Joint Stock Company

Author:Jeffrey Lehman, Shirelle Phelps

Page 33

An association engaged in a business for profit with ownership interests represented by shares of stock.

A joint stock company is financed with capital invested by the members or stockholders who receive transferable shares, or stock. It is under the control of certain selected managers called directors.

A joint stock company is a form of partnership, possessing the element of personal liability where each member remains financially responsible for the acts of the company. It is not a legal entity separate from its stockholders.

A joint stock company differs from a partnership in that the latter is composed of a few persons brought together by shared confidence. Partners are not free to retire from the firm or to substitute other persons in their place without prior assent of all the partners. A partner's death causes the dissolution of the firm.

In contrast, a joint stock company consists of a large number of stockholders who are unacquainted with each other. A change in membership or a transfer of stock has no effect on the continued existence of the company and the death of a stockholder does not result in its dissolution. Unlike partners in a partnership, a stockholder in a joint stock company has no agency relationship to the company or any of its members.

A joint stock company is similar to a corporation in that both are characterized by perpetual succession where a member is allowed to freely transfer stock and introduce a stranger in

Page 34

Anxious investors wait for news about the South Sea Company, a joint stock company formed in London in 1711. Joint stock companies are a form of partnership in which each member, or stockholder, is financially responsible for the acts of the company.


the membership. The transfer has...

To continue reading