Capital IQ Interview Questions - Kinds of Joint Stock Companies

Kinds of Joint Stock Companies

Companies can be classified on the basis of certain characteristics like (i) incorporation (ii) liability and (iii) membership.

Classification on the basis of Incorporation

1) Statutory companies. Statutory companies are formed by the special Act passed by the parliament or state assemblies examples: Reserve Bank of India, Life Insurance Corporation etc.
2) Registered Companies. These are the companies formed and registered under the Companies Act.

Classification on the basis of liability

1) Companies limited by shares. In case of such companies liability of each member is limited to the external of the race value of shares held by him.

2) Companies limited by Guarantee. In case of such companies liability is limited to the extent of the guarantee given to contribute to the assets of the company in the event of its wound op. If the guarantee is given to addition to the shares then the total liability shall he equal to the unpaid amount, on shares and the amount of guarantee given.

Capital IQ Interview Questions 

3) Unlimited Companies: In case of unlimited companies the liability of the members is unlimited and members are personally liable to the creditors of the company for making up the deficiency. Such companies are rarely formed these days.

Classification on the basis of membership

1) Private Companies: A private company means a company which by its articles (i) restricts the right to transfer its shares (ii) limits the number of its members to fifty excluding past or present employees of the company who are members of the company and (iii) Prohibits any invitation to the public to subscribe for any shares or debentures of the company.

2) Public Companies: Public companies are those companies which are not private companies.
Classes of Shares: Total capital of the company is divided into units of small denomination. Each unit into which capital of the company is divided is called a share. If the total capital of a company is Rs. 50,00,000. It can be divided 5,00,000 units of Rs. 10 each then unit of Rs. 10 is a share of Rs. 10 each.
According to Companies Act, 1956 a company can issue two classes of shares, namely Preference shares and Equity shares.

Preference Shares. According to companies Act, preference share is that part of the share capita) of the Company which enjoys preferential rights as to (a) payment of dividend at a fixed rate and (b) return of capital on the winding up of the company.

Capital IQ Interview Questions - Characteristics of a Company

According to Justice Marshall a company is ‘an artificial being, invisible. intangible ind existing only in the contemplation of Law.’’ According to Sec.3(1) of the Companies Act defines a company as ‘company formed and registered under this Act, or an existing company’. An existing company means a company formed and registered under any of the former companies Acts.

Characteristics of a Company 

1) It is a Voluntary association of person.

2) A company has a separate legal existence. It can hold, purchase and sell property, can enter into contracts with others in its name.

3) It has a perpetual or continuous existence. Its existence is not effected by the death, lunacy or insolvency of any member. Members may he changing from time to time, but the company goes on for ever.

4) The liability of the members is limited to the extent of the face value of shares held by them.

5) The shares in a joint stock company are freely transferable, except in case of private companies.

6) It has a common seal. Being an artificial person it can act only through natural persons, called Directors.
All documents prepared by •directors will be valid only when it contains the common seal.

7) There is a separation of ownership and management. A company is owned by shareholders and managed by a separate body called ‘Board of Directors’.

8) In a public limited company, the minimum number of members is seven and there is no maximum limit. In case of private limited companies the minimum number is two and the maximum number is fifty.

9) A company comes into existence only after its registration under the companies Act. A company from incorporation to liquidation is governed by various provisions of the companies Act.