What is joint stock company and what are its main objective?

Answer 1

Joint stock company is an organization that falls between the definitions of a partnership and corporation. This type of company issues stock and allows for secondary market trading; however, stockholders are liable for company debts.This is a type of company that has access to the liquidity and financial reserves of stock markets, but also has the restrictions of a partnership.Joint stock companies first came into being in the 18th century in Britain, and were mainly concerned with foreign trade. Initially, the organizational form was viewed with suspicion, it being supposed that it encouraged managerial inefficiency and corruption.

The key features of the joint stock company can be simply stated. It is a separate legal entity, distinct from the people engaged in it, and with continuity, so that it does not die when the founders withdraw. The basic framework involves three sets of economic actors: the shareholders,the directors and the employees. The shareholders provide financial capital in return for a share in the profits. Their liability is limited to the capital they have subscribed, which is forfeit if the company fails. There is a distinction in practice, though not in legal treatment, between a "private company" where the shares are held by a single person or small group and cannot be transferred without the agreement of the shareholders, and a public company or PLC, where shares are offered for sale to the public at large, and can be freely traded. The largest public companies will usually take steps to have their shares listed and traded on the Stock Market. Smaller public companies may have to make do with less public means of trading their shares e.g. the Unlisted Securities Market in the UK, or arrangements for placing shares organised by merchant banks. The directors of the company are elected to the Company Hoard by the shareholders at the Annual General Meeting.