Kids, we start with yet again a new module. This time name of the chapter, what, yeah you recollect, Joint Stock Company and features of the same, so let’s check.
A Joint Stock Company is a voluntary association means willingness of the people to be a member formed for the purpose of undertaking a business. So willingly they take a part in it, if they don’t want they don’t, right, they can stay away. It is called as Joint Stock because shares or the stocks of the company are jointly owned by its members so everyone is the owner of this company. A Joint Stock Company undertakes different business activities like manufacturing, marketing, servicing and etc.
The funds required by the company are contributed by its members called as shareholders, you can see next to me. Now the shareholders are the co-owners, right, I told you each and every person who buys the share becomes the co-owner, right, and they share profits of the company in the form of dividends, that is share in profits. Now the company is managed by board of directors. Now board is a group of elected representatives of the shareholders. Board frames the plans and policies of the company. Who elects board of directors? Yes, shareholders, remember that. The board in turn appoints several other mangers and subordinate staff to look after day to day aspects of the organisation. So they have support staff. And who appoint board of directors, shareholders. And who appoints support staff and all, board of directors, remember that. In India Joint Stock Companies are governed and registered under yes, ICA, 1956, that is Indian Companies Act, 1956.
Now let’s take the definition of Joint Stock Company. A company means a company registered under this Act, or an existing Companies act.
An existing company means a company formed and registered under any of the previous Companies Acts, right. Now this is the definition which is given in section 3(1) (i) of the Companies Act, 1956.
Let’s check feature number one. We call it as an Artificial Person. A Joint Stock company is an artificial person created by, yes, law. So who gives birth, law gives birth to this artificial person or you can call it as a Joint Stock Company. It has no physical existence but it has a legal existence, right, remember. Like human beings it can acquire property, enter into contract, right, signature can be done and can take legal action. So remember what does that mean, we can sue this company and this company also can sue us. Sue means, right, file a case against, remember that. Incorporated association, every company in India has to be registered under Indian Companies Act, 1956, remember that. Registration of incorporation gives birth to a Joint Stock Company. Perpetual succession means very long life, so once the company is started, a company has a very, very long or perpetual succession, it means the company has a long and stable life. Its existence is not affected by death of any shareholder or insolvency or maybe insanity, right, someone becomes mad, it doesn’t affect the company’s business, right, or existence. You can see there, insanity, the state of being seriously mentally ill or madness. But company continues, continues and continues. Common seal, a company is an artificial legal person, and as such it has to sign documents and other papers, right, do remember that. So what do you need, you need a common seal so it cannot sign like us, right. So therefore a common seal serves as the signature, kids, do remember signature. Affixing of the common seal on important documents is witnessed by the signature of two directors of the company, right, that means wherever you find the common seal you will find the signatures of two directors along with it. You can see, right, along with the common seal directors are signing the same important documents. So the common seal remains in the custody of yes, board of directors. Separate legal entity, a company has a legal entity, separate and different from its members. A company cannot hold a member responsible for the debts of the company, correct. So whatever debts company takes the company is responsible, whatever debts shareholder takes, shareholder is responsible. So they cannot hold a member responsible, right, kids. So do remember these features. We continue remaining in the next module.
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