Joint-stock company

Ajoint-stock company(JSC) is abusiness entityin which shares of the company'sstockcan be bought and sold byshareholders. Each shareholder owns company stock in proportion, evidenced by theirshares(certificates of ownership).Shareholders are able to transfer their shares to others without any effects to thecontinued existenceof the company.
In modern-daycorporate law, the existence of a joint-stock company is often synonymous withincorporation(possession oflegal personalityseparate from shareholders) andlimited liability(shareholders are liable for the company's debts only to the value of the money they have invested in the company). Therefore, joint-stock companies are commonly known ascorporationsorlimited companies.
Somejurisdictionsstill provide the possibility of registering joint-stock companies without limited liability. In theUnited Kingdomand in other countries that have adopted its model of company law, they are known asunlimited companies.
A joint-stock company is an artificial person; it has legal existence separate from persons composing it. It can sue and can be sued in its own name. It is created by law, established for commercial purposes, and comprises a large number of members. The shares of each member can be purchased, sold, and transferred without the consent of other members. Its capital is divided into transferable shares, suitable for large undertakings. Joint stock companies have a perpetual succession and a common seal.
Ownership refers to a large number of privileges. The company is managed on behalf of the shareholders by a board of directors, elected at an annual general meeting.
The shareholders also vote to accept or reject an annual report and audited set of accounts. Individual shareholders can sometimes stand for directorships within the company if a vacancy occurs, but that is uncommon.
A joint-stock company also differs from other company forms, as it lacks internal ownership (hence its shareholders). This means that although the shareholder(s) in the joint-stock company may also work for the company as employees or by contract, when they act as shareholders they are always exterior to the company, which may help keep ownership business-oriented and impersonal.
Provided sales and assets exist within the company, a joint-stock company is effectively a forum for three- party trading: Owners, i.e. shareholders, are seeking financial funds (profits) and offer economic assets, in the form of capital. Employees, contractors and other contracted parties seek compensation and offer labor for this. Utilisers, ie customers, clients and other stakeholders, seek products and services, and offer financial funds for this.
The shareholders are usually not liable for any of the company debts that extend beyond the company's ability to pay up to the amount of them.
The earliest records of joint-stock companies appear in China during theTangandSong dynasties. The Tang dynasty saw the development of theheben, the earliest form of joint stock company with an active partner and one or two passive investors. By the Song dynasty this had expanded into thedouniu, a large pool of shareholders with management in the hands ofjingshang, merchants who operated their businesses using investors' funds, with investor compensation based on profit-sharing, reducing the risk of individual merchants and burdens of interest payment.
Finding the earliest joint-stock company is a matter of definition. An early form of joint-stock company was the medievalcommenda, although it was usually employed for a single commercial expedition.Around 1350 inFranceatToulouse, 96 shares of theSociété des Moulins du Bazacle, orBazacle Milling Companywere traded at a value that depended on the profitability of the mills the society owned, making it probably the first company of its kind in history.TheSwedishcompanyStorahas documented a stock transfer for an eighth of the company (or more specifically, the mountain in which thecopperresource was available) as early as 1288.
In more recent history, the earliest joint-stock company recognized inEnglandwas theCompany of Merchant Adventurers to New Lands, founded in 1551 with 240 shareholders. It became theMuscovy Company, which had a monopoly on trade betweenRussiaandEngland, whenroyal charterwas granted in 1555. The most notable joint-stock company from theBritish Isleswas theEast India Company, which was granted aroyal charterbyQueen Elizabeth Ion December 31, 1600 with the intention of establishing trade on theIndian subcontinent. The charter effectively granted the newly formedHonourable East India Companya fifteen-yearmonopolyon all English trade in theEast Indies.
Soon afterwards, in 1602, theDutch East India Companyissued shares that were made tradable on theAmsterdam Stock Exchange. The development enhanced the ability of joint-stock companies to attract capital from investors, as they could now easily dispose of their shares. In 1612, it became the first 'corporation' in intercontinental trade with 'locked in' capital and limited liability.The joint-stock company became a more viable financial structure than previousguildsor state-regulated companies. The first joint-stock companies to be implemented in theAmericaswere theLondon Companyand thePlymouth Company.
Transferable shares aim to achieve positive returns onequity, which is evidenced by investment in companies like the East India Company, which used the financing model to manage their trade on theIndian subcontinent. Joint-stock companies paid out divisions (dividends) to their shareholders by dividing up the profits of the voyage in the proportion of shares held. Divisions were usually cash, but whenworking capitalwas low and detrimental to the survival of the company, divisions were either postponed or paid out in remaining cargo, which could be sold by shareholders for profit.
