Question:
Explain meaning, features, merits and demerits of joint stock company.
Answer:
Joint stock company is a voluntary association of persons having a separate legal existence, perpetual succession and common seal. Its capital is divided into transferable shares.
Features:
- Separate legal existence: It is created by law and it is a distinct legal entity independent of its members. It can own property, enter into contracts, can file suits in its own name.
- Perpetual existence: Death, insolvency and insanity or change of members has no effect on the life of a company. It can come to an end only through the prescribed legal procedure.
- Limited Liability: The liability of every member is limited to the nominal value of the shares bought by him or to the amount, guaranteed by him.
- Transferability of shares: Shares of public company are easily transferable. But there are certain restrictions on transfer of share of private company.
- Common seal: It is the official signature of the company and it is affixed on all important documents of company.
- Separation of ownership and control: Management of company is in the hands of elected representatives of shareholders known individually as director and collectively as board of directors.
Merits:
- Limited liability: Limited liability of shareholders reduces the degree of risk borne by him.
- Transfer of Interest: Easy transferability of shares increases the attractiveness of shares for investment.
- Perpetual existence: Existence of a company is not affected by the death, insanity, insolvency of member or change of membership. Company can be liquidated only as per the provisions of companies Act.
- Scope for expansion: A company can collect huge amount of capital from unlimited number of members who are ready to invest because of limited liability, easy transferability and chances of high return.
- Professional management: A company can afford to employ highly qualified experts in different areas of business management.
Limitations:
- Legal formalities: The procedure of formation of company is very long, time consuming, expensive and requires lot of legal formalities to be fulfilled.
- Lack of secrecy: It is very difficult to maintain secrecy in case of public company, as company is required to publish and file its annual accounts and reports.
- Lack of motivation: Divorce between ownership and control and absence of a direct link between efforts and reward lead to lack of personal interest and incentive.
- Delay in decision making: Red tapism and bureaucracy do not permit quick decisions and prompt actions. There is little scope for personal initiative.
- Oligarchic management: Company is said to be democratically managed but actually managed by a few people i.e., Board of Directors. Sometimes they take decisions keeping in mind their personal interests and benefit, ignoring the interests of Shareholders and company.
Forms of Business Organisation
Q 1.
X is interested in the floatation of a company. Briefly discuss the steps he should take.
Q 2.
What is the role of Karta in Joint Hindu Family business?
Q 3.
Compare the status of a minor in a Joint Hindu Family Business with that in a partnership firm.
Q 4.
What is meant by ˜partner by estoppel'? Explain.
Q 5.
Define promoter. What are the functions of a promoter?
Q 6.
Explain meaning, features, merits and demerits of Sole Proprietorship.
Q 7.
Explain procedure of registering a partnership firm.
Q 8.
Explain different types of partners.
Q 9.
Explain procedure of registering a partnership firm.
Q 10.
Explain meaning, features, merits and demerits of partnership firm.
Q 11.
What are the steps required for raising funds from public?
Q 12.
What do you mean by incorporation of a company? What are the steps involved in corporation of a company?
Q 13.
Explain meaning, features, merits and demerits of joint stock company.
Q 14.
Discuss the characteristics, merits and limitations of the cooperative form of organization. Also describe briefly different types of cooperative societies.
Q 15.
State the important privileges available to a private company.
Q 16.
Define Articles of Association. What are its contents?
Q 17.
Is registration of partnership firm compulsory? What are the consequences of non-registration?
Q 18.
For which of the following types of business do you think a partnership firm of organization would be more suitable, and why?
(i) Grocery store (ii) Medical store
(iii) Legal consultancy (iv) Craft centre
(v) Internet cafe (vi) Chartered accountancy firm
Q 19.
Explain the contents of Memorandum of Association.
Q 20.
Distinguish between a Joint Hindu family business and partnership.
Q 21.
What do you understand by a.sole proprietorship firm? Explain its merits and limitations.
Q 22.
Despite limitations of size and resources, many people continue to prefer sole proprietorship over other forms of organization. Why?
Q 23.
Explain the concept of mutual agency in partnership with suitable example.
Q 24.
Distinguish between a Joint Hindu family business and partnership.
Q 25.
For which of the following types of business do you think a sole proprietorship firm of organization would be more suitable, and why?
(i) Grocery store (ii) Medical store
(iii) Legal consultancy (iv) Craft centre
(v) Internet cafe (vi) Chartered accountancy firm
Q 26.
Explain the meaning, features, merits and demerits of cooperative society.
Q 27.
Explain different types of partners.
Q 28.
Explain the following terms in brief:
(i) Perpetual succession (ii) Common seal
(iii) Karta (iv) Artificial person
Q 29.
If registration is optional, why do partnership firms willingly go through this legal formality and get themselves registered? Explain.
Q 30.
How does a cooperative society exemplify democracy and secularism? Explain.
Q 31.
Why is partnership considered by some to be a relatively unpopular form of business ownership? Explain the merits and limitations of partnership.
Q 32.
Differentiate between:
- Memorandum of Association and Articles of Association.
- Private and Public Company