The oldest form of business is sole proprietorship. The limitations inherent in sole proprietorship and partnership are, to some extent, overcome by forming a company.
Moreover, as soon as industrial revolution took place, the method of production changed. Production was started on a large scale, and huge amount of capital was invested to substitute the traditional method of production.
In this situation, factory system emerged which helped to decrease the costs of production and to meet the requirement of total demand.
These necessities inspired the formation of a type of business organization, called Joint Stock Company. In our country company operates according to the Companies Act-1994.
Definition of Joint Stock Company
A company may be defined as an artificial person recognized by law, with a distinctive name, a common seal, a common capital comprising transferable shares of fixed value, carrying limited and having a perpetual succession.
According to companies Act-1994 Sec. 2-1(d), “Company means a company formed and registered under this Act, or any existing company.”
According to Indian companies Act, “A company means an artificial entity which is formed and registered under this act or an existing company formed under any previous Companies Act.”
According to M.H. Bukhari, “A company is an association of persons associated together for the purpose of carrying on a lawful business with a view to profit.”
According to Justice John Marshal, “Corporation is an artificial being, invisible, intangible and existing only in contemplation of law.”
Thus a joint stock company is an association or organization of many persons formed for the purpose of profit, possessing a common capital contributed by the members composing it; such capital being divided into shares of which each member holds one or more and the liability of each such member is limited to the face value of the shares he possesses.
Other Content of Joint Stock Company:
- Characteristics / Features of Joint Stock Company
- Advantages and Disadvantages of Joint Stock Company
- Types of Joint Stock Company