A joint stock company has more than one person invested by making shares. The owners retain collective ownership of that company, but its liability is nothing more than what it has invested here. The independent legal entity works for a company in perpetual succession, meaning it will not depend upon only one shareholder. There are various kinds of joint stock companies, and their types vary according to ownership, liability, and operations. Types of joint-stock companies include public limited companies (PLCs), private limited companies (Ltd), state-owned enterprises (SOEs), and listed/unlisted companies based on ownership and stock trading. Business companies can be either public limited companies or private limited companies. Some businesses even exist in the form of government-owned joint stock companies. It would be helpful for investors, business owners, and commerce students if they know the types of joint stock companies. Therefore, this article discusses the meaning, features, and types of joint stock companies with an example and advantages and disadvantages.
What is Joint Stock Company?
A joint stock company is one such type of business organization in the form of a division with shares. Shareholders have purchased the share and are therefore earning the profit that arises according to their shareholding. A joint stock company has a legal existence or identity; it may be regarded separately from its owners, so it can enter into a contract, have a property sue or may be sued.
The concept behind a joint stock company is pooling financial resources from several investors to undertake huge business activities. A company will assist in efficiently raising capital to extend business operations. Unlike sole proprietorships and partnerships, the joint stock company provides liability; shareholders’ assets are protected against any losses incurred on business.
The operation of joint stock companies falls under the government guidelines. They will follow business laws in accordance. They work under the board of directors, who decide all the business matters. Hence, this structure is stable, and the business will not be affected if the shareholders change.
Some known joint stock companies are Reliance Industries, Tata Group, Infosys, and State Bank of India. They operate in diversified banking, manufacturing, and information technology sectors.
Types of Joint Stock Company
A joint stock company is one in which ownership is constituted into shares. Shareholders invest their capital by purchasing shares and become part company owners. They possess an independent legal entity, limited liability, and perpetual succession. There are various ways of classifying a joint stock company based on the mode of ownership, purpose, and business structure. The nature of the operation defines each type of classification.
Private Joint Stock Company
One of the private forms of business does not float shares to the public. Its ownership form generally includes a few investors. These are family members, business partners, or private institutions.
Main Features
- A private company has a minimum of two and a maximum of 200 shareholders.
- The free transfer of shares without permission from existing shareholders is forbidden.
- Does not offer equity capital to the public-at-large through the stock exchange.
- Exempted by lesser legal controls compared to Public Companies.
- More swift and more flexible decisions
Private Joint Stock Company Types
- Family-Controlled Private Companies are companies in which single-family members hold majority shares. Example: Tata Sons.
- Subsidiary Private Companies: Privately owned subsidiary companies. Example: Infosys BPM (subsidiary of Infosys Limited).
- Limited Liability Private Companies: An organisation with liability limited up to capital invested. Example: TVS Motor Company Limited.
Private Joint Stock Companies in India
- Tata Sons
- Wipro Enterprises
- Haldiram Foods International.
Public Joint Stock Company
A public joint stock company is an undertaking that floats its shares to the public through the stock exchange. This type of firm raises capital by issuing shares, which can be freely transferable.
Major Features
- There must be at least seven shareholders.
- It has no upper limit to its investors.
- Annual reports and financial statements should be prepared and issued.
- The government regulations for such a corporation are very strict.
- It is used when a company requires very heavy capital.
Subcategories of Public Joint Stock Compan
- Public Traded Companies: Those whose shares are registered in the stock exchange. Reliance Industries Limited.
- Public Unlisted Companies: These have public shareholders but are not registered in the stock exchange. Tata Capital Limited.
- Multinational Public Companies: Large companies operating worldwide and issued with shares publicly. Example: HDFC Bank Limited.
Indian Public Joint Stock Companies
- Reliance Industries Limited
- State Bank of India (SBI)
- HDFC Bank
Government-Owned Joint Stock Company
A joint stock company owned and controlled by the central or state government. The central or state government owns more than 51% to become in majority control over the companies. Such firms are in areas that contribute to national development, such as energy, transport, and banking.
Main Characteristics
- The main purpose is to enhance public welfare rather than to make profits.
- It is operated and controlled by the officials appointed by the government.
- The government gives financial aid.
- Heavy emphasis on infrastructure and economic development.
Subcategories of Government Joint Stock Company
- Central Government-Owned Companies: This type of company is owned directly by the central government. IRFC is one of the examples.
- State Government-Owned Companies: Ownership lies with the state governments in this company. MSEB is an example.
- Public Sector Undertakings (PSUs): Those corporations owned by the government for carrying on trade.
Indian Government Joint Stock companies
- Bharat Petroleum Corporation Limited (BPCL)
- Indian Examples of Government-Owned Joint Stock Companies
- Oil and Natural Gas Corporation (ONGC)
- Bharat Heavy Electricals Limited (BHEL)
- Indian Oil Corporation (IOC)
Foreign Joint Stock Company
A foreign joint stock company is incorporated in one country but does business in another. Such firms follow the local business laws of the country wherein they conduct business, but their head office resides outside that nation.
