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Overview of Joint Stock Company in India

To begin the process of establishing a Joint Stock Company in India, it is essential to understand the concept of a Joint Stock Company. A Joint Stock Company is a business entity that is collectively owned by multiple shareholders, each of whom holds a specific number of shares in the company. By investing a certain amount of capital into the company through these shares, shareholders can earn returns on their investment in the form of dividends.
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There are several compelling reasons why business owners and founders may choose to establish a Joint Stock Company in India, and we will explore each of these reasons in-depth in this blog. We have provided a comprehensive guide to Joint Stock Companies in this blog, covering its definition, types, and key features. For a thorough understanding of Joint Stock Companies, we recommend reading the full article. If you have any further questions or comments, please feel free to post them in the comment section below the blog. We would be happy to address them.

What is a Joint Stock Company?

A Joint Stock Company is a type of company that is owned by multiple shareholders who collectively own the company. The percentage of ownership, voting rights, and share in profits of each shareholder is determined by the number of shares they hold in the company. Additionally, the liabilities of shareholders are limited to the number of shares they have subscribed to in the company.
The primary objective of Joint Stock Companies is to significantly increase the amount of investment received by corporations. This concept can be better understood by comparing Joint Stock Companies with other corporate structures like Sole Proprietorships and Partnership Firms, which typically have lower capital investments due to the limited number of owners/investors.
Sole Proprietorships can only have one owner or proprietor responsible for investing all the capital, and Partnership Firms can have a maximum of 20 partners for capital investment. As a result, these businesses can only bring a limited amount of investment into the company.
In contrast, Joint Stock Companies, whether established as Private or Public Limited Companies in India, can have a larger number of stockholders. A Private Limited Company can have up to 200 stockholders, while there is no maximum limit on the number of stockholders a Public Limited Company can have. This means that Joint Stock Companies can attract significant investment from multiple shareholders, compared to the limited investment of Sole Proprietorships and Partnership Firms.

What are the types of Joint Stock Companies in India?

In India, Joint Stock Companies can be classified into different types based on their methods of establishment, registration, liability, and ownership. The table below provides a detailed overview of these types:
Type of Joint Stock Company Method of Establishment Registration Liability Ownership
Public Limited Company
Through public subscription
Publicly traded
Private Limited Company
Through private subscription
Restricted to members only
One Person Company
Sole proprietorship
Owned by a single person
Section 8 Company
For non-profit objectives
Restricted to non-profit activities
Producer Company
For agricultural production
Restricted to agricultural production
Each of these types of Joint Stock Companies has its unique features and requirements, which determine their suitability for different business objectives and structures. It is important to carefully evaluate and select the appropriate type of Joint Stock Company based on the specific needs and goals of the business.
S.No. Parameters of Categorization Types of Joint Stock Company in India
Basis of Establishment
  1. Chartered Company: Companies established under a royal charter, like the East India Company.
  2. Statutory Company: Companies established under a specific statute or law.
  3. Registered Company: Companies formed by registration by a specific Government authority.
Type of Company Registration
  1. Private Company: Joint Stock Companies registered as Private companies are restricted to sell their shares to the general public on public platforms like stock exchange. Their shares are sold to investors in private manner only.
  2. Public Company: Joint Stock Companies registered as Public companies are eligible to sell their shares publicly on stock exchange to the general public and investors alike.
  1. Limited by Shares: The liability of the shareholders are limited to the amount worth of which they have subscribed the shares of the company.
  2. Limited by Guarantee: The liabilities of the promoters or members are limited by the amount they guarantee to pay-off, if the company gets wound up unprecedentedly.
  3. Unlimited: The liabilities of the members or shareholders are unrestricted or unlimited, meaning in all circumstances and at all costs, the shareholders will have to pay-off the entire amount of liabilities accumulated by the company.
  1. Private-owned: Private entities, both individuals and non-individuals, hold majority stakes in such companies.
  2. Government-owned: Majority stakes are held by the Government, whether Central, State, or both Central & State.

