Meaning and Definition of a Joint Stock Company

A joint stock company is the most developed and widely used form of business organisation for undertakings that need large amounts of capital, wide ownership and continuity of existence. Unlike a sole proprietorship or a partnership, a company is created by law, and it exists independently of the people who form it or invest in it.

The Companies Act, 2013, which governs the formation, working and winding up of companies in India, including every company registered in Andhra Pradesh, defines a company in Section 2(20) as 'a company incorporated under this Act or under any previous company law'. In plain language, a company comes into existence only when it is registered (incorporated) with the Registrar of Companies; registration is what gives it a distinct legal personality, separate from its shareholders and directors.

Earlier legal writers described a company as 'an artificial person created by law, having a separate legal entity, a perpetual succession and a common seal'. This description still captures the essential idea even though a common seal is no longer compulsory after the Companies (Amendment) Act, 2015. A company is best understood as a voluntary association of persons who contribute capital (divided into shares) to carry on a business for profit, and who, in return, become its members/shareholders without becoming personally liable for its debts beyond the value of their shares.