2. What is a J.S.C. ?
A Joint-Stock Company is a business entity which is owned
by shareholders. Each shareholder owns the portion of the
company in proportion to his or her ownership of the company's
shares (certificates of ownership).
This allows for the unequal ownership of a business with some
shareholders owning a larger proportion of a company than
others. Shareholders are able to transfer their shares to others
without any effects to the continued existence of the company.
Reliance Industries Limited (RIL) is an
Indian conglomerate holding
company headquartered in
Mumbai, Maharashtra, India. It is one
of the largest Joint-Stock Company
in India.
3. History of J.S.C.’s …….
The earliest joint-stock company recognized in England was
the Company of Merchant Adventurers to New Lands,
chartered in 1553 with 250 shareholders. Russia's Muscovy
Company, which had a monopoly on trade between
Moscow and London, was chartered soon after in 1555.
The much more famous, wealthy and powerful English (later
British) East India Company was granted an English Royal
Charter by Elizabeth I on December 31, 1600, with the
intention of favouring trade privileges in India.
in 1602, the Dutch East India Company issued shares, that
were made tradable on the Amsterdam Stock Exchange.
This invention enhanced the ability of joint-stock companies
to attract capital from investors as they now easily could
dispose their shares.
The transfer letter dated
1288 through which
bishop Peter of Västerås
re-acquires 1/8 of
Tiskasjöberg, i.e.
Kopparberget. The
original can be found at
Riksarkivet (National
Archive) in Stockholm.
4. Key Features of a J.S.C.
A voluntary association of persons who generally
contribute capital to carry on a particular type of
business.
Persons who contribute capital become members of the
company
Company has a legal existence separate from its
members, which means even if its members die, the
company remains in existence
The total capital of a JSC is called share capital and it is
divided into a number of units called shares.
Members are also called shareholders.
An illustration showing the key
features of a Joint-Stock
Company
5. Formation Of a J.S.C.
Formation of a
Joint-Stock
Company
Promotion Stage
Incorporation
Stage
Certificate of
Commencement
Capital
Subscription
Stage
These are the 4 most
prominent stages of
establishment.
6. Formation Of
a J.S.C.
These are the 4 most
prominent stages of
establishment.
Formation of a Joint-Stock
Company
Promotion Stage
Incorporation
Stage
Certificate of
Commencement
Capital Subscription
Stage
7. Promotion Stage
Promotion is the discovery of ideas and organization of funds, property and skill to run the business
for the purpose of earning income. Steps involved
Idea about Business
Investigation- make out plans as regards to the availability of resources like capital, means of transportation,
labour, electricity, gas ,water, etc.
Assembling various Factors- like arrangement of licences, copyrights, employment of necessary employees,
etc.
Financial Sources
Preparation of Essential Documents like Memorandum, Articles and Prospectus of company.
The promoters carryout these various activities to give the company its physical shape in the form of
Giving a name to the company
Sanctioning of Capital Issue
8. Incorporation Stage
The second stage for establishment
Filing of Document: Following documents are to be submitted by the promoters in the Registrar‟s
office.
Memorandum of Association – indicates name, address, authorized capital etc.
Articles of Association – contains laws and rules for internal control and management of a company.
List of Directors - list of the names, occupations, addresses, along with the declaration of director
Written Consent of Directors
Declaration of Qualifying Shares- A declaration certificate showing that the directors have take n up
qualifying shares and have paid up the money or pay it in near future to the registrar.
Prospectus
Statutory Declaration – stating that all legal formalities have been completed.
9. Incorporation Stage (Contd.)
Payment of Registration Fee - the registration fee is paid to the Registrar for
Application and documents filing fee
Registration fee
Stamp fee on Memorandum and Articles
Certificate of Incorporation - If the registrar finds all the documents right, he issues the certificate of
incorporation to promoters.
10. Capital Subscription Stage
After getting certificate of incorporation, the next stage is to make arrangement for raising capital
by issuing
Shares
Debentures
Savings CERTIFICATE OF COMMENCEMENT – requires the fulfilment of following conditions
Issue of Prospectus: Acompany has to issue prospectus for selling shares and debentures to public.
11. Certificate of Establishment
The Certificate of Establishment is a parchment that sates that the
following company is now established as per the given date.
Within the period specified in sub- section (5), the occupier of every
establishment shall send to the Chief Inspector a statement in a
prescribed form, together with such fees as may be prescribed,
containing the detailed information of the company.
The following is a e.g.. Of
a Certificate of
Establishment form
Switzerland
12. Shares
Companies act 1956
“a share in the share capital of a company and includes stock except when a distinction
between stock and shares is expressed and implied”.
Companies act 2013
“a share in the share capital of a company and Includes stock”
13. Equity
Shares
Equity is the residual claimant or interest of
the most junior class of investors in assets,
after all liabilities are paid. If liability exceeds
assets, negative equity exists. In an
accounting context, shareholders' equity (or
stockholders' equity, shareholders' funds,
shareholders' capital or similar terms)
represents the remaining interest in the
assets of a company, spread among
individual shareholders of common or
preferred stock. A negative shareholders'
equity is often referred to as a positive
shareholders' deficit.
14. Preference
Shares
is a type of stock which may have any
combination of features not possessed
by common stock including properties of
both an equity and a debt instrument,
and is generally considered a hybrid
instrument.
15. Features of Equity Shares
Maturity of shares: Equity shares have permanent nature of capital.
Right to income: Dividend paid to shareholders in the form of immediate cash flows. Retained
earnings gives benefit in the form of capital gains.
Claim on Assets: In case of liquidation, equity share holders will get payment after debt holders,
preference shareholders etc.
Right to control: Equity shares gives right to elect board directors of the company.
Voting Rights: Shareholders have right to vote in person or by proxy.
Limited Liability: Equity share holder's liability is limited to the investment made on equity shares.
16. Features of Preference Shares
Fixed Dividends: Like debt carries a fixed interest rate, preference shares have fixed dividends
attached to them.
Preference over Equity: As the word preference suggests, these type of shares get preference
over equity shares in sharing the income as well as claims on assets.
No Voting Rights: Preference share capital is not allotted any voting rights normally. They are
similar to debenture holders and do not have any say in the management of the company.
No Share in Earnings: Preference shareholders can only claim two things. One, agreed
percentage of dividend and second the amount of capital invested.
Fixed Maturity: Just like debt, preference shares also have fixed maturity date. On the date of
maturity, the preference capital will have to be repaid to the preference shareholders.
17. Shares who do not enjoy any
preference as regards payment of
dividend and repayment of capital.
This share holder have right to vote
And Equity share holders are owners
of the company.
Risk about losing money is more..
Shares which enjoy preference as
regards payment of dividend and
repayment of capital.
This share holder have no right to vote
And Equity share holders are Creditors
of the company.
Risk about losing money is less than
equity share holders.
Equity Shares PreferenceShares
Difference Between
Equity and Preference
Shares
18. Stock Exchange
A Stock exchange is a form of exchange which provides services for stock brokers and traders to trade
stocks, bonds, and other securities.
Stock exchanges also provide facilities for issue and redemption of securities and other financial
instruments, and capital events including the payment of income and dividends. Securities traded on a
stock exchange include stock issued by companies, unit trusts, derivatives, pooled investment products
and bonds. Stock exchanges often function as "continuous auction" markets, with buyers and sellers
consummating transactions at a central location, such as the floor of the exchange.
