Joint Stock Company Definition, Types, and Procedure of Formation

Updated on April 25, 2016

Joint-stock company definition

A joint-stock company (JSC) is a form of company or joint venture involving two or more individuals that own shares of stock in the business. Certificates of ownership ("shares") are issued by the corporation in return for each financial contribution, and the shareholders are free to relocate their ownership interest at any time by selling their shares to others.

At present, company law the existence of a joint-stock company is often identical with incorporation (i.e. possession of authorized personality separate from shareholders) and limited liability (meaning that the shareholders are only liable for the company's debts to the value of the money they invested in the company). And as an outcome joint-stock company is generally known as corporations or limited companies.

Some jurisdictions still provide the opportunity of registering joint-stock companies without limited liability. In the United Kingdom and other countries which have adopted their form of company law, these are known as unlimited companies. In the United States they are, to some extent confusingly known as joint-stock companies. (Company means a company formed and registered under this act or an existing company. – Company Act 1994)

Types of Join Stock Company
Types of Join Stock Company

Types of Join Stock Company


1. Chartered Company: The companies that form by the order of the king of England are called the charter company. These companies were formed before 1844. For example, East India Company, Chartered Bank of England, the charter of the British South Africa Company, given by Queen Victoria (More information here)

2. Statutory Company: Companies that are formed by the order of the President, or by the Legislative Committee or by bill of Parliament are called Statutory Company. These Companies are operated by those laws. For example, municipal councils, universities, central banks and government regulators, Central Bank. (More information here)

3. Registered Corporation: Companies that are formed under the prevailing law of the company are called the registered company. The corporation that has filed a registration statement with the SEC prior to releasing a new stock issue. It is two types-

i) Unlimited Company: The liabilities of the shareholders of this company are unlimited. For example, British all-terrain vehicle manufacturer Land Rover, GlaxoSmithKline Services Unlimited.

ii) Limited Company / limited corporation: The liabilities of the shareholders are limited. For example, Charitable organisations, Financial Services Authority. This liability of a company can be of two types.

a) By Guarantee

b) By share value. The company limited by share can be of two types.

• Private Limited Company, where the number of shareholder ranges from two to fifty. The share of these companies can’t be traded in the stock market.

• Public Limited Company, where the number of shareholder ranges from seven to share limitation. The share of the public limited company is traded in the stock market.

Procedure of Formation of a Joint Stock Company

In "Bangladesh" perspective (but the moreover same process all over the world) Joint Stock Company is formed, registered and guided by the Companies Act 1994. The promoters by themselves or by their appointed person (advocate, consultancy firm, or consultant) undertook the task of formation. However, the task of formation could be discussed in steps.

1. Promotional Steps:

The person who undertook the task of formation is called promoter or entrepreneur. For Public Limited Company there should be at least seven (7) and for Private Limited company, there should be at least two (2) promoters. These promoters undertook the following tasks:

a) Planning: Here the promoters decide about the objectives, area, type, capital structure of the new business. Based on these factors, the promoters go forward.

b) Feasibility Analysis: Here the promoters undertook the feasibility analysis for the new venture: both from existing and potential viewpoint. Promoters undertook different tools like SWOT (Strength, Weakness, Opportunity and Threat) Analysis; Competitive Analysis, etc. Being assured of the potentiality of the business the promoters go for the further.

c) Naming the Company: The name of the company should be such that is not used by any other existing company; it is not a name of the King or Queen or President. The Public Limited Company should use (pvt.) Limited and the Public Limited Company must use Limited at the end of the company name. The promoter upon deciding the name, they submit the name in black and white for Clearance in the registrar office. The registrar upon verifying the uniqueness of the proposed name gives clearance of using the name.

2. Registration or Incorporation:

To incorporate the new company the promoters needs go through the following steps:

a) Collecting Registration Form and Filling it up: The promoters have to collect the registration form and other papers for a fee from the registrar office. Then they should fill up it by themselves or should take the help of the consultants or advocates.

b) Preparing Documents and Submitting for Registration: The promoters have to submit the filled-up form with fees and the following documents in the registrar office:

• Memorandum of Association

• Articles of Association

• Capital Structure of the proposed Company

• List of Directors and the amount of the sponsored share they purchased

• Declaration regarding the proposed name of the company

• Declaration of an advocate or chartered accountant or any director of a proposed company that the company has followed all the rules and regulations of Company Act 1994.

The registrar being satisfied on the paper submitted for the proposed company issues' Certificate of Incorporation. On getting that certificate the Private Limited Company can start its business but the Public Limited Company has to go to another step to start its business.

c) Obtaining Certificate of Commencement: Here the promoters should make the Prospectus for the company. This prospectus needs to be published in the daily newspaper. To get the Certificate of Commencement, the promoters need to submit the following documents to the registrar:

• A copy of Prospectus

• Name, address, designation, occupation, etc. of Directors

• Directors’ written Letter of Agreement that they want to work as director of that company.

