Joint stock company:

• As per Companies Act, 1956, a company is an artificial, invisible and intangible person created by law, having a separate legal entity.
• As per Companies Act, 2013, ‘Company’ means a company registered under this act or any former act.
• This means that the company ‘is different’ from investors who invest in the company. For example, if an investor has invested ₹ 1000/- in a particular company and the company goes bankrupt, an investor loses only that money which he has invested i.e. his liability is limited and in the eyes of law the company and investor are two different persons. The investor need not sell his personal assets to pay the company’s debts.

Characteristics of a joint stock company:
1. Legal entity:

• Being an artificial person, a joint stock company has its own separate legal entity independent of its investors.
• This means a company can own property, enter into contracts, it can sue and can be sued by others.

2. Perpetual existence:

• As per the law, a ‘company’ is separate from its investors. So, it is not affected by the death or insolvency of the members.
• A company can be brought to an end only through liquidation procedure.

3. Divison of capital in small fractions:

• If for a public company, the capital to start the company is raised from the public in the form of shares.
  The company asks the public to apply for purchasing shares of the company or in simple words ‘purchasing a share’ in the company.
• People buy company’s shares from stock market and become shareholders. The company than starts its business with the share capital i.e. fund raised by selling the shares.
• In case of a private limited company, fund is raised by members or borrowed from banks and other sources.

4. Easy transfer of shares:

• The shareholders sell and purchase the shares of the company in the stock market. They can easily do so subject to the provisions of the company and the law.
• If one sees trial ine company is performing well he can buy its shares from the stock market. On the other hand the holder of the shares can sell them at the stock market and book his profit.
• This way the share-trading continuous in the market. Thus, trading and transfer of ownership of shares is one of the main and continuous characteristic.

5. Common seal:

• A company has a ‘seal’ or say stamp is used while dealing with third parties, entering into contracts, issuing share certificates, documents and day-to-day transactions of the company.
• This seal is called ‘common seal’ because it can be used by any authorized officer of the company.
• Stamping a document with this seal means that the company expresses its consent to whatever is mentioned in the document.

6. Management:

• The shareholders (investors) elect representatives from among themselves who are then called the director of the company. More than one director is elected and together they are called Board of Directors.
• The Board of Directors manages the company on behalf of the shareholders as per the Memorandum of Association and Articles of Association. Hence in a company the owners are the shareholders whereas the managers/directors are the Board of Directors i.e. ownership and management are separate unlike proprietorship/partnership.

7. Status of members:

The company and members are two separate entities. So a member can neither enter into a contract on behalf of the company nor can a company be held liable for the act of its members.

8. Number of members:

In a private limited company there are minimum 2 and maximum 200 members whereas in a public limited company there are minimum 7 members. There is no limit to the maximum numbers of members in a public limited company.

9. Liability of members:

The liability of members is limited to the face value of number of shares he possesses of that company. This means that if a share-holder possesses 50 shares of ₹1 00 each then his total share in that company is of ₹ 5000. If the company goes bankrupt the share-holder will lose only ₹ 5000 he invested in the company and he will not be liable for the entire loss of the company.

• Note that, the concept of unlimited liability is rarely seen in companies.
• The company in its Memorandum of Association on mentions whether the share-holder will have limited or unlimited liability.

10. Fundamental rights:

Although a company is treated as a separate person in the eyes of law it cannot be considered as a citizen of the country because it is in invisible form. Hence, a company does not enjoy any fundamental rights just like the citizens of a nation.

11. Voting right per share:

• The members of company can cast votes on the basis of the number of shares they hold.
• Unlike the single vote right that individuals commonly possess, the number of votes a share-holder can vote corresponds to the number of shares that he owns.
• Easy transfer of shares and voting per share are special characteristics of the company.