QS Study

Essential Elements of Joint Stock Company

Joint Stock Company is a legal and invisible artificial being created by law. It is a company whose stock is owned jointly by the shareholders. It is an artificial person recognized by law, with a distinctive name, a common seal, a common capital comprising transferable shares of fixed value carrying limited liability and having a perpetual succession. It has some vital components that give it separate life and utmost position. These important components are placed below:

  1. Voluntary organization: Joint Stock Company is the voluntary association of persons established for the profit motive. Some people willingly attempts to construct it. For the formation of the private company, there must be at least two & maximum fifty members needed, while in public company, minimum members are seven and maximum are determined by the number of shares.
  2. Artificial personality: A company is an artificial person and has a legal entity quite distinct from its members or owners. Even though it has no natural personality, it has legal personality. Like that of the human being, it can own property; incur debts, file suits, and enter into the contracts with others under its own name.
  3. Perpetual succession: The Company enjoys perpetual succession, which means a continuous existence Since the company has a separate existence from its members, directors, and employees, their death, insolvency or insanity will not affect its life and existence men may come and men may go but a company remains forever.
  4. Limited liability: The liability of a member or a shareholder is limited to the extent of the face value of shares held or the amount guaranteed by him. Whatever may happen to the company and whatever may be the state of solvency of the company, his total liability does not exceed the face value of his shares.

From the above description, it is clear that Joint Stock Company has some distinct essential elements that help us to differentiate it compared to other forms of the business organizations.