scale and is able to enjoy cost efficiency. viii. Economic Development Joint stock company system has been responsible for the rapid growth of industries and trade in many countries. Since Joint Stock Companies have large financial resources, they are able to undertake large scale production, satisfy the needs of more number of consumers, create large scale employment opportunities, promote balanced regional development and contribute substantially to the government by way of taxes.
Disadvantages The following are the disadvantages of company form of organization i. Costly and difficult to form Number of legal formalities must be observed in the formation of the company. To observe these legal formalities, promoters have to spend much time and money. ii.
Scope for dishonest and unscrupulous management The directors manage the company with the help of paid officers. If the Example of Limited liability Shyam is a share holder in a company holding shares of ₹ each, on which he has already paid ₹ per share. In the event of losses or company’s failure to pay debts , Shyam is liable to pay only ₹ , . (i.e.,the unpaid amount of ₹ on shares) commerce - - .
. PM directors are dishonest, they may make personal gain at the expense of the company. They may misuse their power and position. iii.
Management oligarchy A few rich persons may secure control over the affairs of the company. Thus, the management of a joint stock company might become oligarchic in character. (Oligarchy means a small group of people havimg control) iv. Speculation A few individuals may corner the shares to gain control over the company.
v. Lack of interest The officers of the company do not have incentive to work hard. They are not usually inclined to take risks. They lack initiative.
vi. Lack of good labour relations In sole trading business personal supervision is possible. But in company form of organization there is lack of personal contact between owners and workers. As a result, there is scope for more industrial disputes in a company form of organization.
vii. High taxation Joint stock companies have