What are the Features of a Joint Stock Company?

Below are the features of joint stock companies, which make them a popular choice among other types of corporate bodies, in addition to their ability to attract large investments. These features make joint stock companies a popular choice among investors and entrepreneurs, and have contributed to their widespread use in modern economies.
  • Limited Liability: Limited liability is a key feature of joint stock companies, and it means that the shareholders’ personal assets are protected from the company’s debts or liabilities. In the event of the company’s insolvency, the shareholders are only liable to the extent of the amount of their investment in the company. They cannot be forced to pay more than that, even if the company’s debts exceed its assets. This is an important protection for shareholders and encourages them to invest in the company without the fear of losing more than their investment. 
  • Flexible Transfer of shares:  One of the advantages of joint stock companies is the ease of transferring ownership through the buying and selling of stocks. In a public limited company, the stocks are listed on a stock exchange, which allows for easy buying and selling of shares by the public. In a private limited company, the shares can be transferred privately to new investors. This flexibility in the transfer of shares enables shareholders to sell their stake in the company to other investors without affecting the continuity of the company. It also allows for new investors to enter the company without the need for a complete restructuring or incorporation of a new entity.
  • Perpetual Succession: Joint stock companies have perpetual succession, which means that they continue to exist even if their shareholders or directors change or die. The company is a separate legal entity, created under law, and its existence is not dependent on the lives of its owners. The closure of a joint stock company is also governed by law and requires compliance with legal procedures. In addition, the transferability of shares in a joint stock company makes it easier to find new owners when old ones depart. This ensures the continuity of the company’s operations and prevents the need for a complete restructuring or incorporation of a new entity. This feature is particularly advantageous for businesses that require long-term planning and investment.
  • Separate legal entity: in India, it is mandatory for all joint stock companies to be incorporated under the Companies Act, 2013. Once a company is incorporated, it becomes a separate legal entity with its own legal identity, distinct from its shareholders. This means that the company can own property, enter into contracts, and file lawsuits in its own name, just like a natural person. Incorporation provides various benefits to joint stock companies, such as limited liability protection, perpetual succession, and ease of raising capital. It also imposes certain legal obligations on the company, such as maintaining proper books of accounts, holding annual general meetings, and complying with various other provisions of the Companies Act.
  • Easy Incorporation: In India, the process of incorporating joint stock companies has been made completely online through the Ministry of Corporate Affairs (MCA) portal, known as the “MCA21” portal. This makes the process of company registration quick, easy, and affordable to execute. The applicant can access the MCA21 portal and fill out the required application form online. All necessary documents, such as the Memorandum of Association, Articles of Association, and identity proof of the directors, can be uploaded digitally. The applicant’s signature can also be affixed using a Digital Signature Certificate, which is a secure electronic method of signing documents. The online process of incorporation has greatly simplified the procedure, eliminated the need for physical visits to government offices, and reduced the time and cost involved in registering a company

Conclusion of Joint Stock Company

Joint Stock Companies have several advantages that make it extremely preferable among entrepreneurs and business owners. Unlike other business structures like Sole Proprietorships and Partnerships, Joint stock companies mandatorily operate with their own identities, and can be continued perpetually, unless voluntarily or otherwise wound up under law. We have attempted to provide a detailed and comprehensive explanation of Joint Stock Company definition and overview in this blog, but if you still have any doubts or queries, you can contact us and we will resolve them in no time!

About Setindiabiz

Setindiabiz is an organized team of experienced CA, CS, & Lawyers, duly supported by a pool of trained accountants & paralegal staff that provides quality & affordable compliance services to startups & small businesses in India. The views, statements and recommendations expressed in this article or post are only for the sole objective of providing information, and it does not constitute professional advice or recommendation of the company. Neither the author nor the company or its affiliates accepts any liability for any loss or damage arising from any information in this article or any actions taken in reliance thereon.

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