However, in general,incorporationwas possible byroyal charterorprivate act, and it was limited because of the government's jealous protection of the privileges and advantages thereby granted.
As a result of the rapid expansion of capital-intensive enterprises in the course of theIndustrial Revolutionin Europe and the United States, many businesses came to be operated asunincorporated associationsor extendedpartnerships, with large numbers of members. Nevertheless, membership of such associations was usually for a short term so their nature was constantly changing.
Consequently, registration and incorporation of companies, without specific legislation, was introduced by theJoint Stock Companies Act 1844. Initially, companies incorporated under this Act did not have limited liability, but it became common for companies to include a limited liability clause in their internal rules. In the case ofHallett v Dowdall, theCourt of the Exchequerheld that such clauses bound people who have notice of them. Four years later, theJoint Stock Companies Act 1856provided for limited liability for all joint-stock companies provided, among other things, that they included the word "limited" in their company name. The landmark case ofSalomon v A Salomon & Co Ltdestablished that a company with legal liability, not being a partnership, had a distinctlegal personalitythat was separate from that of its individual shareholders.
The existence of a corporation requires a special legal framework and body of law that specifically grants the corporation legal personality, and it typically views a corporation as a fictional person, a legal person, or a moral person (as opposed to a natural person) which shields its owners (shareholders) from "corporate" losses or liabilities; losses are limited to the number of shares owned. It furthermore creates an inducement to new investors (marketable stocks and future stock issuance). Corporate statutes typically empower corporations to own property, sign binding contracts, and pay taxes in a capacity separate from that of its shareholders, who are sometimes referred to as "members". The corporation is also empowered to borrow money, both conventionally and directly to the public, by issuing interest-bearing bonds. Corporations subsist indefinitely; "death" comes only by absorption (takeover) or bankruptcy.  According toLord ChancellorHaldane,
This 'directing will' is embodied in a corporate Board of Directors. The legal personality has two economic implications. It grants creditors (as opposed to shareholders or employees) priority over the corporate assets upon liquidation. Second, corporate assets cannot be withdrawn by its shareholders, and assets of the firm cannot be taken by personal creditors of its shareholders. The second feature requires special legislation and a special legal framework, as it cannot be reproduced via standard contract law.
The regulations most favorable toincorporationinclude:
In many jurisdictions, corporations whose shareholders benefit from limited liability are required to publish annualfinancial statementsand other data so that creditors who do business with the corporation are able to assess the creditworthiness of the corporation and cannot enforce claims against shareholders.Shareholders, therefore, experience some loss of privacy in return for limited liability. That requirement generally applies in Europe, but not incommon lawjurisdictions, except for publicly traded corporations (for which financial disclosure is required for investor protection).
In many countries, corporate profits are taxed at a corporate tax rate, and dividends paid to shareholders are taxed at a separate rate. Such a system is sometimes referred to as "double taxation" because any profits distributed to shareholders will eventually be taxed twice. One solution, followed by as in the case of the Australian and UK tax systems, is for the recipient of the dividend to be entitled to a tax credit to address the fact that the profits represented by the dividend have already been taxed. The company profit being passed on is thus effectively taxed only at the rate of tax paid by the eventual recipient of the dividend.
In other systems, dividends are taxed at a lower rate than other income (for example, in the US), or shareholders are taxed directly on the corporation's profits, while dividends are not taxed (for example,S corporationsin the US).
The institution most often referenced by the word "corporation" ispublicly traded, which means that the company's shares are traded on a public stock exchange (for example, theNew York Stock ExchangeorNasdaqin the United States) whose shares of stock of corporations are bought and sold by and to the general public. Most of the largest businesses in the world are publicly traded corporations.
However, the majority of corporations areprivately held, or closely held, so there is no ready market for the trading of shares. Many such corporations are owned and managed by a small group of businesspeople or companies, but the size of such a corporation can be as vast as the largest public corporations.
Closely held corporations have some advantages over publicly traded corporations. A small, closely held company can often make company-changing decisions much more rapidly than a publicly traded company, as there will generally be fewer voting shareholders, and the shareholders would have common interests. A publicly traded company is also at the mercy of the market, with capital flow in and out based not only on what the company is doing but also on what the market and even what the competitors, major and minor, are doing.
