Board of Directors: It is not possible for each shareholder to participate in the management affairs of the business. In respect to developments in the Age of Discovery or, the 15th to17th centuries in the West , the primary advantage of investing ina joint-stock company was the following: one was able to invest asmall amount with the promise of a considerable return. Separation of Ownership and Management : A company is owned by shareholders but managed by directors. The shares will have to be sold during the prescribed time. Further, as companies cannot be managed by all the shareholders who are large in number, it has to employ professional managerial personnel and this has helped the development of management as a profession.
Often directors try to mislead the members and manipulate voting power to maintain and perpetuate their control. It enjoys goodwill and holds better image among the public if the company declares dividend regularly. Different types of securities may be issued to attract various types of investors. An analysis of the above definition reveals many distinctive features of joint-stock company, which distinguish it from other forms of business organization. An estimated 90% of indigenous peoples in the Americas died due to exposure to disease brought over by Europeans McLaren, 1998.
The shareholders play an insignificant role in the working of the company. Since, there is no maximum limit of the number of shareholders ii case of public company, fresh shares can be issued to meet the financial requirement. This type of tourist behavior demonstrates a lack of respect for the local culture. Lack of Secrecy - In case of a public limited company, there is lack of secrecy. In spite of the disadvantages discussed above, it may be concluded that the advantages considerably outweigh the disadvantages of company form of organization and hence it has become universally popular and well established in the business world. The capital of the company is divided into numerous parts of small value called shares and this attracts even the person with limited resources. These reports present data on sales volume, profit, total assets, and other financial matters.
It also helps a company in tapping more resources. The shareholders own the company. The managing body may take undue advantages for their personal benefits. Development of land also causes land prices to rise so that local residents cannot afford to buy. The excessive regulations are made with a view to protecting the interest of the shareholders and the public but in practice, they put obstacles in their normal and effective working.
Public Confidence: A company enjoys a greater public confidence and reputation in the market due to legal control, publicity of accounts and perpetual existence. So trade secrets cannot be maintained. A member can sell his shares in the open market at any time or transfer it at any one. Complicated Formation: -The promotion and formation of a joint stock company is complicated. This reckless speculation harms the interest of shareholders.
It can benefit from large scale production due to various economies of scale. All the acts of the company are authorized through its common seal. This enables a company to enjoy the trust and confidence of the public. The advantages or Merits of joint stock company's points explained briefly as under: 1. This also leads to dilution of business secrecy. The shareholders have the right to remove then directors if the shareholders find that the directors are insufficient or corrupt. This divorce between ownership and management provides an opportunity to employ managerial personnel of exceptional abilities in business.
The Disadvantages of Hire Purchase Agreements to the consumers â¢ Personal debt. The prices of these shares keep on fluctuating depending upon the financial health, dividend, future prospects and reputation of the company. The limited liability encourages many people to invest in shares of joint stock companies. This is mandatory as per law. All these facilitate the concentration of economic power in the hands of a few persons. The company bears all expenses for the top position holders.
The expert, competent, and most modern services rendered by managers bring about efficiency and effectiveness in business operations. The companies are well suited for business, which require a long period to establish and consolidate. Benefits of limited liability and transferability of shares attract investors. Delay in formation may deprive the business the momentum of an early start. Encourages Speculation: This form of organization encourages speculation on the stock exchange. To increase the liquidity and marketability, the directors themselves misuse the inner information and make a speculation for personal benefits. There is lack of flexibility of operations in a company.
Similarly, they have to discuss business strategies in the annual meetings and furnish information to its inventors. Advantages of Joint Stock Company: 1 Huge resources: A company can raise large amount of resources from the genera public by issuing shares. The stability of business is of great importance to the society as well as to the nation. Thus, the risk is reduced for each shareholder. Lack of Privacy: A company has to observe many legal formalities.