the annual general meeting
- Owners are separated from management: In joint stock company owners are separated from manager
- The shareholders are regarded as owners of the company while management is in the hands of a board of directors.
- Employees can become co-owners: Employees could become co-owners of the business by purchasing shares in the company.
- Recruitment of experts: Joint stock company attracts men of ability and skill to work for it.
- Research programmes: In a joint: Company, there is a greater opportunity to undertake research programmes.
DISADVANTAGES OF PUBLIC LIMITED LIABILITY COMPANY (OR JOINT STOCK COMPANY
- Lack of privacy: Public limited liability companies lack privacy because they are mandated by law to publish their: audited accounts to the public. This makes it impossible for them to maintain se or privacy.
- Conflict of interest: There is the possibility of conflict of interest among the shareholders, directors and staff, which may affect the efficiency of operations of the business.
- Slow decision-making: Decision-making because of wider consultations and discussions in the management hierarchy.
- Separation of owners from control: The owners of the business (shareholders) have little or no say in the affairs of the business, while the people at the helm of affairs who are not the owners may not put in their best.
- Hard to establish: The procedures and formalities involved in registration are very broad and complicated.
- Payment of large corporate tax: They are saddled with heavy tax burdens, arising from profit
- Lack of flexibility: The company can only carry on the business provided for it in its object
clause in the memorandum of association. It cannot venture into any other type of business.
- Decrease in personal interest: The type of interest exhibited in this type of company is
usually very low compared with the sole proprietorship where the zeal tad. interest is very high.
- Large capital requirement: The capital required to set up and run a joint stock company is usually very large.
SOURCES OF FINANCE OR CAPITAL AVAILABLE TO PUBLIC LIABILITY COMPANIES OR JOINT STOCK COMPANY
- Loans and overdraft: Joint stock company can obtain loans and overdrafts from commercial or development banks.
- Sales of shares: A joint stock company can also raise capital by issuing shares for public subscription.
- Sales of debentures: These are long-term loans obtained from the general public at a fixed interest.
- Bill of exchange: This is a document duly signed by the debtor’s bank to the creditor and the creditor cashes the money with some discounts.
- Equipment leasing: Public limited liability companies can lease out some of their equipment for money.
- Retained (plough back) profits: The profits made by the company can be set aside for re-investment.
- Trade credit: Raw materials can be purchased by the joint stock company on credit.
- Hire purchase: Facilities can be granted to the company to buy and pay by instalments
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