INTRODUCTION
Joint Stock Company is a third major form of business organization. Joint stock company is formed and controlled under the companies ordinance 1984 which came into force on January,1985 in Pakistan. It is managed by group of persons known as board of directors.
DEFINITIONS
"A company is an incorporated association of persons formed usually for the pursuit of some commercial business."
OR
"A joint stock company is voluntary association of individual for profit, having a capital divided into transferable shares, the ownership of which is the condition of membership."
OR
"A company is an artificial person created by law with a perpetual succession and a common seal. It has a legal entity, separate from the persons composing it. It can sue and be sued in its own name."
ADVANTAGES
1. ATTRACTION OF CAPITAL
A joint stock company attracts large amount of capital. Company divides its share capital into share of small values. So it becomes easy for any one to buy shares.
2. CREDIT FACILITIES
A joint stock company enjoys the highest credit facilities. Banks and other financial institutions easily easily agree to give loan to joint stock company because its accounts are audited.
3. ECONOMICS
The production cost in joint stock company is economical because of large scale of production.
4. EASY TO SEPARATE
Every one can easily separate oneself from the company by selling his shares. It means there is no restriction for sale of shares.
5. EXPANSION OF BUSINESS
It is very easy for joint stock company to expand its business because it has a large amount of capital.
6. FLEXIBILITY
It is flexible organization. The board of direction of joint stock company can bring new changes in the business according to circumstances.
7. HEAVY AND RISKY INDUSTRY
Heavy and risky industry may be started only under this organization because the liability of its members is limited and it has large amount of capital.
8. MINIMUM RISK OF LOSS
There are minimum chances of loss under this organization. In case of company suffers loss, it is shared among all the members. The risk is, therefore, reduced.
DISADVANTAGES
1. BOGUS REPORTS
Directors who know the internal affairs of the company do not provide the correct and full information about the company to the shareholders. So interested parties may not know the actual performance of the company.
2. CORRUPTION
There are more chances of corruption and fraud in joint stock company. Because dishonest promoters show that film is in loss when there are chances of more profit so that people sell their shares at low prices.
3. CONCENTRATION OF CONTROL
In joint stock company, shareholders who are the real investors are not allowed to take part in the operation of business. So they cannot know the internal activities of directors who take undue benefits from the ignorance.
4. COMPLICATED FORMATION
The process of formation of joint stock company is very complicated. There are many legal requirements for the formation of this type of business organization.
5. END OF FREEDOM
Various Government's authorities interfere during the operation of joint stock company. So this organization can not perform its functions freely.
6. LACK OF INTEREST
Its ownership belongs to the thousands of persons who do not know each other. Secondly business activities are conducted by paid persons who do not take interest of creating direct relationship with public, so business may suffer loss due to absence of personal interest.
7. LABOUR DISPUTES
In joint stock company, the paid managers of the company do not give proper attention to the problems of labours and so laborers trade unions fight against company management.
No comments:
Post a Comment