1. UNIT – I JOINT STOCK COMPANY
DEPARTMENT OF MANAGEMENT STUDIES
UNIT – I JOINT STOCK COMPANY
11/19/2017
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2. Definition of Joint Stock Company
Company means a company formed and registered under this Act or existing company.
(Company Act, 1994)
A joint stock company is ‘an association of many persons who contribute money or money’s worth to a common stock and employ it for a common purpose’. Joint Stock Company is a new venture in the big business area. After industrial revolution, there must be changed in the production system.
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3. Definition of Joint Stock Company
Justice Marshall : “A company is an artificial being, invisible, intangible and existing only in contemplation of law”.
Justice Lindley : “A company is a voluntary association or an organization of many persons who contribute money or moneys worth to a common stock and employ it in some trade or business and who share the profit or loss arising therefore”
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4. Features of a Joint Stock Company
1. Corporate personality Joint capital Share capital Transferability of share Limited liability Statutory responsibility Number of shareholder Independent nature of management Democratic norm 10.Profit distribution 11.Tax payment
12. Dissolution
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5. Advantages of a Joint Stock Company
The power and presence of corporations in American business suggest that this form has certain advantages over other forms of business ownership:
High amount of capital
Limited liability
Low risk investment
Perpetual succession
Separate entity
Transferability of share
Efficient management
Credit facility
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6. Disadvantages of a Joint Stock Company
As was true with the other forms of business organization , the corporation has some disadvantages. Some of the more obvious ones follow: Complexity of formation Creation of monopoly business Bureaucracy Nepotism High administrative cost Overlook to the shareholder Scope of fraud Tide following of law Expose of secrecy
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7. Classification of Company
Joint Stock Company
Chartered
Company
Statutory Company
Registered Company
Others Company
Special Company
Foreign Company
Unregistered Company
Existing Company
Limited Company
Unlimited Company
Private limited Company
Public Limited Company
Company Limited by Share
Company Limited by Guarantee
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8. Chartered company
In 1844, the first Company Act was issued in the England . A chartered company is a company which is incorporated by royal charter obtained from the crown. This type of company is in vogue in England a century ago. The examples of such companies are:
The Chartered Bank of England
Chartered Mercantile Bank of India and
East India Company.
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9. Statutory company
A company formed and regulated by the special Act of legislature is known as a statutory company. Usually such companies are formed for the purpose of maintaining and accelerating the pace of economic development in the country. The examples of statutory companies are as follows:
Bangladesh Bank
Bangladesh Biman
BRTA
WASA
DESA
TNT
PDB
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10. Registered Company
A registered company means a company formed and registered under the companies Act Broadly there are two types of registered companies from the view point of liabilities of members:
1 . Limited company : A limited liability company of which the liability of each member is limited to the face value of the share held by him and the capital of the company is divided into the number of shares. This type of company is two types:
Private Limited Company: A private limited company means a company which by its articles of association,
a) Restricts the right to transfer the shares
b) Limits the number of its members to fifty excluding persons who are in the employment of the company
c) Prohibits any invitation to the public to subscribe for the shares or debentures of the company.
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11. Public Limited Company: It is a voluntary Association of at least seven or more persons, authorized and recognized under the law as a separate legal entity apart from its owners who agree to supply capital and share the profits or losses. A public limited company may be of two types which are the following:
a) A company limited by shares : It is a company, of which the liability of each shareholder is limited to the face value of the shares held by him. If he pays the full amount of his share, he gets freed from any other liability.
b) A company limited by guarantee : A company is called a company limited by guarantee, when each shareholder undertakes to contribute a certain amount to the liability of the company in the event of its being wound up while he is a member, In this company which members are bearing a company limited by guarantee, for the unpaid amount of share they are liable. If they paid full amount of share they are free from the liability. This organization is usually formed for furthering the cause of education or some professional cause.
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12. 2. Unlimited Company: Unlimited Liability Company is a company of which the liability of each shareholder is unlimited- each shareholder is liable for the debts of the company to an unlimited extent. In other words the liability of the member extends beyond the face value of shares held by him to his personal properties.
