Demerits of Joint Stock Company is as Follows: -
1. Difficulty in Formation: -The formation of the company is in itself a very difficult and involves too many formalities. Promoters have to prepare and submit various documents to the registrar of companies for approval i.e. Articles of Association, Memorandum of Association etc. the public limited company cannot commence business without obtaining a certificate of commencement of business. Registration of Joint Stock Companies is compulsory as per Indian Companies Act, 1956. Thus the formation is complicated, costly and time consuming.
2. Delay in Decisions: - In sole trading concern, and partnership firm decisions can be taken quickly. Company business is managed by Board of Directors who are not owners of the company. Therefore, there is no direct motivation for directors to give their best to the company. Moreover, for taking various decisions and getting them approved from share holders, they have to hold board Meeting and share holders meeting, for which a proper procedure has to be followed. That results into delay in decision making, good business opportunities may be lost.
3. Excessive Government Control: - There is a lot of government interference in the working of the company. Various rules and regulation of the companies Act have to be strictly followed by the company, the non – compliance of any of these provisions results into penalties for the officers involved.
4. High cost of Management: - The management of joint stock company form of organization is costly. The formation involves availing of the expert services of many professional like underwriters, financial and technical experts, share brokers, solicitors, bankers etc.
5. Undue Speculation: -since directors are responsible for the management of the company, they sometime use the confidential information for speculation and for personal gains. This results in sudden fluctuations in prices of shares in stock exchange, adversely affecting the public confidence.
6. No Personal Contact: -Due to very large size of the organization, employees feel that their efforts are not recognized and appreciated, their work related problems are not taken care of. as a result they feel demoralized and their productivity declines.
7. Lack of Secrecy: -There is no business secrecy involved in the company form of organization since it has to fulfill various statutory requirements.
8. No Direct Effort Reward Relationship: -Since the ownership and management are separate, there is no direct relationship between the efforts and rewards. This can be de motivating for the owners of the company
Gaurav Seth 4 years, 6 months ago
Demerits of Joint Stock Company is as Follows: -
1. Difficulty in Formation: -The formation of the company is in itself a very difficult and involves too many formalities. Promoters have to prepare and submit various documents to the registrar of companies for approval i.e. Articles of Association, Memorandum of Association etc. the public limited company cannot commence business without obtaining a certificate of commencement of business. Registration of Joint Stock Companies is compulsory as per Indian Companies Act, 1956. Thus the formation is complicated, costly and time consuming.
2. Delay in Decisions: - In sole trading concern, and partnership firm decisions can be taken quickly. Company business is managed by Board of Directors who are not owners of the company. Therefore, there is no direct motivation for directors to give their best to the company. Moreover, for taking various decisions and getting them approved from share holders, they have to hold board Meeting and share holders meeting, for which a proper procedure has to be followed. That results into delay in decision making, good business opportunities may be lost.
3. Excessive Government Control: - There is a lot of government interference in the working of the company. Various rules and regulation of the companies Act have to be strictly followed by the company, the non – compliance of any of these provisions results into penalties for the officers involved.
4. High cost of Management: - The management of joint stock company form of organization is costly. The formation involves availing of the expert services of many professional like underwriters, financial and technical experts, share brokers, solicitors, bankers etc.
5. Undue Speculation: -since directors are responsible for the management of the company, they sometime use the confidential information for speculation and for personal gains. This results in sudden fluctuations in prices of shares in stock exchange, adversely affecting the public confidence.
6. No Personal Contact: -Due to very large size of the organization, employees feel that their efforts are not recognized and appreciated, their work related problems are not taken care of. as a result they feel demoralized and their productivity declines.
7. Lack of Secrecy: -There is no business secrecy involved in the company form of organization since it has to fulfill various statutory requirements.
8. No Direct Effort Reward Relationship: -Since the ownership and management are separate, there is no direct relationship between the efforts and rewards. This can be de motivating for the owners of the company
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