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Joint Stock Companies: Definition, Types, and Formation Procedures

Ankandhk is a passionate business student from Bangladesh. They are particularly interested in the different types of enterprises.

Types of join stock companies

Types of join stock companies

What Is a Joint-Stock Company?

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

  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.


Hafsat Ahmad on July 01, 2020:

Good and nice explanation.

Niyas on June 17, 2020:

Nice explanation

bextol on March 06, 2020:

Nice article. If you want to know more about join-stock companies please check this page

sourabh on February 18, 2020:

pls upload as companies act 2013

Albert on December 11, 2019:

Thanks it's the best resource

yaswanth on August 16, 2019:

will it usefull for me please help me

prashanth on July 24, 2019:

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Shobhit Mohanty on May 14, 2019:

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

Aryan sarkar on May 11, 2019:


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Humza Islam Chaudhary on January 04, 2019:

easy explanation

Bagonza Jimmy on November 12, 2018:

very useful for me thanks.

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princes on August 11, 2018:

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Ashly on April 24, 2018:

A nice definition and thank u for this information

Lavanya on February 03, 2018:

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

AKASH MADDHESHIYA on December 18, 2017:

thanks for giving all information

Princes Aarya Rai on November 19, 2017:

Very help full definition thnks

swami on October 31, 2017:

Can you explain it more deeply

Namira Lambe on October 22, 2017:

Very helpful........

Alberta on August 19, 2017:

Very precise

Subita on June 23, 2017:

very helpful for me.

jansuk chaplain on May 16, 2017:

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

Roadrunner on April 06, 2017:

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Tukuna on February 27, 2017:

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Hasan Shaikh on February 25, 2017:

Thanks you

Sougata Bose on February 09, 2017:

Describe the different steps for formation of a

joint stock company.

Amol Patekar on January 09, 2017:

it is so good for students in colleges and school

aisha on December 11, 2016:

thank u so much

Ahmed.K. Buhusain on December 01, 2016:

Thanks a lot it was very very useful...

maira on November 29, 2016:

Superb information

Abhishek kumar on November 28, 2016:

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Shafin on October 30, 2016:

Good Defination i like it.

Jessica Thomas on October 26, 2016:

Very nice but too big definitions. But also useful to

divya on September 03, 2016:

Very helpful for my assignment thanzxx

noor on July 27, 2016:


essa on July 06, 2016:


aaisha on January 05, 2016:

ok information

rani on December 30, 2015:


Kishan on October 07, 2015:

There are given very good understanding points been


Nikki Rocksss on January 03, 2015:


ZECH (jr) on October 14, 2014:

solution found, thumbs up to you but is that all about the floatation stage??

Muhammad Ashiq C.A. on August 09, 2014:


good on March 16, 2014:


YashPreet Kaur on October 09, 2013:

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

Gowtham .M on July 24, 2013:

it is so good for students in colleges and school

mr.m on July 10, 2013:


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khushbu on April 24, 2013:

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

shahbaz jadoon on May 19, 2012:

good work'

JIGNESH.KAKADIYA on May 03, 2012:

Very Nice ,

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

Nhsagar on April 11, 2012:

Its a good collection