Features of a Joint Stock Company

A joint stock company can be recognised by a distinct bundle of legal features that, taken together, separate it sharply from a sole proprietorship or a partnership firm.

1. Artificial person created by law. A company is not a natural human being, yet the law treats it as a "person" capable of owning property, entering into contracts, earning income, and being taxed in its own name. It is called "artificial" because it has no physical body of its own and can act only through human agents — its directors, officers, and employees.

2. Separate legal entity. The company's identity is entirely distinct from the identity of its members (shareholders). The company's property belongs to the company, not to its shareholders individually; the company's debts are the company's own debts, not the personal debts of its members. A shareholder can, in the ordinary course, also enter into a contract with the company they own shares in, or even be its employee — something that is legally meaningless in a sole proprietorship, where the owner and the business are the same person.

3. Perpetual succession. A company's existence does not depend on the lives of its members. Members may die, resign, sell their shares, or be declared insolvent, but the company continues unaffected — "members may come and members may go, but the company goes on forever" until it is formally wound up according to law.

4. Limited liability of members. In a company limited by shares (the most common type), a member's liability for the company's debts is limited to the amount, if any, remaining unpaid on the shares they hold. If a member has paid the full face value of their shares, they cannot be called upon to pay anything further, however large the company's losses or debts may be. This is in sharp contrast to a sole proprietor or an ordinary partner, whose personal property can be attached to pay off business debts.

5. Common seal / company representation. Traditionally, a company (having no physical hand to sign with) authenticated its official documents by affixing a common seal engraved with its name. Following the Companies (Amendment) Act, 2015, a common seal is no longer compulsory — a company may instead authorise documents through the signatures of two directors, or of one director and the Company Secretary, where the company has one. Many companies, however, continue to use a common seal by choice as a mark of authenticity.

6. Transferability of shares. The capital of a company is divided into small units called shares, and (subject to restrictions in a private company's articles) a shareholder is generally free to sell or transfer their shares to another person without needing the consent of the company or of the other members. This makes an investment in a public company's shares relatively liquid compared to a partner's stake in a partnership firm. …