Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
• DEFINITION
•MEANING
•HISTORY
•CHARACTERSTICS
•FORMATION
•TYPES
•COMPARISON B/W PUBLIC AND PRIVATE CO.
•INDIAN CONTEXT
•SECURITIES
•STOCK EXCHANGE
•ADVANTAGES
•DISADVANTAGES
•SUITABILITIES
Definition
A Joint Stock Company is a voluntary association of
individuals for profit, having its capital divided into
transferable shares, the ownership of which is the condition
of membership.
A company is an incorporated association of persons
formed usually for the pursuit of some commercial purpose.
Section 3(1) of Indian Companies Act, 1956-Company
means a company formed and registered under this Act or
an existing company
• Existing company means a company formed and
registered under any of the previous company laws
A JSC is a type of corporation or partnership involving two or
more individuals that own shares of stock in the company.
Certificates of ownership ("shares") are issued by the company
in return for each financial contribution.
The shareholders are free to transfer their ownership interest at
any time by selling their shareholding to others.
A voluntary association of persons who generally contribute
capital to carry on a particular type of business.
Persons who contribute capital become members of the
company.
Company has a legal existence separate from its members,
which means even if its members die, the company remains in
existence.
This type of company needs huge capital investment.
The total capital of a JSC is called share capital and it is
divided into a number of units called shares.
Members are also called shareholders.
In 1250, in Toulouse, France, Bazacle Milling Company
traded 96 shares whose value depended on the profit of the
company.
In 1288, a Swedish company, Stora documented transfer of
shares.
In modern history, the earliest recognized company was the
British East India Company, was one of the most famous joint-
stock companies.
In 1602, the Dutch East India Company issued shares on
the Amsterdam Stock Exchange.
The first JSC to be implemented in the America were
The Virginia Company and The Plymouth Company.
It‟s aseparate legal entity, distinct from the people engaged in it.
It involves three sets of economic actors:
2) Statutory Companies
i) Such companies are formed under the special act passed by
the Parliament or State Legislature.
ii) The powers which can be exercised by such companies are defined by the Acts
that constitute them.
Example: Reserve Bank of India, State Bank of India, Life Insurance Corporation
3) Registered Companies
2) Foreign Companies:
i) company which is registered in one country but carries out its operations in
India.
On the basis of Shareholding
1) Holding Companies
i)A company which controls another companyby holding a minimum
51% of shares and thereby controlling the composition of the board
of the company.
2) Subsidiary Companies
i)A company in which another company holdsa minimum of 51%
of share capital i.e. holding company is known as subsidiary
company.
Private Limited Company Public Limited Company
1. Membership:
Minimum membership 2, Maximum Minimum membership 7, Maximum
membership 50 membership unlimited
2. Formation
Comparatively simple, certificate of Comparatively difficult as the procedure
incorporation is adequate is lengthy.
3. Number ofDirectors:
It must have at least two directors It must have at least three directors
4. Transfer of Shares:
The shares are not freely transferable Shares are freely transferable.
5. Issue ofProspectus:
It is not allowed to issue prospectus It can issue prospectus
6. Commencement of Business:
It can start the business after the It requires trading certificate for starting
receipt of certificate of incorporation. business
7. Suitability:
Suitable for business on a small scale Suitable for large – scale business.
8. Invitation:
It cannot invite public to subscribe for It invites public to purchase securities of
securities of the company the company.
9. Allotment:
It can allot shares immediately after Shares cannot be allotted unless
incorporation minimum subscription is collected.
10. Qualification shares:
The directors need not hold The directors have to purchase some
qualification shares qualification shares to become the
director.
11. Directorship:
There is no restriction on the number A director cannot be a director of more
of directorship than 20 companies
12. Quorum:
Two members present in the meeting isa Five members present in the meetings is
quorum at general meeting a quorum at general meeting.
A) There are three type of companies -Private Limited, Public
Limited and Government companies on the basis of ownership
B) Two types of companies - Indian and Foreign on the basis of
nationality.
3) Government Company
i) the Govt (either state or central Gvt or both) holds a majority
share capital i.e., not less than 51%.
ii)companies having less than 51% share holding by the govt
can also be called Govt companies provided control and
management lies with the Govt.
examples : Mahanagar Telephone Nigam Limited, Bharat Heavy
Electricals Limited, etc.
4) Indian Company
i) A company having business operations in India and registered
under the Indian Companies Act, 1956
ii)company may be formed as a public limited, private limited
or government company.
5) Foreign Company
i) a company formed and registered outside India having
business operations in India.
Indian Companies Act 1956 defines share as “a share in the
share capital of a company and includes stock except when a
distinction between stock and shares is expressed and
implied”.
Owned capital of a company divided into a large number of
equal parts or units. Each such part having the same face value
is called share.
1.Equity Shares(Ordinary shares):
Equity shares are those shares which do not have, preferential
rights with regards to
(1) Payment of dividend
(2)Repayment (return) of capital, in case of winding up of the
company.
2.Preference Shares:
Preference shares are those shares which have preferential
rights over the equity shares with regards to:
(1) Repayment of capital in the event of liquidation / winding up
of the company.
(2) Payment of dividend.
Classification of Preference Shares:
(I) On the basis of participation:
(a) Participating Preference Shares
(b) Non – participating Preference Shares
United States
1 NYSE Euronext 15970 19813
and Europe
United States
2 NASDAQ OMX 4931 13439
and Europe
Tokyo Stock
3 Japan 3827 3787
Exchange
London Stock
4 United Kingdom 3613 2741
Exchange
Shanghai Stock
5 China 2717 4496
Exchange
Hong Kong Stock
6 Hong Kong 2711 1496
Exchange
Toronto Stock
7 Canada 2170 1368
Exchange
Bombay Stock
8 India 1631 258
Exchange
National Stock
9 India 1596 801
Exchange of India
8. Business Secrecy:
Can be maintained to a certain extent No business secrecy
9. Government Regulation:
Minimum government regulation Strict and excessive government regulation
10. Taxation:
Less compared to joint stock companies Subject to heavy taxation
11. Decision making:
Quick decision making Delay in decision making
12.Economies of scale:
Less economies of scale as compared to Joint Stock Enjoys economies of scale as it undertakes
Companies business on a large scale
15.Legal status:
No legal status Possesses and a legal status
16.Act:
Governed by Partnership Act, 1932 Governed by Companies Act, 1956
(i) Large financial resources
(ii) Limited Liability
(iii) Professional management
(iv) Large-scale production
(v) Contribution to society
(vi) Research and Development
(vii) Bargaining Power
(viii) Government Revenue
(ix) Economic Development
(x) Public Confidence
(xi) Long Life
(i) Difficult to form
(ii) Excessive government control
(iii) Delay in policy decisions
(iv) Concentration of economic power and wealth in few hands
(v) Labour Disputes
(vi) Lack of Responsibility
(vii) Lack of Secrecy
(viii) Double Taxes
(ix) Lack of contact with customers
(x) Lack of contact with employees
(xi) Conflicts of Interest
(xii) Not suitable for all types of business
where the volume of business is large
huge financial resources are needed
suitable for businesses which involve heavy risks
which require public support and confidence
Examples: production of pharmaceuticals, machine
manufacturing, information technology, iron and
steel, aluminum, fertilisers, cement