Merits and Demerits of Joint Stock Company Class 11

In a company, there is often a risk of fraud and misuse of assets through dishonest management. Shell companies can be created to deprive investors of their hard-earned money. The shareholders of a joint-stock company are free to transfer their shares at will. The exchange provides a market ready for the purchase and sale of shares. The ability to bring in shares provides liquidity for an investor`s investment and stability for the company. This helps a company tap into more resources. Scams are a common feature of many businesses. Promoters and directors may engage in fraudulent practices. Company law has developed various methods to verify fraudulent practices, but they have not proven that they fully verify them. This form of organization lacks trade secrets, since it is mandatory for the company to publish accounts and other records In this form of organization, decisions are not made by a single person. All important decisions are made by the Board of Directors.

The decision-making process takes a lot of time. So many options can be costly due to delays in decision-making. Speed of decisions, which is a common feature of retail and partnership, is not found in a company. (c) A company encourages reckless speculation with its shares on the stock exchange. For this reason, the prices of its shares fluctuate artificially, which goes against the interests of the company and prevents new investments in the companies. Starting a business is a long and expensive process. Too many legal formalities must be followed and several legal documents must be prepared and submitted. A delay in starting up can take away the momentum of an early start of the business.

A public company is able to attract the best management talent. It works on a larger scale and can therefore pay higher salaries to its employees. It can extend many benefits (perks) such as business class travel, accommodation in 5-star hotels, taxi facilities, etc. to its directors and executives. 5. Conflict of interest – There is always the possibility of a conflict of interest of different groups of a company such as management and employees, board of directors and shareholders, etc. (2) Limitation of liability: The liability of the partners of a company is limited to the nominal value of the shares they acquire. Limited liability encourages many people to invest in shares of public companies. If the funds of a corporation are insufficient to satisfy the claims of creditors, no member may be required to pay more than the value of the shares it holds. (iv) Expansion Opportunities – A company has significant financial resources and more capital can be attracted both by the public and through loans from banks and financial institutions.

This gives more opportunities for expansion. Investors tend to invest in stocks because of limited liability, transferable ownership, and the possibility of high returns in a company. Since the company was created by law, it has had a separate legal existence from its members. Therefore, members cannot be held personally responsible for the actions of the company and the company cannot be held responsible for the actions of members. A company enjoys an uninterrupted business life. As a society, it continues to exist even if all its members die or leave. Because of its stability, a business is best suited for the types of businesses that require long periods of time to mature and grow. The wisest and most skilful directors can be selected, and the one who is deemed ineffective or indifferent could be dismissed. Since the company is independent of one man, the organized intelligence of the board of directors and other senior executives is available for solid and courageous policy. (6) Oligarchic management: The shareholders, who are the real owners, do not have much say in the management. A handful of shareholders who also manage the company`s affairs may have control over it. Theoretically, the company is democratic, but in practice it is mostly a case of oligarchy (rule of a few).

A few people have power and control and try to take advantage of the majority. It therefore does not favour the interests of shareholders in general. The form of ownership of the company allows the collection of huge financial resources. The capital of a company is divided into shares of small denominations, so that even people with small funds can buy them. In the management of corporations, directors, officers and other administrative staff may try to make personal gains at the expense of members. Misuse of corporate funds and assets for the self-interest can harm the interests of shareholders and cause panic in the investing public. Company law has developed methods to verify these fraudulent practices; but they haven`t proven enough to fully verify them. A company pays income tax as an independent legal entity at a flat rate set by the Finance Act from year to year. For higher incomes, the rate is lower than that of sole proprietors and partners. At every stage of running a business, there are legal rules and regulations. Several legal requirements must be met and reports must be submitted.

Such legal interference in day-to-day operations leads to a lack of secrecy. A lot of time and money is spent to meet legal requirements. Based on the advantages and disadvantages of a public limited company discussed above, it can be concluded that the advantages of a form of company outweigh its disadvantages. Shareholders` liability is limited. Members may not be required to pay more than the par value of the shares they hold. This encourages people who have little to save to invest money in the business, thus providing sufficient capital for initial expenses and business expansion. Most of the negative points listed above stem mainly from the weaknesses of the people in charge of the leadership task; they are by no means a natural part of the system itself. If the management and control of a company is in good hands, no form of organization can be parallel to it. The state that establishes the company meticulously monitors the activities of the company`s organization. A company and its management must operate well in compliance with the law and the provisions of the Companies Act are quite elaborate and complex. Thus, it is able to attract and recruit professionals. These professionals bring a lot of experience and expertise.

Their vision and direction, coupled with extensive experience, are likely to benefit the company tremendously. The business ownership form of business has become very popular in modern businesses because of its many advantages: 5. Efficiency of management – The advantage comes to a company because of its size and resources.. .

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