1ST YEAR
PRINCIPLE OF COMMERCE 
CHAPTER # 4 JOINT STOCK COMPANY

(Short Question And Answer)

Q-1. Define joint stock company?

 Ans.JOINT STOCK COMPANY:

A company which has some features of a corporation and some features of a partnership. The company sells fully transferable stock, but all shareholders have unlimited liability.

OR

 A company may be defined as:

“Any business that issues shares the liability of which is limited.” 

Q-2. Define any four characteristic of joint stock company?

Ans.  Characteristic of joint stock company:

• Name Of The Company: 

The name of the company is followed by the word “ Limited “ which becomes its part. The word limited denotes that the liability of the shareholders of the company is limited to their individual investments.

• Limit to liability:

The liability of the members of a company is restricted to the extent of the unpaid value of the shares held by him. The personal asset of a shareholder cannot be used to pay the company's liabilities.

•  Large capital :

A Joint Stock Company can generate huge amount of money towards capital, because the number of persons contributing towards capital are more in number when compared to Sole Proprietorship or Partnership organization.

• Compulsory Registration: 

The corporation cannot come into existence unless it is registered under the companies Ordinance 1084 in Pakistan. After it is so registered, it is issued a certificate known as commencement certificate. This certificate is not required by the private company.

Q-3.Describe any four advantages of joint stock company?

Ans. Advantage of joint stock company:

•  Limited Liability :

Liability of members of Joint Stock Company is limited to the extent of shares held by them. Hence shareholders assets will not be on stake. This feature attracts large number of investors to invest in the company. 

• Perpetual Existence :

A company is an artificial legal person created by law which has its own independent legal status. Its existence is not affected by the death or insolvency of its members. 

• Large Scale Operation :

The capacity of the corporate organizations to raise the funds is comparatively high which provide capital for large scale operations. Hence opens the scope for expansion. 

• Transferability of Shares :

In a joint stock company it is easy to transfer shares to anyone. But the same is not permitted to private limited company. 

Q-4.Describe any four disadvantage of joint stock company?

Ans. Disadvantages of joint stock company:

• Formation is not easy : 

To act as a legal entity a company has to fulfill various legal and procedural formalities making it a complicated process.

•  Double Taxation : 

This is the biggest disadvantage which the company faces. Firstly, company needs to pay tax for the earned profits and again the shareholders are taxed for the earned income. 

•  Delay in Policy Decisions :

All the legal and procedural formalities which are required to  fulfill before making policies of the company delay the policy decisions. 

•  Lack of secrecy:

A company cannot maintain these secrecy because it submits the various reports to registrar. Sometime it affects the goodwill of the firm badly.