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
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.
It‟sa separate legal entity, distinct from the people engaged in it.
Compulsory Incorporation
a voluntary association of persons formed and incorporated
under the existing law.
Artificial person
created by legal process and not by natural birth. Even though
it has no natural personality, it has legal personality
Common Seal
every company by law must have a common seal on which its
name is engraved. The common seal can serve as its
signature.
Perpetual succession
men may come and men may go but a company remains
forever. It can be wound up only under the provisions of the
act.
Limited liability
usually the liability of members of a company is limited to
the extent of value of shares held by them.
Share capital
1. The capital required by the company is raised by issuing
shares.
2. The member who holds the shares of a company can transfer
its ownership to any other person, without the company‟s
permission.
Separation of ownership and management
1. The shareholders do not take active part in the everyday
affairs of the company.
2. Elected representatives known as Directors, who with the
help of managers and employees manage the company.
Legal Entity
1. It has separate legal existence compared to its members.
2. The members cannot be personally held responsible for the
acts of the company.
Large membership
Owned by a larger number of members.
Private Limited Company
A private limited company is the one which by its articles
i) Limits the maximum number of its members to 200,
minimum being 2.
ii)Places some restriction on the transfer of its shares.
ii)Prohibits any invitation by prospectus or otherwise to the
general public to subscribe to any of its shares or
debentures
ii) A private company must used the word „Private Limited‟
after its name.
Public Limited Company
i) It must have atleast 3 directors – 1/3rd of the directors are
permanent and 2/3rd are subject to retirement by rotation out of
which 1/3rd retire every year.
i) Shares can be freely transferred in a public company.
i) In case of a public company Statutory Meeting is
compulsory.
Private Limited Company Public Limited Company
1. Membership:
Minimum membership 2, Maximum Minimum membership 7, Maximum
membership 200 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 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.
1) Private Limited Company
i)can be formed by at least two individuals having minimum
paid–up capital of not less than Rupees one lakh.
ii) total membership of these companies cannot exceed 50.
iii) shares allotted to its members are also not
freely
transferable between them.
iv)not allowed to raise money from the public through open
invitation.
v)are required to use “Private Limited” after their names.
examples : Combined Marketing Services Private Limited,
Indian Publishers and Distributors Private Limited Limited,
etc.
2) Public Limited Company
i) Min of 7members are required, no restriction on max no
of members
ii) must have minimum paid–up capital of Rs. 5 lakhs.
iii) shares allotted to the members are freely transferable.
iv)can raise funds from general public through open invitations
by selling its shares or accepting fixed deposits.
v)required to write either „public limited‟ or „limited‟ after their
names.
Examples :Hyundai Motors India Limited, Steel Authority of
India Limited, Jhandu Pharmaceuticals Limited etc.
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, 2013
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.
Partnership Joint Stock Company
1. Meaning:
Here 2 or more people come together for It is voluntary association, artificial person
doing some business and making profit created by law having a common seal and
perpetual succession
2. Formation:
Relatively easy, less legal formalities Formation difficult, too many legal
involved formalities involved.
3. Capital:
It can raise limited capital due to limitation It can raise large capital due to large
on the number of members and their members
capacity
4. Liability:
Liability of partners is unlimited joint and Members liability limited to the face value
several of shares
5. Ownership and Management:
There is difference in ownership and There is no difference in ownership and
management management
6. Flexibility:
More flexible, compared to Joint Stock Less flexible compared to partnership firm
Companies
7. Continuity and Stability:
Lacks continuity and stability, business may Joint stock company is continuous and
come to an end with death, insolvency and stable, business does not come to an end
insanity of partners with death insolvency or insanity of
partners
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. Decisionmaking:
Quick decision making Delay in decision making
[Link] of scale:
Less economies of scale as compared to Joint Stock Enjoys economies of scale as it undertakes
Companies business on a large scale
[Link] Power: Strong bargaining power
Generally weak bargaining power
[Link] customers &employees:
Close contact with customers and employees No contacts with customers and employees
[Link] status:
No legal status Possesses and a legal status
[Link]:
Governed by Partnership Act, 1932 Governed by Companies Act, 1956