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13. Differences between Private Limited and Public Limited Company
Particulars
Private Limited
Public Limited
1. Formation
2.Number of Members
3. Starting of work
4. Sales of share
5. prospectus
6. Transfer of shares
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14. Differences between Private Limited and Public Limited Company
Particulars
Private Limited
Public Limited
7. Size of capital
8. Minimum capital
9. Board of director
10.Statutory meeting
11. Right of voting
12. Articles of association
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15. Economic Importance of Joint Stock Company in Bangladesh
Establishment of large scale business
Proper scope of investment
Encouraging savings and forming capital
Facilities of risk distribution
Creating opportunities of employment
Use of modern technology and techniques
Observing social responsibility
Establishing international relation
Developing management profession
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16. Method of the Formation of a Joint Stock Company
1. Promoting state : In the first stage, few persons involve with the generating idea about the formation of a company. The persons who involve with the formation of company is called promoter. In the initial state the promoters take decision about the following:
Taking necessary decision
Collecting name clearance
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17. 2. Preparation of documents: In this stage, the promoters prepare two important documents which as follows:
a)Memorandum of association :Memorandum of association is a charter which contains the fundamental conditions upon which the company is incorporated. It includes company’s name, address, amount of capital, objectives, rights and duties of shareholders.
b)Articles of association : Articles of association refers to the document which contains rules and regulations for the internal administration of the business.
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18. A copy of memorandum of association A copy of article of association
c) Certificate of incorporation collection: In this stage, the promoters collect registration form from the registration office and submit it within thirty days with some important documents. The important documents are as follows:
A copy of memorandum of association
A copy of article of association
The name, address and profession of the promoters who want to be director
A sign with declaration for obeying the duty as a director
A agreement for collecting share of competence
A declaration of obeying all the rules and regulations for promoting the company by a lawyer.
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19. 4. Certificate of commence collection:
In this stage, the promoters of a public limited company prepare a prospectus. The company wants to collect capital by issuing share to the pubic by taking permission from the Security and Exchange Commission. For collecting the certificate of commencement, the promoters submit few documents with application which are as follows:
Minimum capital is collected and the directors are collected the share in cash.
Prospectus or like declaration for collecting shares from the public.
5. Commence collection : After getting letter of commencement the company start the work.
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20. Definition of Minimum Subscription
Minimum subscription is the amount of money is to be collected share subscription for starting a joint stock company . The minimum amount of money is collected by the promoters of the company in the articles of association and prospectus according to the companies act.
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21. Meaning of Prospectus
Prospectus is an appeal to the public to subscribe shares or debentures offered to the public. The main objective of prospectus is to persuade the people to purchase shares and to give all necessary information to guide the potential investors.
According to the Companies Act-1994, Section-142, “Document containing offer of shares or debentures for sale to be deemed a prospectus”.
A public limited company, after its registration, issues the prospectus to the public with a view to draw their attention and creating confidence in their minds for subscribing shares or debentures on behalf their company.
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22. Contents of Prospectus
Name of the company
Address of the registered office
Objectives of the company
Name, address and profession of the promoters
Short description of memorandum of association
Short description of articles of association
Name, address and profession of board of directors and managing director
Name, address and profession of profession
Salaries and compensation of the directors
Authorized capital of the company
Signature of the directors
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23. Contents of Prospectus
Classification of share and amount of capital involved
with the each share
Name and address of the bank, broker, auditor and
accountant
Rules of inspection of accounts
Description about the contract with the other company
Preliminary expenses for forming the company
Reserve fund and way of converting fund to capital
Profit-loss and final accounts for the existing company
Time and date for receiving application for subscribing
shares and debentures
Date of issue of prospectus
Specimen copy of applications of share and debenture
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24. Definition of Share
Share means small parts of total capital of a company.
The company collect big amount of capital by issuing
shares to the public.
According to the Companies Act-1994, Section-2(1) :
“Share means a share in the capital of the company, and
includes stock except when a distinction between stock
and shares is expressed or implied”.
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25. Debenture
Any instrument under seal evidencing a deed , the essence of it being the admission of indebtedness.
Debenture includes debenture stock , bonds and any other securities of a company , whether constituting a charge on the assets of company or not.
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26. Underwriting / Underwriter
The term underwriter means any person who has purchased from an issuer with a view to , or sells for an issuer in connection with .
Underwriter means a financial institution , usually an issuing house or merchant bank that guarantees to buy a proportion of any unsold shares when a new issue is offered to the public .
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27. Pattern of Company Management
Shareholder
Board of Director
Managing Director
General Manager
Divisional Mgt
Purchase
Sales
HRM
Finance
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28. Thank You
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