A Joint stock company is an organization which is owned jointly by all its shareholders. All the shareholders own a certain amount of stock in the company, which is represented by their shares.
The shareholders are the owners of the company while the Board of directors who are elected by the shareholders manages the company.
MAIN DOCUMENTS OF A JOINT STOCK COMPANY
The important papers which are required for bringing a joint stock company in existence are known as main documents. The following three documents are essential for a company:
Ø Memorandum of Association (MOA)
Ø Articles of Association (AOA) and
However, in case of a Private Limited Company prospectus is not required.
MEMORANDUM OF ASSOCIATION (MOA)
A Memorandum of association is the constitution of a joint stock company. It is the principal document of the company and no company can be registered without the memorandum of association. It is considered as the charter or constitution of the company because it lays down the objectives of the company precisely and clearly, defines scope of its operation and its relation with the investors and outside world.
A Memorandum of Association includes the following details :-
- The name of the company
- The place where the registered office of the company is situated.
- Present and future objectives of the company.
- The liability clause of the shareholders.
- The authorised share capital of the company in amount.
- Other necessary documents etc.
ARTICLE OF ASSOCIATION (AOA)
The article of association is a document which contains rules regarding the internal management of the company. The articles are framed to help the company in achieving its objectives set out in memorandum of association. It is a supplementary document to the memorandum.
CONTENTS OF ARTICLE OF ASSOCIATION :-
- The appointment of directors, powers, duties and their remuneration.
- Accounting and Auditing of the company.
- The appointment of manager, managing director, etc.
- The procedure for holding and conducting of various meetings.
- Provisions relating to the rules and regulations of internal management
- Different types of shares and its right.
- Appointment of company secretary.
- Provision relating to the calls on shares, forfeiture of shares & transfer of shares etc.
- Other necessary matters.
A prospectus is an invitation to the public to purchase shares or debentures of the company.It provides a summary of past history and helps to convert potential shareholders into existing shareholders.
It must include the following details :-
(i) There must be an invitation offering to the public.
(ii) The invitation must be made on behalf of the company or intended company.
(iii) The invitation must be to subscribe or purchase.
(iv) The invitation must relate to shares or debentures.
***Every prospectus must be dated and signed by the signatories to the memorandum and articles. A copy of the prospectus must be filled with the office of the company registrar before it is issued to general public.
Any information given in the prospectus must be true otherwise the subscriber can be held guilty for misrepresentation.