However, publicly traded companies also have advantages over their closely held counterparts. Publicly traded companies often have moreworking capitaland can delegate debt throughout all shareholders. Therefore, shareholders of publicly traded company will each take a much smaller hit to their returns as opposed to those involved with a closely held corporation. Publicly traded companies, however, can suffer from that advantage. A closely held corporation can often voluntarily take a hit to profit with little to no repercussions if it is not a sustained loss. A publicly traded company often comes under extreme scrutiny if profit and growth are not evident to stock holders, thus stock holders may sell, further damaging the company. Often, that blow is enough to make a small public company fail.
Often, communities benefit from a closely held company more so than from a public company. A closely held company is far more likely to stay in a single place that has treated it well even if that means going through hard times. Shareholders can incur some of the damage the company may receive from a bad year or slow period in the company profits. Closely held companies often have a better relationship with workers. In larger, publicly traded companies, often after only one bad year, the first area to feel the effects is the workforce with layoffs or worker hours, wages or benefits being cut. Again, in a closely held business the shareholders can incur the profit damage rather than passing it to the workers.
The affairs of publicly traded and closely held corporations are similar in many respects. The main difference in most countries is that publicly traded corporations have the burden of complying with additional securities laws, which (especially in the US) may require additional periodic disclosure (with more stringent requirements), stricter corporate governance standards as well as additional procedural obligations in connection with major corporate transactions (for example, mergers) or events (for example, elections of directors).
A closely held corporation may be asubsidiaryof another corporation (itsparent company), which may itself be either a closely held or a public corporation. In some jurisdictions, the subsidiary of a listed public corporation is also defined as a public corporation (for example, inAustralia).
InAustraliacorporations are registered and regulated by the Commonwealth Government through theAustralian Securities and Investments Commission. Corporations law has been largely codified in theCorporations Act 2001.
InBrazilthere are many different types of legal entities (sociedades), but the two most common ones commercially speaking are (i)sociedade limitada, identified by "Ltda." or "Limitada" after the company's name, equivalent to the British limited liability company, and (ii)sociedade anônimaorcompanhia, identified by "SA" or "Companhia" in the company's name, equivalent to the British public limited company. The "Ltda." is mainly governed by the new Civil Code, enacted in 2002, and the "SA", by Law 6.404, dated December 15, 1976, as amended.
InBosnia and Herzegovina, a joint-stock company is called:
The specified form of organization means that the company (privateorstate-owned) is organized on theBosnian market(Federation of BiHand RS entitylevel) as a legal entity that hasshares(Bosnian/Croatian:dionicaorvrijednosni papir; Serbian:akcijaorhartija od vrijednosti-Cyrillic:акцијаorхартија од вриједности) that can be traded in a free market or stock exchanges in the Bosnia and Herzegovina (listed inSarajevo Stock ExchangeorBanja Luka Stock Exchange).
InBulgaria, a joint-stock company is called aaktsionerno druzhestvoorAD(Bulgarian:акционерно дружествоorАД). When all shares are owned by a single shareholder the company receives the special designation ofednolichno aktsionerno druzhestvoorEAD(Bulgarian:еднолично акционерно дружествоorЕАД).
InCanadaboth the federal government and theprovinceshave corporate statutes, and thus a corporation may be incorporated either provincially or federally. Many older corporations in Canada stem fromActs of Parliamentpassed before the introduction of general corporation law. The oldest corporation in Canada is theHudson's Bay Company; though its business has always been based in Canada, itsRoyal Charterwas issued in England byKing Charles IIin 1670, and became a Canadian charter by amendment in 1970 when it moved its corporate headquarters from London to Canada. Federally recognized corporations are regulated by theCanada Business Corporations Act.
TheChileanform of joint-stock company is calledSociedad por Acciones(often abbreviated "SpA"). They were created in 2007 by Law N° 20.190,and they are the most recent variety of societary types, as they represent a simplified form of corporation – originally conceived for venture capital companies.
According to the Ministry of Economy's Business and Society Registry, SpAs accounted for 71.42% of new businesses in October 2023.
TheCzechform of the public limited company is calledakciová společnost(a.s.) and its private counterpart is calledspolečnost s ručením omezeným(s.r.o.).
TheirSlovakequivalents are calledakciová spoločnosť(a.s.) andspoločnosť s ručením obmedzeným(s.r.o.).
Germany,Austria,SwitzerlandandLiechtensteinrecognize two forms of company limited by shares: theAktiengesellschaft(AG), analogous topublic limited companies(or corporations in US/Can) in the English-speaking world, and theGesellschaft mit beschränkter Haftung(GmbH), similar to the modernprivate limited company.
