Long answer type question. Define Joint Stock Company and explain its features.


A joint stock company refers to an organisation wherein a group of persons forms an association to perform business activities together. It is a separate entity that is managed by a group of members known as the board of directors. Main features of a joint stock company:

i. Artificial person: Unlike human beings, a company, as an artificial person, cannot sign its documents, negotiate with its customers and breathe and talk. Like human beings, a company does have its own life, which is independent of the life of its members.  That is why a company is regarded as an artificial person.

ii. Separate legal entity: It implies that a company is created as a separate legal entity by law and is a juristic person. In other words, a company, from the day of its incorporation, is given a separate legal status distinct from its members. A company can carry out a business in its name and own assets.

iii. Formation: The formation of a company requires the fulfilment of a set of legal formalities. This makes the formation of a company expensive and time-consuming. Also, the registration of a company is mandatory under the Indian Companies Act 1956.

iv. Perpetual succession: A company, being a separate legal entity, cannot come to an end by itself; it continues to operate even after the death of its members. Death, retirement or insolvency of any of its members cannot cease its existence.

v. Control: The management and ownership lie in the hands of different individuals. The company is owned by the shareholders, while its management and control lie in the hands of the elected members (board of directors). This board of directors, in turn, appoints the top management officials who manage the day-to-day operations of the business.

vi. Liability: In a joint stock company, the liability of all shareholders is limited to the amount of capital invested by them in the business. The personal property of the shareholders cannot be used for paying off the liabilities of the company. However, the shareholders can be asked to pay the amount of money that remains unpaid on the shares held by them.