Importance of joint stock company.Joint stock companies are important for several reasons.The rights, duties and liabilities of members are decided by the special Act.
Importance of Joint Stock Company.
- Long life
The life of a Joint stock company compared to the partnership is very stable If the business remains well managed it can live on indefinitely. The life of a company not affected by the death, disability, insolvency or disagreement of shareholder. The shareholders may come or go the life of the company like an artificial person is least affected by these changes There is thus a greater permanency of the joint stock companies.
- Stock exchange
The joint stock company facilitates speculation in shares at stock exchanges. The reckless speculations are harmful to the interest of the shareholders and for sound investment. .
- Large profit:
Due to availability of a large capital the company installs expensive and updated machinery. There is thus greater production of goods. The cost is reduced and the company can earn higher profits by producing better quality of goods.
- Legal Entity
The joint stock company is incorporated under the companies ordinance. In all legal matters, it is dealt with as an individual person. The company can enter into contracts borrow money, open banking account in its name. It can use or sue or be sued, hold deal and dispose of property in its own name. .
- Better Management
In a joint stock company the management activities are divided according to functions. The company, employs specialists in the department to do specific work of purchase, sale, manufacturing, finance etc. under the supervision.of directors of the company. The availability of highly skilled managerial talent thus gives greater, permanence and continuity to the company.
- Large capital:
The joint stock companies divided the state capital into shares of small part in order to attract capital from large number of Investors for starting big business and industrial enterprises.
- Easy to transfer:
One of the basic features of Joint Stock Company is that the shareholders can transfer the ownership of shares to the interested parties through the share brokers. The company simply records the change of ownership. This facility provides liquidity to the investors and stability to the company.
- Large production:
The company due to the increase in the size of business enjoys all the economies of large-scale production. Due to large production it can earn maximum profits.
- Share risk:
In a company form of organization, the risk is distributed among iargc number of shareholders. From the point of view of an Investor, it is a great advantage.
- Democratic Management:
The management of the company is carried on by the elected board of directors on behalf of and for the shareholders of the company ‘i bus the organization of the company is democratic.
- Legal control:
There is a full legal cover on the activities of a company from the birth to its liquidation. People have therefore great confidence in companies than they have in sole trading or partnership .
- Social benefits
Joint stock companies have made it possible for the persons of low Income groups to invests in productive. Activity under unified management. The number of the poor is thus moving up in to the levels of middle income groups