Italyrecognizes three types of company limited by shares: thepublic limited company(società per azioni, or S.p.A.), theprivate limited company(società a responsabilità limitata, or S.r.l.), and the publicly traded partnership(società in accomandita per azioni, or S.a.p.a.). The latter is a hybrid of thelimited partnershipand public limited company, having two categories of shareholders, some with and some without limited liability, and is rarely used in practice.
InJapan, both the state and local public entities under theLocal Autonomy Act(now47 prefectures, made in the 19th century andmunicipalities) are considered to be corporations(法人,hōjin). Non-profit corporations may be established under theCivil Code.
The term "company"(会社,kaisha)or (企業kigyō) is used to refer to business corporations. The predominant form is theKabushiki gaisha(株式会社), used by public corporations as well as smaller enterprises.Mochibun kaisha(持分会社), a form for smaller enterprises, are becoming increasingly common. Between 2002 and 2008, theintermediary corporation(中間法人,chūkan hōjin)existed to bridge the gap between for-profit companies and non-governmental and non-profit organizations.
InLatvia, which uses a model similar to Germany, a public stock company is called anakciju sabiedrība(a/s, A/S or AS), whereas a private, 'limited liability company' is called asabiedrība ar ierobežotu atbildību(SIA).State-owned variants of these companies add an initial capital V (valsts- 'state'), as in VAS and VSIA.
In Norway, a joint-stock company is called anaksjeselskap, abbreviatedAS. A special and by far less common form of joint-stock companies, intended for companies with a large number of shareholders, is the publicly traded joint-stock companies, calledallmennaksjeselskapand abbreviatedASA. A joint-stock company must be incorporated, has an independent legal personality and limited liability, and is required to have a certain capital upon incorporation. Ordinary joint-stock companies must have a minimum capital of NOK 30,000 upon incorporation, which was reduced from 100,000 in 2012. Publicly traded joint-stock companies must have a minimum capital of NOK 1 million.
See:Open joint-stock company(OJSC).
InSpainthere are two types of companies with limited liability: (i) "S.L.", orSociedad Limitada(a privatelimited company), and (ii) "S.A.", orSociedad Anónima(similar to apublic limited company).
TheUkrainianform of the private limited company is called товариство з обмеженою відповідальністю (ТОВ or ТзОВ).
Several types of joint stock companies (Ukrainian:Акціонерне Товариство,Aktsionerne Tovarystvo) exist inUkraine. Due to specifics of the Soviet economy, all enterprises in the Soviet republic as the rest of theSoviet Unionwere state owned and private entrepreneurship was strictly prohibited and criminally prosecuted. Following the Gorbachev initiated broad spectrum reforms (perestroika), there was introduced a term ofkhozraschetand permission for organization of public economic entities called cooperatives.
Following thedissolution of the Soviet Union, Ukraine's economy, along with those of the rest of the former Soviet republics, was further liberalized. Along with private entrepreneurship, many state owned companies were privatized, primarily by the former party'sapparatchikswhich gave a rise of another term "Red directors". Many companies started to be sold at open market and commercialized. Those companies were transformed in joint-stock companies by selling their shares for mutual cooperation and investment.
As in the rest former Soviet republics (predominantly Russia) in Ukraine were created following commercial companies:
In 2009 further reforms were introduced and open joint-stock companies were forced to be restructured as public joint-stock company (Ukrainian:Публічне Акціонерне Товариство,Publichne Aktsionerne Tovarystvo) or private joint-stock company (Ukrainian:Приватне Акціонерне Товариство,Pryvatne Aktsionerne Tovarystvo).
Minimum amount of share capital is 1,250 minimum wages (as of 1 January 2017 ₴4,000,000 orUS$148,000).
UkraineNational Securities and Stock Market Commissionis the main stock market state authority.
Most companies are regulated by theCompanies Act 2006. The most common type of company is the privatelimited company("Limited" or "Ltd"). Private limited companies can either be limited by shares or by guarantee. Other corporate forms include thepublic limited company("plc") and the privateunlimited company.
Some corporations, both public and private sector, are formed by Royal Charter or Act of Parliament.
A special type of corporation is acorporation sole, which is an office held by an individual natural person (the incumbent), but which has a continuing legal entity separate from that person.
Several types of conventional corporations exist in theUnited States. Generically, any business entity that is recognized as distinct from the people who own it (i.e., is not a sole proprietorship or a partnership) is a corporation. This generic label includes entities that are known by such legal labels as 'association', 'organization' and 'limited liability company', as well as corporations proper.
