JOINT STOCK COMPANY

A joint stock company is a specific form of business organization that is structured like a corporation, but is treated like a partnership in the eyes of the law. Such companies are no longer common in the United States, but are still frequently found in Europe. Like a corporation, a joint stock company has a legal identity distinct from the legal identity of whomever owns it. Its owners hold shares in the company that can be freely transfered to others, and the company continues to exist even if its original members no longer retain ownership of it. Like a partnership, the owners of a joint stock company have some limited liability if the company goes bankrupt or is sued. Joint stock companies are easier to establish than corporations, but they share the ability of corporations to raise large amounts of capital.

Even for the prosperous governments of Britain and the Netherlands in the seventeenth century, settling the North American continent was too expensive a proposition to shoulder on their own. Before Christopher Columbus's (1451–1506) discovery of the New World was a century old, the British government was granting exclusive charters to joint stock companies like the Levant Company and the Muscovy Company to establish colonies around the world. By pooling the wealth of many private businessmen, these companies could undertake the huge expense of funding colonial settlements until they became profitable. The first joint stock company in America, the Virginia Company of London, failed to produce a profit in Jamestown, Virginia. After 18 years of losses, Britain dissolved the company in 1624 and took over the settlement. The Plymouth Company, a joint stock company founded to settle New England, was a little more profitable, and the Massachusetts Bay Company (founded in 1629) successfully established a colony in Salem, Massachusetts; Boston; and Connecticut. Another joint stock company, the Dutch West India Company, settled present-day New Jersey and New York before England seized the territory from the Netherlands in the 1660s. The joint stock companies' charters gave them wide powers to recruit armies, establish political institutions, and collect taxes, and because all of its owners lived in the colony the Massachusetts Bay Company actually achieved independent self-management. This kind of independence made the British Crown very nervous, however, and in 1684 it cancelled the Bay Company's charter and ruled the colony directly.

See also: Corporation, Partnership, Settlement and Economic Development

JOINT STOCK COMPANY

An association engaged in a business for profit with ownership interests represented by shares of stock.

A joint stock company is financed with capital invested by the members or stockholders who receive transferable shares, or stock. It is under the control of certain selected managers called directors.

A joint stock company is a form of partnership, possessing the element of personal liability where each member remains financially responsible for the acts of the company. It is not a legal entity separate from its stockholders.

A joint stock company differs from a partnership in that the latter is composed of a few persons brought together by shared confidence. Partners are not free to retire from the firm or to substitute other persons in their place without prior assent of all the partners. A partner's death causes the dissolution of the firm.

In contrast, a joint stock company consists of a large number of stockholders who are unacquainted with each other. A change in membership or a transfer of stock has no effect on the continued existence of the company and the death of a stockholder does not result in its dissolution. Unlike partners in a partnership, a stockholder in a joint stock company has no agency relationship to the company or any of its members.

A joint stock company is similar to a corporation in that both are characterized by perpetual succession where a member is allowed to freely transfer stock and introduce a stranger in

the membership. The transfer has no effect on the continuation of the organization since both a joint stock company and a corporation act through a central management, board of directors, trustees, or governors. Individual stockholders have no authority to act on behalf of the company or its members.

A joint stock company differs from a corporation in certain respects. A corporation exists under a state charter, while a joint stock company is formed by an agreement among the members. The existence of a joint stock company is based upon the right of individuals to contract with each other and, unlike a corporation, does not require a grant of authority from the state before it can organize.

While members of a corporation are generally not held liable for debts of a corporation, the members of a joint stock company are held liable as partners.

In a legal action, a corporation sues and is sued in its corporate name, but a joint stock company sues and defends in the name of a designated officer.