JOINT STOCK COMPANY

Joint Stock Company is the third major form of business organization. It has entirely
different organizational structure from sole proprietorship and partnership. There are two
advantages of Joint Stock Company. First of all, it enjoys the advantage of increased capital.
Secondly, the company offers the protection of limited liability to the investors.
The law relating to Joint Stock Company has been laid in Companies Ordinance, 1984, which
came into force on January 1, 1985 in Pakistan.

DEFINITIONS
Following are some important definition of Joint Stock Company:
1. Simple Definition
“A company may be defined as an association of persons for the purpose of making profit.”
2. According to Kimball,
“A corporation by nature is an artificial person, created or authorized by a legal statue for
some specific purpose.”
3. According o S.E. Thomas,
“A company is an incorporated association of persons formed usually for the pursuit of
some commercial purpose.”

FEATURES OF JOINT STOCK COMPANY
Following are the main features of a Joint Stock Company.

1. Creation of Law
A joint stock company is the creation of law or special ‘Act’ of the state. It is formed and
governed by the Companies Ordinance or by a special Act of the legislature. Pakistani
companies are incorporated under the Companies Ordinance, 1984.

2. Capital Borrowing 
The company can borrow capital in its own name to expand the business.
3. Separate Legal Entity
A Joint Stock Company has separate legal entity, apart from its members. It can sue in a
court of law in its own name.

4. Legal Person
A Joint Stock Company, as a legal person, has the usual rights of any person to carry on the
business in its own name, to own property, to borrow or lend money and to enter into
contract.

5. Long Life
A joint stock company has long life as compared to other forms of business organizations.

6. Limited Liability
The liability of the shareholder is limited to the extent of the face value of the shar4es they
hold.

7. Large Scale Business
Because of more members, a company has larger capital as compared to sole trade ship and
partnership, which helps in doing business on large scale.

8. Management of Company
The shareholders elect the Board of Directors in the Annual General Meeting and all the
management is selected by the Board of Directors.

9. Number of members
In case of private limited company, minimum number of shareholders is ‘2’ and maximum is
‘50’; but in case of public limited company, minimum number is ‘7’ and there is no limit for
maximum number.

10. Transferability of Shares
A shareholder of a company can easily transfer his shares to other persons. There is no
restriction on the purchase and sale of shares.

11. Trade Agreement 
A joint stock company enjoys separate existence, so it can join the trade agreements with
other firms in its own name.

12. Purchases and Sale of Property
A joint stock company can purchase and sale the property in its own name.

13. Payment of Taxes

A joint stock company pays double taxes to the government.

14. Object
The basic object of a joint stock company is to earn profit. Whole profit is not distributed
among the shareholders. Some portion is transferred to General Reserve for emergencies.

15. Government Control
A joint stock company has to comply with the rules of the government. It has to audit its
accounts.

16. Easy Mode of Investment
The capital of a joint stock company is divided into the shares of small value. So, every
person can purchase these shares according to his income and saving.

17. Common Seal
Since a company is an artificial person created by law, therefore, it cannot sign documents
for itself. The common seal, with the name of the company is used as a substitute for its
signature.