• Declaration that the directors have fully paid the minimum amount of sponsor share.

• Declaration by the company secretary or other authorized person that the above affairs have maintained all rules and regulation of Company Act 1994.

The registrar being satisfied on the paper submitted for the proposed company issues' Certificate of Commencement. On getting that certificate the Public Limited Company can start its business.

3. Flotation Stage

If the sponsor directors are unable to provide the adequate capital, public limited company can float their share in the capital market (Stock Exchange) to get required capital. By this time, the company can do its other functions.

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

Questions & Answers

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      • profile image

        Shobhit Mohanty 

        6 days ago

        what are the sources of finance for Joint Stock Company???

      • profile image

        Aryan sarkar 

        9 days ago

        Thnx

      • profile image

        john kuch garang nhiany 

        2 months ago

        so nice for students at university

      • profile image

        Sonu 

        2 months ago

        Good and helpful collection

      • profile image

        Salako Adebayo 

        4 months ago

        I Need Your Helap Pleace Hw Can I Connect Wiht You

      • profile image

        Humza Islam Chaudhary 

        4 months ago

        easy explanation

      • profile image

        Bagonza Jimmy 

        6 months ago

        very useful for me thanks.

      • profile image

        Sagar Thakur 

        7 months ago

        Its very useful information and helpful thnx

      • profile image

        princes 

        9 months ago

        Thanku so much

      • profile image

        Aryan rana 

        11 months ago

        Not good

      • profile image

        waleed 

        12 months ago

        awesome lacture....

      • profile image

        Ashly 

        13 months ago

        A nice definition and thank u for this information

      • profile image

        Lavanya 

        15 months ago

        I don't interest in business. But this is very interesting.

      • profile image

        AKASH MADDHESHIYA 

        17 months ago

        thanks for giving all information

      • profile image

        Princes Aarya Rai 

        18 months ago

        Very help full definition thnks

      • profile image

        swami 

        18 months ago

        Can you explain it more deeply

      • profile image

        Namira Lambe 

        19 months ago

        Very helpful........

      • profile image

        Alberta 

        21 months ago

        Very precise

      • profile image

        Subita 

        23 months ago

        very helpful for me.

      • profile image

        jansuk chaplain 

        2 years ago

        very interesting but there are no definition of limited by guarantee and by shares.

      • profile image

        Roadrunner 

        2 years ago

        i am passing my paper tomorrow because of this content. beautifully compiled. thankyou

      • profile image

        Yasir khan 

        2 years ago

        It is very useful collection

      • profile image

        Tukuna 

        2 years ago

        It's really an outstanding collection.

      • profile image

        Hasan Shaikh 

        2 years ago

        Thanks you

      • profile image

        Sougata Bose 

        2 years ago

        Describe the different steps for formation of a

        joint stock company.

      • profile image

        Amol Patekar 

        2 years ago

        it is so good for students in colleges and school

      • profile image

        aisha 

        2 years ago

        thank u so much

      • profile image

        Ahmed.K. Buhusain 

        2 years ago

        Thanks a lot it was very very useful...

      • profile image

        maira 

        2 years ago

        Superb information

      • profile image

        Abhishek kumar 

        2 years ago

        very good collection

      • profile image

        Shafin 

        2 years ago

        Good Defination i like it.

      • profile image

        Jessica Thomas 

        2 years ago

        Very nice but too big definitions. But also useful to

      • profile image

        divya 

        2 years ago

        Very helpful for my assignment thanzxx

      • profile image

        noor 

        2 years ago

        good

      • profile image

        essa 

        2 years ago

        informative

      • profile image

        aaisha 

        3 years ago

        ok information

      • profile image

        rani 

        3 years ago

        Nice

      • profile image

        Kishan 

        3 years ago

        There are given very good understanding points been

        given

      • profile image

        Nikki Rocksss 

        4 years ago

        usefull

      • profile image

        ZECH (jr) 

        4 years ago

        solution found, thumbs up to you but is that all about the floatation stage??........jnrzech@yahoo.com

      • profile image

        Muhammad Ashiq C.A. 

        4 years ago

        Useful.....

      • profile image

        good 

        5 years ago

        useful

      • profile image

        YashPreet Kaur 

        5 years ago

        em confuse i got an assignment and i have lot of things don't know what to right or not.. anyway MUCH HELPFUL 10Q (:

      • profile image

        Gowtham .M 

        5 years ago

        it is so good for students in colleges and school

      • profile image

        mr.m 

        5 years ago

        superb

      • profile image

        kajal 

        6 years ago

        that is very good facility for all

      • profile image

        khushbu 

        6 years ago

        it is very helpful for me.....its content and flow chart is superb

      • profile image

        shahbaz jadoon 

        7 years ago

        good work'

      • profile image

        JIGNESH.KAKADIYA 

        7 years ago

        Very Nice ,

        just add the limit of no. of direcor in the companies

      • profile image

        Nhsagar 

        7 years ago

        Its a good collection

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