Key Characteristics
- Formed as a subsidiary or branch of a different nation
- It has to follow local rules and tax laws.
- Help multinational companies to establish their presence throughout the world.
- The government must approve operations in certain industries
Foreign Joint Stock Company Sub-categories
- Wholly Owned Foreign Subsidiary: A foreign company entirely owns a subsidiary in a foreign country—for example, Google India Private Limited, a wholly owned subsidiary of Alphabet Inc.
- Joint Venture Foreign Company: A company created through local and foreign firms’ joint efforts. Example: Maruti Suzuki- a joint venture between Maruti Udyog Ltd. and Suzuki Motor Corporation
Examples of Foreign Joint Stock Companies in India
- Amazon India
- Google India Private Limited
- Microsoft India Pvt. Ltd.
Chartered Joint Stock Company
Chartered joint stock company arises because of the special charter given by the state. Some business companies are even granted exclusive powers and privileges regarding the conduct of certain business deals.
Key Attribute:
- Arises because of royal charter or government sanction.
- Trade, operation, or any other similar rights with special privileges.
- Used for conducting external trade and establishing colonies.
- History is very prominent; the present world is very few.
Type of Chartered Joint Stock Company
- East India Company of Britain
- Hudson’s Bay Company
Registered Joint Stock Company
A registered joint stock company is formed in a state per that state’s Companies Act. A registered joint stock company must have governmental regulation and lawful obligations.
Features:
- Acts like an independent entity, being a corporation to the proprietors.
- Registration is a pre-condition, along with governmental approval.
- Requirements relating to corporate governance Most companies in India fall under the modern registered joint stock company type.
Some examples of Registered joint stock company in India,
- Infosys Ltd
- Tata Steel Limited
Features of Joint Stock Company
A joint stock company has very specific features that characterise it differently from other kinds of business. These features include making a joint stock company the first option for large-scale firms requiring heavy investments.
Separate Legal Entity
A joint stock company is a separate legal entity independent of the shareholders. It has an identity and can possess property, sign contracts, and sue independently. Even if the shareholders change, the company operates without disruption.
Limited Liability
This also limits the liability of shareholders up to the investment in the shares. Therefore, in a loss-making position, he will not be held liable beyond the amount of shareholding. So, this is the security feature offered to the investor.
Transferability of Shares
In a public joint stock company, shareholders can easily transfer their shares to other shareholders. This way, it becomes easy for the investors to have access or be withdrawn from business. However, private companies would require permission from other shareholders when such a transfer is made.
Perpetual Succession
A joint stock company experiences continuity even during a change of ownership. The shareholders may be dying or liquidating their shares, and the business continues. That is why there is long-term stability in the industry.
Ownership and Management Separation
Shareholders own the firm but do not manage it. A board of directors, elected by shareholders, makes all the major business decisions. This ensures professional management and efficient decision-making.
Government Regulations
According to the Companies Act, the rules of the game are provided with legal rules by the joint stock company. Government registration is made, and financial statements are submitted every year. Therefore, transparency and responsibility exist in business.
Ability to Raise Huge Amounts of Capital
Joint stock companies can raise huge amounts of money through issuance to investors by shares. This makes them suitable for business establishments that require large investments in infrastructural development, production, and expansion.
All these features make joint stock companies highly effective for business growth and long-term success. They can work as separate legal entities through a structured management process that provides stability and operational efficiency.
| Type | Ownership | Share Transferability | Examples |
| Private Joint Stock Company | Limited to private investors | Restricted | Tata Sons, Infosys Ltd. |
| Public Joint Stock Company | Open to the public | Freely transferable | Reliance Industries, SBI |
| Government-Owned Joint Stock Company | Owned by the government | Not publicly traded | Indian Oil Corporation, ONGC |
| Foreign Joint Stock Company | Owned by foreign investors | Follows local laws | Amazon, Google |
| Chartered Joint Stock Company | Created by government charter | Limited operations | British East India Company |
| Registered Joint Stock Company | Registered under business laws | Fully legal entity | Most modern companies |
Classification of Joint Stock Company FAQs
1. What are the forms of joint stock company?
There are six types: Private, Public, Government-Owned, Foreign, Chartered and Registered Joint Stock Companies.
2. What is one form of a joint stock company?
In a private joint stock company, shares are not issued publicly, and ownership is not allowed for various persons.
3. What characteristic features of the joint stock company?
Its prominent features include a legal identity, limited liability, perpetual succession, and share transferability.
4. Give some examples of joint stock companies in India.
Examples include Reliance Industries, Tata Sons, Infosys, SBI, and Indian Oil Corporation.
5. Discuss its advantages and disadvantages.
Advantages: large capital, limited liability, and continuity. Disadvantages: complex regulations and reduced privacy.
