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Q94 (CDS-I/2019) Economy › Industry, Infrastructure & Investment › Corporate and business forms Answer Verified

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?

Result
Your answer: —  Â·  Correct: D
Explanation

A joint-stock company is a registered association that exists as an artificial legal person with an independent legal entity separate from its members [1]. This legal existence allows the company to enter contracts and own property in its own name [1]. A defining characteristic is limited liability, where shareholders are only liable for the unpaid balance of their shares, protecting personal assets from company debts [2]. Management is democratic as shareholders, who represent collective ownership through their capital contributions, elect a Board of Directors to manage the company's affairs. While ownership and management are separate, the right to vote on a proportionate basis (one share, one vote) ensures a democratic structure for major decisions and director selection [3]. Thus, all four statements correctly describe the fundamental characteristics of a joint-stock company.

Sources

  1. [2] History , class XII (Tamilnadu state board 2024 ed.) > Chapter 10: Modern World: The Age of Reason > Important Results Of Commercial Revolution > p. 139
  2. [3] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.4 Securities > p. 42
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