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Introduction

What is a Joint Stock Company? Explain the merits and demerits of a Joint Stock Company? Introduction We have heard about companies like Reliance Industries Limited (RIL), Tata Iron and Steel Company Limited (TISCO), Maruti Udyog Limited (MUL) etc. these are all Joint Stock Companies which are owned by not just 1 or 20 but many people, as they are quite large in size and their activities are spread all over the country. These companies are different from sole proprietorship or partnership form of Business Organization. Text What is a Joint Stock Company? A company form of business organization is known as Joint Stock Company. It is a voluntary association of persons who generally contribute capital to carry on a particular type of business, which is established by law and can be dissolved only by law. The Indian Companies Act, 1956, governs these companies. This form of business has a legal existence separate from its members, even if a member dies the company remains in existence, it requires huge capital investment, which is contributed by its members. The total capital of Joint Stock Company is called the share capital and is divided into shares. Thus every member has some shares in the business depending upon the amount of capital contributed by him/her (shareholders). ...read more.

Middle

For e.g. if a person owns 1000 shares of Rs 10 each then he is liable only upto Rs 10,000 towards payment of debts. 7. Democratic Management - These companies have democratic management and control. That is, even though the shareholders are owners of the company, all of them cannot participate in the management of the company. The shareholders can elect representatives from among themselves know as 'Directors' to manage the affairs of the company. Merits of Joint Stock Companies The main advantages of Joint Stock Companies are: 1. Large Financial Resources - A Joint Stock Companies is able to collect a large amount of capital through small contributions from a larger number of people. Like in public limited company shares can be offered to the general public to raise capital 2. Limited Liability - In case of a company, the liability of the members is limited to the extent of the value of shares held by them. Private property of members cannot be attached for debts of the company. This advantage attracts many people to invest their savings in the company and encourages the owners to take more risks. 3. Professional Management- Management of the company is vested in the hands of the directors, who are democratically elected by the members or shareholders. ...read more.

Conclusion

Further the company has to fulfill certain procedural formalities these procedures are time consuming and therefore may delay action on the decisions. 4. Concentration Of Economic Power And Wealth In Few Hands- A Joint Stock Companies is a large-scale business organization having huge resources. This gives a lot of economic and other power to the persons who manage the company. Any misuse of such power creates unhealthy conditions in the society. e.g. having monopoly over a particular business or industry or product, exploitation of workers, consumers or investors. 5. Lack of Confidentiality of Information - It is obligatory for the Joint Stock companies to file several returns, distribute final accounts to the shareholders, as so many people are involved the information can no more remain confidential and the company may suffer losses. 6. Fluctuation of Shares- The share market is never stable and anything can cause fluctuation of share like shortage or excessive shares in the market, change in government or policies leads to instability and lowers the confidence of the shareholders in the company. Conclusion A Joint Stock Company form of business is found to be suitable where the volume of business is large and huge financial resources are required. This form of business is also suitable for business, which involves huge risks. Certain types of business, like Pharmaceuticals, fertilizers, cements, iron, steel etc. are generally organized in the form of joint stock companies ...read more.

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