What is a joint-stock company? Definition and examples

A joint-stock company is a company that belongs to the individuals who own its shares. It is a business entity in which people can buy and sell its stock. Each stockholder owns company stock in proportion. Stockholders can sell their stocks to others without the sale affecting the company’s existence in any way.

In this context, the term ‘company stock’ means ‘company shares.’ Hence the terms ‘stocks and shares’ and ‘stock market.’

In the United States, shareholders can freely sell stocks of a joint stock company. However, they are liable for all debts of the company.

Nasdaq.com has the following definition of the term:

“A form of business organization that falls between a corporation and a partnership.”

“The company sells stock, and its shareholders are free to sell their stock, but shareholders are liable for all debts of the company.”

Joint-stock company – definitions vary

This term may have a meaning in one country and a different meaning in another.

In some jurisdictions, it is still possible to register a joint-stock company without limited liability.

Shareholders of a joint-stock company in the United Kingdom are only liable for the nominal value of the shares they own.

In the United States, however, their liability is unlimited. So, what happens in the US if the company goes bankrupt and is heavily in debt? Its creditors can go after the shareholders’ personal assets to recover their money.

Britons refer to companies in which shareholders are fully liable as ‘unlimited companies.’

Joint-stock company – advantages

A board of directors manages the company on behalf of the shareholders. Shareholders elect board members at an annual general meeting.

The shareholders may also vote to reject or accept an annual report as well as an audited set of accounts.

If a vacancy occurs, shareholders may stand for directorships within the company. However, it is not very common.

Regarding shareholders’ liability for the company’s debts, Wikipedia says:

“The shareholders are usually liable for any of the company debts that extend beyond the company’s ability to pay up to the amount of invested by them.”