A joint-stock company (JSC) is a type of corporation or partnership involving two or more individuals that own shares of stock in the company. Certificates of ownership ("shares") are issued by the company in return for each financial contribution, and the shareholders are free to transfer their ownership interest at any time by selling their shareholding to others.

In modern company law the existence of a joint-stock company is often synonymous with incorporation (i.e. possession of legal personality separate from shareholders) and limited liability (meaning that the shareholders are only liable for the company's debts to the value of the money they invested in the company). And as a consequence joint-stock companies are commonly known as corporations or limited companies.

Some jurisdictions still provide the possibility of registering joint-stock companies without limited liability. In the United Kingdom and other countries which have adopted their model of company law, these are known as unlimited companies. In the United States they are, somewhat confusingly known as joint-stock companies.

Advantages

Ownership of stock confers a large number of privileges. The company is managed on behalf of the shareholders by a Board of Directors, elected at an Annual General Meeting. The shareholders also vote to accept or reject an Annual Report and audited set of accounts. Individual shareholders can sometimes stand for directorships within the company, should a vacancy occur, but this is uncommon.

The shareholders are usually liable for any company debts that exceed the company's ability to pay. However, the limit of their liability only extends to the face value of their shareholding. This concept of limited liability largely accounts for the success of this form of business organization.

Ordinary shares entitle the owner to a share in the company's net profit. This is calculated in the following way: the net profit is divided by the total number of owned shares, producing a notional value per share, known as a dividend. The individual's share of the profit is thus the dividend multiplied by the number of shares that they own.

Early joint-stock companies

Finding the earliest joint-stock company is a matter of definition. Around 1250 in France at Toulouse, 96 shares of the Société des Moulins du Bazacle, or Bazacle Milling Company were traded at a value that depended on the profitability of the mills the society owned. The Swedish company Stora has documented a stock transfer for 1/8 of the company (or more specifically, the mountain in which the copper resource was available) as early as 1288.

In more recent history, the English were first with joint-stock companies. The earliest recognized company was the English (later British) East India Company, one of the most famous joint-stock companies. It was granted an English Royal Charter by Elizabeth I on December 31, 1600, with the intention of favouring trade privileges in India. The Royal Charter effectively gave the newly created Honourable East India Company (HEIC) a 15-year monopoly on all trade in the East Indies. The Company transformed from a commercial trading venture to one that virtually ruled India as it acquired auxiliary governmental and military functions, until its dissolution. 250px|right|thumb|The East India Company's flag initially had the flag of England, St. George's Cross, in the corner. Soon afterwards, in 1602, the Dutch East India Company issued shares, that were made tradeable on the Amsterdam Stock Exchange. An invention that enhanced the ability of joint-stock companies to attract capital from investors as they now easily could dispose their shares.

During the period of colonialism, Europeans, initially the British, trading with the Near East for goods, pepper and calico for example, enjoyed spreading the risk of trade over multiple sea voyages. The joint-stock company became a more viable financial structure than previous guilds or state-regulated companies. The first joint-stock companies to be implemented in the Americas were The Virginia Company and The Plymouth Company.

Transferable shares often earned positive returns on equity, which is evidenced by investment in companies like the British East India Company, which used the financing model to manage trade in India. Joint-stock companies paid out divisions, dividends, to their shareholders by dividing up the profits of the voyage in the proportion of shares held. Divisions were usually cash, but when working capital was low and it was detrimental to the survival of the company, divisions were either postponed or paid out in remaining cargo which could be sold by shareholders for profit.

However, in general, incorporation was only possible by Royal charter or private act, and was limited owing to the government's jealous protection of the privileges and advantages thereby granted.

As a result of the rapid expansion of capital intensive enterprises in the course of the industrial revolution in Britain, many businesses came to be operated as unincorporated associations or extended partnerships, with large numbers of members. Nevertheless, membership of such associations was usually short term, so their nature was constantly changing.

Consequently, registration and incorporation of companies without specific legislation was introduced by the Joint Stock Companies Act 1844. Initially companies incorporated under this Act did not have limited liability, although it became common for companies to include a limited liability clause in their internal rules. In the case of Hallett v Dowdall the English Court of the Exchequer held that such clauses bound people who have notice of them. Four years later the Joint Stock Companies Act 1856 provided for limited liability for all joint-stock companies provided, amongst other things, that they include the word "limited" in their company name. The landmark case of Salomon v A Salomon & Co Ltd established that a limited liability company had a distinct legal personality, separate from that of its individual shareholders.

Joint-stock companies globally

The principles of a joint-stock company are used to organize many contemporary corporate entities, such as the American business corporation, the British public limited company, the French société par actions, the Russian Акционерное общество (AO), the German Aktiengesellschaft (AG), the Swedish Aktiebolag (AB), the Italian Società per Azioni (S.p.A.), the Spanish Sociedad Anónima (S.A.), the Dutch Naamloze Vennootschap (NV), the Turkish Anonim Şirketi (A.Ş.), the Polish Spółka Akcyjna (SA), the Japanese kabushiki kaisha (株式会社),and the South Korean jusik hoesa (주식 회사).raj

See also

Aktieselskab

Limited liability company

Legal entities

Economy of Russia

Types of companies

References

Further reading

External links

The History of the Corporate Business Firm

Category:Legal entities Category:Types of business entity

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