Only a company that has been formally incorporated according to the laws of a particular state is called a "corporation." A corporation was defined in theDartmouth College caseof 1819, in whichChief Justice Marshallof theUnited States Supreme Courtstated: "A corporation is an artificial being, invisible, intangible, and existing only in contemplation of the law." A corporation is a legal entity, distinct and separate from the individuals who create and operate it. As a legal entity the corporation can acquire, own, and dispose of property in its own name like buildings, land and equipment. It can also incur liabilities and enter into contracts like franchising and leasing. American corporations can be either profit-making companies or non-profit entities. Tax-exempt non-profit corporations are often called "501(c)3 corporations," after the section of theInternal Revenue Codethat addresses the tax exemption for many of them.
In some states, such as Colorado, a corporation may represent itselfpro sein courts of law in some situations
Thefederal governmentcan only create corporate entities pursuant to relevant powers in theU.S. Constitution. Thus, virtually all corporations in the U.S. are incorporated under the laws of a particular state. A major exception to the federal non-participation in the incorporation of private businesses is inbanking;  under theNational Bank Act, banks may receive charters from the federal government asnational banks, subjecting them to the regulation of the federalOffice of the Comptroller of the Currencyrather than state banking regulators.
All states have some kind of "general corporation law" (California, Delaware, Kansas, Nevada and Ohio actually use that exact name) which authorizes the formation of private corporationswithouthaving to obtain a charter for each one from the state legislature (as was formerly the case in the 19th century). Many states have separate, self-contained laws authorizing the formation and operation of certain specific types of corporations that are wholly independent of the state general corporation law.  For example, in California, nonprofit corporations are incorporated under the Nonprofit Corporation Law, and in Illinois, insurers are incorporated under the Illinois Insurance Code.
Corporations are created by filing the requisite documents with a particular state government. The process is called "incorporation", referring to the abstract concept of clothing the entity with a "veil" of artificial personhood (embodying, or "corporating" it, 'corpus' being the Latin word for 'body'). Only certain corporations, including banks, are chartered. Others simply file their articles of incorporation with the state government as part of a registration process.
Once incorporated, a corporation has artificial personhood everywhere it may operate, until such time as the corporation may be dissolved. A corporation that operates in one state while being incorporated in another is a "foreign corporation". This label also applies to corporations incorporated outside of the United States. Foreign corporations must usually register with the secretary of state's office in each state to lawfully conduct business in that state.
A corporation is legally a citizen of the state (or other jurisdiction) in which it is incorporated (except when circumstances direct the corporation be classified as a citizen of the state in which it has its head office, or the state in which it does the majority of its business). Corporate business law differs dramatically from state to state. Many prospective corporations choose to incorporate in a state whose laws are most favorable to its business interests. Many large corporations are incorporated inDelaware, for example, without being physically located there because that state has very favorable corporate tax and disclosure laws.
Companies set up forprivacyor asset protection often incorporate inNevada, which does not require disclosure of share ownership. Many states, particularly smaller ones, have modeled their corporate statutes after theModel Business Corporation Act, one of many model sets of law prepared and published by theAmerican Bar Association.
Asjuristic persons, corporations have certain rights that attach to natural persons. The vast majority of them attach to corporations under state law, especially the law of the state in which the company is incorporated – since the corporations very existence is predicated on the laws of that state. A few rights also attach by federal constitutional and statutory law, but they are few and far between compared to the rights of natural persons. For example, a corporation has the personal right to bring a lawsuit (as well as the capacity to be sued) and, like a natural person, a corporation can be libeled.
Harvard College, an undergraduate school ofHarvard University, formally thePresident and Fellows of Harvard College(also known as the Harvard Corporation), is the oldest corporation in the western hemisphere. Founded in 1636, the second of Harvard's two governing boards was incorporated by theGreat and General Court of Massachusettsin 1650. Significantly, Massachusetts itself was a corporate colony at that time – owned and operated by the Massachusetts Bay Company (until it lost its charter in 1684) – so Harvard College is a corporation created by a corporation.
Many nations have modeled their own corporate laws on American business law. Corporate law inSaudi Arabia, for example, follows the model of New York State corporate law. In addition to typical corporations in the United States, the federal government, in 1971 passed theAlaska Native Claims Settlement Act(ANCSA), which authorized the creation of 12 regional native corporations forAlaska Nativesand over 200 village corporations that were entitled to a settlement of land and cash. In addition to the 12 regional corporations, the legislation permitted a 13th regional corporation without a land settlement for those Alaska Natives living out of theState of Alaskaat the time of passage of ANCSA.
Almost every recognized type of organization carries out some economic activities (for example, thefamily). Other organizations that may carry out activities that are generally considered to bebusinessexist under the laws of various countries: