Joint Stock Company

Concept of Joint Stock Company

A stock company is an association of person for profit having legal existence perpetual succession and common seal. Capital of the company is generated by issuing transferable shares. It is managed by the representatives of shareholders. In Nepal, a joint-stock company must be registered in according to the provision of Nepal Company Act 206.

Characteristics of Joint Stock Company

The common features of Joint Stock Company are as follows

1. Legal personality
2. Limited liability
3. Management by representatives
4. Common seal
5. Publication of financial statements
6. Perpetual succession
7. Complex for formation
8. Transferability of shares
9. Relation with shareholders
10. Collection of capital

Merits of Joint Stock Company

The common advantages of Joint Stock Company are as follows

1. Limited liability
2. perpetual existence
3. effective management
4. stimulus to saving
5. social value
6. adequate capital
7. transferability of shares
8. easy to obtain loan
9. public confidence
10. greatest potentiality

Demerits of Joint Stock Company

The following are the basic disadvantages of joint stock company

1. Difficult to establish
2. lack of prompt decision
3. separation of ownership and management
4. lack of secrecy
5. exploitation of general shareholders
6. difficult for management
7. reckless speculation
8. excessive legal provision
9. groupism for authority
10. social abuse

Types of Joint Stock Company

There may be different types of company on the basis of different basis of study they are:

1. On the basis of incorporation:
   • chartered,
   • statutory, and
   • registered company
2. On the basis of liability:
   • limited,
   • unlimited and
   • limited by guarantee company
3. On the basis of the number of members:
   • private limited and
   • public limited comp
4. On the basis of ownership:
   • government and
   • non-government company

Main Documents of Joint Stock Company

Memorandum of association is the charter or constitution of the company. It contains all necessary contents for company formation and operation. All the activities of the company would be run on the basis of information contained in the memorandum of association. It is submitted to office of company registrar while applying for company incorporation duly signed by the required number of members. The common contents of it are as follows:

1. name, address, objectives, and nature of business of the company
2. amount of authorized and issued capital, numbers of shares company, and par value of each unit of share.
3. Value of assets purchased and liability for expenses incurred etc.

Articles of association are documents of internal management of the company. It contains rules, regulations, and bye-law of the company which are necessary to maintain hierarchy of management and to maintain day to day operation of the company. It defines relationship between company and its members including employees to achieve defined objectives. The common contents of articles of association are:

1. number of directors and their duties, responsibilities and remunerations
2. procedures of convening company meetings
3. right and duties of managing director
4. matters mentioned in the memorandum of and remuneration association etc,

Prospectus contains past history, present position, and also reflect future prospect. It is known as profile of public limited company and draws the attention of public towards the company. It is published at the time of issue of shares and debentures

Incorporation of Joint Stock Company in Nepal

A company must be registered in the Company Registrar Office under Department of Industry and Commerce of Government of Nepal. A private company can commence its business after getting certificate of incorporation. Whereas a public limited company can start its business only after getting certificate of commencement. Generally, the following are the procedures of company incorporation:

1. Submission of application
2. Submission of registration fees
3. Registration of company
4. Certificate of commencement

Company Meeting

The company meeting is broadly classified into two shareholders’ meeting and board of directors meeting. Shareholders’ meeting consists of

1. preliminary general meeting,
2. special general meeting, and
3. annual general meeting.

Section 67 of the Company Act 2063 mentioned about the provision of board of directors.

Agenda and Resolution

Agenda: Agenda is the subject matter or program of the company meeting. It is prepared for the systematic conduction of meeting of shareholders. According to company act, it is essential to deliver agenda of discussion to shareholders alone with notice for meeting.

Resolution: A proposal when accepted for discussion and decision with the majority of the consent of members is resolution. It is the beginning step of decision in meeting. On the basis of situation, resolution may be general or special.

Winding-up of Joint Stock Company

In general, the existence of Joint Stock Company is perpetual. However, in Nepal a joint-stock company may be dissolved in any of the following reasons:

1. Voluntary liquidation
2. Cancellation of registration by the company Registrar Office