Consider the following statements about a joint-stock company : 1. I

Consider the following statements about a joint-stock company :

1. It has a legal existence.
2. There is limited liability of shareholders.
3. It has a democratic management.
4. It has a collective ownership.

Which of the statements given above are correct?

[amp_mcq option1=”1 and 2 only” option2=”1, 2 and 3 only” option3=”3 and 4 only” option4=”1, 2, 3 and 4″ correct=”option4″]

This question was previously asked in

UPSC CDS-1 – 2019

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Statements 1, 2, 3 and 4 are all considered correct characteristics of a joint-stock company in a broad sense relevant to this type of question. Therefore, option D is the correct answer.

A joint-stock company is a form of business organization where the ownership is divided into shares, and it has several distinct features: it is a separate legal entity, shareholders have limited liability, ownership is collective through shares, and its management structure, while often involving professional managers, derives authority from the shareholders (who vote for directors).

Statement 1: A joint-stock company is incorporated under law and has an existence independent of its members. Statement 2: The liability of each shareholder is limited to the unpaid amount of the shares held by them. Statement 4: Ownership is distributed among many shareholders who collectively own the company’s capital. Statement 3, “democratic management”, is perhaps the least precise term. Management is typically professional and appointed by the board of directors, who are elected by the shareholders. While not a direct democracy, the ultimate control rests with the shareholders through their voting rights, which can be considered a form of democratic governance within the company structure compared to other business forms. Given the options, all four statements are likely intended to be considered correct features.

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