Merits and demerits of joint stock company. What are the Advantages and Disadvantages of Joint Stock Company? 2019-01-09

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Advantages and Disadvantages of Joint Stock Company

merits and demerits of joint stock company

Since its capital is divided into shares of small value even a person of small means can contribute to its capital by simply purchasing its shares. Smaller public companies may have to make do with less public means of trading their shares e. Decision making is delayed in a company. The directors who manage the affairs of the company may embezzle funds in Joint stock company. It has merits of huge capital because different member invests huge capital. It is difficult to establish and run. So trade secrets cannot be maintained.


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Advantages and Disadvantages of Company form of Organisation

merits and demerits of joint stock company

Most tourists are oblivious as to the extent of the impact they have on their host community. Some of these issues result from the environmental impacts that carry over into the community. I want a well kept house because the value is greater for me, but my neighbor benefits from my well kept house as well in his property values. There always exists difference of opinion and conflicts between the shareholders and board of directors. This often detracts companies from their main objectives for which they have been formed. Its capital is divided into shares of small value.

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Advantages and Disadvantages of Joint Stock Company

merits and demerits of joint stock company

Growth of monopoly :- Joint stock company wants a monopolistic control over the market. Normally, as the directors have a great stake in the business, in the interest of the company, and in their own interest, they have to be very efficient. Large capital and professional management facilitate large scale operations. Opting to buy on credit can create money problems should a family experience a change of personal circumstances; • Repossession rights. They are free to transfer their shares. Its shareholders cannot be held liable for any conduct of the company.

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DEMERITS OF JOINT STOCK COMPANY

merits and demerits of joint stock company

Expert Services: - Due to large financial resources available with joint stock company, it can appoint experts for managing each area or functions of the company business, by paying attractive salaries to them, these brings in a great degree of professionalism and thereby, efficiency in management of business. Large Capital: The outstanding advantage is that it allows vast mobilization of capital which otherwise is not possible to arrange. Once, a company is formed, it continues for an unlimited period until it is formally liquidated. Delay in Decision-Making: In this form of organisation, decisions are not made by single individual. Directors are responsible and accountable to the general body of shareholders. It also facilitates the growth of stock markets, financial institutions and professional managers.

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Joint Stock Company: Definition, Features, Advantages and Disadvantages

merits and demerits of joint stock company

It invests its capital in various sectors such as health, education, sports and so on. They construct luxurious bungalows and use them as personal property; they use expensive cars and travel many countries as the company representatives. The personal property of members cannot be utilized for meeting the obligations and debts of the company. It continues for a long period of time because it is unaffected by the death, insolvency of the shareholders directors. This results in economics in production, purchase, marketing and management.


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DEMERITS OF JOINT STOCK COMPANY

merits and demerits of joint stock company

It increases the rate of profit. So, many shareholders may transfer their share and the new person may come in their place but it does not affect the existence of the company. Large Capital : - A joint stock company can raise large amount of funds by way of shares, debentures, public deposits, loans and advance from bank and financial institution. The profit of the company belongs to shareholders and the Board of Directors is paid only on a commission. It cannot start its business unless certificate of incorporation has been obtained. Advantages of a Joint Stock Company: The advantages of forming a company rather than carrying on partnership business are as follows: 1.


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Advantages and Disadvantages of Company form of Organisation

merits and demerits of joint stock company

Hence, a company can fully secure the advantage of large scale operations, marketing and finance. The company form of organisation is democratic both from ownership and management side. Delay in Decision Making: -The process of decisions making is slow. Often directors try to mislead the members and manipulate voting powers to maintain their control. Joint stock companies are suitable for those businesses where large resources are required. A number of legal formalities have to be completed before its registration.

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DEMERITS OF JOINT STOCK COMPANY

merits and demerits of joint stock company

But they misuse the power, because of the inactiveness and passive nature of the share holders. Due to this, the cost of production will be less and the society is in a position to get its requirements at a lesser price. The liability of the shareholder is limited to the extent of the value of shares held or the amount guaranteed by them. So, access to large capital is the main advantage of joint stock company. A change in the object clause under condition laid down in the Companies Act is essential for making any alteration in the scope of the business.

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