joint-stock company

noun
Updated on: 13 Oct 2017

Definition of joint-stock company

:a company or association consisting of individuals organized to conduct a business for gain and having a joint stock of capital represented by shares owned individually by the members and transferable without the consent of the group

First Known Use of joint-stock company

1776


Financial Definition of JOINT-STOCK COMPANY

joint-stock company

What It Is

A joint stock company is a company whose stockholders have the same privileges and responsibilities as an unlimited partnership.

How It Works

A joint stock company issues shares similar to a public company that trades on a registered exchange. Joint stock holders may buy or sell these shares freely in the market. But unlike ordinary shares or preferred shares, the shares of a joint stock company carry explicit obligations. Holders have a direct vote in company management decisions as well as a joint and several liability for the company's outstanding debts.

For example, suppose Bob holds shares of Company ABC, a joint stock company. These shares give Bob a percentage of the vote on Company ABC's management decisions, board elections, etc. The shares also give Bob unlimited responsibility for company ABC's outstanding unpaid liabilities. In other words, unless Bob sells his shares of Company ABC, he is liable in whole and in part for principal and interest obligations on bonds or other outstanding loans.

Why It Matters

Due to the nature of the stock, investors who hold shares of a joint stock company put their own assets at risk of being liquidated if the issuing company were to file for bankruptcy.


Law Dictionary

joint-stock company

legal Definition of joint-stock company

see company

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