Economic development: Joint stock company system has been responsible for the rapid growth of industries and trade in many countries. The first joint-stock companies to be implemented in the Americas were The and The. Delay in Decisions: In company decisions making process is time-consuming. Owners of the joint stock company are known as shareholders. There always exists difference of opinion and conflicts between the shareholders and board of directors. Centralized management permits unity of action and continuity of policy. The managerial capabilities a the disposal of a company helps it for planning the future expansion and growth.
West's Encyclopedia of American Law. Several legal provision have to be followed and reports have to be filed. The vast majority of them attach to corporations under state law, especially the law of the state in which the company is incorporated — since the corporations very existence is predicated on the laws of that state. A small, closely held company can often make company-changing decisions much more rapidly than a publicly traded company, as there will generally be fewer voting shareholders, and the shareholders would have common interests. Many prospective corporations choose to incorporate in a state whose laws are most favorable to its business interests. It is through the company that the capital and business ability can be linked together for the benefit of both the individual investor and the community as a whole.
Read further - Related Videos -. In the company ownership is separated from its management. A company cannot maintain secrecy of its financial position. Once incorporated, a corporation has artificial personhood everywhere it may operate, until such time as the corporation may be dissolved. A company can collect large sum of money from large number of shareholders. Thus, a permanent type of conflict of interests may continue to exist in the companies.
Speculation in shares : The Joint Stock Companies facilitate speculation in the shares at stock exchanges. It also helps to expand and diversify the activities of the company. The earliest records of joint stock company can be found in China during the 960—1279. Hence, there exists professional management and the Board is accountable to all their investors. The common seal of a company is an engraved seal, which is to be executed in the presence of the directors or company secretary. The fact that the financial statements do not have to be published by all Joint Stock Exchanges helps the companies maintain their confidentiality in matters of finance.
Ordinary shares entitle the owner to a share in the company's net profit. Board of Directors: It is not possible for each shareholder to participate in the management affairs of the business. Due to specifics of the Soviet economy, all enterprises in the Soviet republic as the rest of the were state owned and private entrepreneurship was strictly prohibited and criminally prosecuted. These are generally experienced and qualified people, so efficiency of the company improves. Shareholders are not the joint owners of the company's property.
Most of the business activities are decided through meetings. Expansion of Business :- A joint stock company sells the shares bonds and debentures on large scale. Thus, virtually all corporations in the U. However a corporation can be dissolved by a government authority by putting an end to its existence as a legal entity. A large number of shareholders are attracted by its shares.
When a large number of reports are issued, the reports become public. Companies also transfer a portion of their profit to reserve which can be utilised for future expansion. Ideally a lawyer in Switzerland can be helpful in such endeavours. This affects the smooth functioning of a company. These hard circumstances detracted from the colonist's financial responsibilities to the company.
Capita can also be obtained by issuing debentures and accepting public deposits. Establishing a joint stock organization is not easy. So it can collect a large capital and can expand its business. The share of big companies in government revenue far exceeds the combined tax contributions of sole proprietorships and partnerships. The company act provides measures against the oppression of the minority, but the measures are not very effective. Economies of large-scale operation: A joint stock company can undertake business on large scale.
Without these features of joint stock companies, it would have been better to call it a firm rather than a company form of organization. Therefore, it is very difficult to maintain business secrecy in a company form of organization in comparison to sole proprietorship and partnership. Efficient administration: The direction of the operations of the business almost depends upon the board of directors. Investors become more attracted as there is a chance of raising the share price. In case of private limited company, minimum number of shareholders is 2 and the maximum is 50, while in case of public limited company minimum number of shareholders is 7 and there is no maximum limit.