Joint Stock Company Laws
Joint stock companies are entities formed under a type of charter. Their purpose is to participate in the stock markets with the aim of generating profits for its members. Members receive some ownership interest in these companies based on the level of their financial investment.
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What Is a Joint Stock Company?
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A joint stock company resembles an investment pool, channeling its assets into a common stock company. The joint stock company issues certificates of ownership to its contributing members. The certificates of ownership are like stock certificates issued to investors when they buy stocks.
Characteristics of Joint Stock Companies
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Joint stock companies all have characteristics of corporations and the same time they assume features of a partnership company. The shareholders have personal liability, but each member can act alone in her own interest. A shareholder may transfer her shares and ownership interests in the company to anyone she chooses. There are two kinds of joint stock companies, one is the private joint stock company and the other is known as an open market joint stock company. The private joint stock companies are like private companies whose shares are not traded in the stock market exchanges and are privately held. The public joint stock companies are companies whose shares are publicly traded in open stock exchanges.
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Regulation of Joint Stock Companies
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Joint stock company laws in the United States emanated from the Joint Stock Company Acts of 1866, enacted in England. The first joint stock company in the United States was organized in Virginia, known as the Virginia company. Today in the United States many of the joint stock companies are organized to take the form of a corporate entity, nevertheless these companies have characteristics of limited liability partnerships. Under U.S. law, all joint stock companies are required to register their issued shares with the Federal Securities Market Commission. The process of registration of the issued shares requires 30 days from the time the federal agency receives the documents. Joint stock companies differ from mutual funds since members of joint stock companies also assume limited liability for the debt of the company. They also differ from hedge funds on this issue also. Also, hedge funds are always organized as limited liability companies only, and not as corporations
Liabilities of Joint Stock Companies
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All the members of the joint stock company have a share of the company's liabilities, as well. While they all share in the company's profits, at the same time they also assume liabilities and debt obligations of the joint stock company. A common and simple formula is used by members to determine the individual liability level of its members. For instance, if a member of a joint stock company owns 5 percent of the shares of the company, such member also would assume 5 percent of the company's liabilities.
Advantages of Joint Stock Companies
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There are some advantages offered to members of the joint stock companies. The shareholders may at their discretion stand for the position of director of the joint stock company should a vacancy occur. All the members of the joint stock company also share the net profits of the company. Each member's level of profit is limited to the percentage of the individual's assets devoted to the company.
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