Disadvantage of joint stock company. Joint 2019-02-21

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8 Important Merits of Joint Stock Companies

disadvantage of joint stock company

Often directors try to mislead the members and manipulate voting powers to maintain their control. Oligarchic Management: The shareholders who are the real owners do not have much voice in the management. Legally, it is an artificial person and having a distinctive name and a common seal. But they have little involvement in the management of the company. So many opportunities may be lost due to delay in decision making. Transferability of Shares: One special feature of company is that shares are freely transferable from one person to another without the knowledge of the shareholders. Diffused Risk: In this form of organization, the risk is reduced for each shareholder, because it is diffused and spread over several shareholders of the company.

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Disadvantages of Joint Stock Company

disadvantage of joint stock company

Change of ownership and management also does not affect the continuity of the business. This is most important characteristic of the company that the liability of each shareholder of the company is limited up to the value of the share purchased by him. Thus, the decision making process is usually delayed. There always exists difference of opinion and conflicts between the shareholders and board of directors. Disadvantages of Company Form of Organisation : The company form of organisation suffers from the following drawbacks: 1. Again, as the affairs of the company are published, and as the companies are well regulated and controlled by the State, the public has great confidence in the company form of organization. So the management does not take the personal interest in the workings of a company.


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bussiness organizations: ADVANTAGES AND DISADVANTAGES OF JOINT STOCK COMPANY

disadvantage of joint stock company

While monopoly is always against the public interest. Every member of a partnership firm is an agent of the firm and also of the other members. Secondly every shareholder will pay tax on his individual income. This may be due to lack of interest and lack of proper and timely information. Scope for Expansion: As there is no limit to the number of persons in a company, there is a great scope for expansion of the business. Research and Development : It invests a lot of money on research and development for improved production process, improving quality of product, designing and innovating new products etc.

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Limited Liability versus Joint Stock: Advantages and Disadvantages in Turkish Law Perspective

disadvantage of joint stock company

Bolder Management: In this form of organization, as the persons who manage the company have relatively smaller financial stake, they can become adventurous. Shareholders are not the joint owners of the company's property. It is a company whose stock is owned jointly by the. The management is in the hands of those persons who have not invested much in the company. Despite the company's efforts in sending hundreds of new settlers each year, the colony was extremely fragile and almost perished. Bureaucracy: Planning, regulating and decision making of other aspects comes from directors, it gets practiced of salary taken by the third party.

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8 Important Merits of Joint Stock Companies

disadvantage of joint stock company

Hence, there exists professional management and the Board is accountable to all their investors. A shareholder can sell his shares at any time to anybody in the stock exchange Therefore, the conservative and cautious investors are also attracted to invest in the shares of public company. They can be shareholders, employees, suppliers, creditors, government and community. Joint-stock companies were used by English merchants in the 17th century which is the 1600s to pool capital and share the risks associated with trading voyages to Asia and Africa. Interlocking of direction-ship and establishment of subsidiary companies have facilitated concentration of economic power in the hands of a few business houses.

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Disadvantages of Joint Stock Company

disadvantage of joint stock company

Thus, a permanent type of conflict of interests may continue to exist in the companies. In company form of organisation, the number of contributories is large; so risk is shared by a large number of persons. This feature attracts large number of investors to invest in the company. This certainly introduces an element of socialisation of business ownership. Most of the business activities are decided through meetings. The initial settlers quickly realized that they were bound to follow the orders of company officials in constructing a fort and other dwellings.

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Advantages & Disadvantages of Joint Stock Company

disadvantage of joint stock company

However, these gentlemen were reluctant to do the initial labor required to survive in the wilderness, including building structures and preparing fields for the cultivation of food. A shareholder cannot be held liable for the acts of the company. There are many industries, which would not have come into existence if people had been unduly cautious. The initial settlement was dominated by gentlemen investors who expected to get rich quickly. The members of a company may go on a company. The simplified and accelerated incorporation due to online company establishment system and minimized bureaucracy, and the possibility of online general meetings are other amendments which may be regarded as essential law reforms which affect the number of company establishments in Turkey in a positive way. Thus, a permanent type of conflict of interests may continue to exist in the companies.

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8 Important Merits of Joint Stock Companies

disadvantage of joint stock company

The Virginia Company, as highlighted above, was very successful in this respect. Therefore, public have enough faith in it. The promoters with an intention to defraud may indulge in such practices. The suitability of a particular type of business is to be decided first. Because of this, the joint stock form of organization is well adopted for raising amounts of capital.

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Disadvantages of Joint Stock Company

disadvantage of joint stock company

There is little scope for personal initiative and a sense of responsibility. Every year financial annual statements are distributed among shareholders, registrar, bankers, and stock exchanges of the country. So, it can get a loan from different financial institutions. The shares will have to be sold during the prescribed time. It is the factor of limited liability that has greatly contributed to the phenomenal growth of giant companies throughout the world with the resultant benefits of large scale production and distribution. Violent fluctuations in share prices caused by unhealthy speculation reduces investors' confidence and lead to financial crisis.

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Joint stock companies: features, merits and demerits

disadvantage of joint stock company

The efficient management may help the company to take rational decisions and can produce better results for the company. The person who holds shares of the company is known as shareholder. A lot of precious time, efforts, and financial resources are wasted in complying with statutory requirements. The liability of every member is limited to nominal value of the shares bought by him or the amount of the guarantee given by him. Its accounts are published and they are public documents. The meeting of the directors or the shareholders cannot be held at any time as and when required.

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