Commercial Applications
A shareholder in a public company transfers all their shares to a competitor, leading to significant changes in company control. The board of directors raises concerns about the implications. What feature of public companies allows such an event to occur?
- Transferability of shares
- Perpetual succession
- Limited liability
- Common seal
Joint Stock Company
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Answer
Transferability of shares
Reason — Transferability of shares is the feature that allows a shareholder in a public company to transfer all their shares to anyone, including a competitor. The shares of a public company are listed on the stock exchange and are freely transferable, allowing members to easily sell their shares without the permission of other members. While this provides liquidity, it can also lead to changes in company control if a large block of shares is transferred.
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Related Questions
Why is the principle of limited liability important for shareholders in a joint stock company?
- It allows shareholders to transfer shares freely.
- It restricts the financial loss of shareholders to the unpaid value of shares.
- It ensures shareholders participate in daily management.
- It makes shareholders responsible for company debts.
A company faces criticism for taking too long to make decisions due to bureaucratic delays. Which disadvantage of joint stock companies is highlighted here?
- Lack of motivation
- Delay in decision-making
- Conflict of interests
- Unhealthy speculation
Directors in a joint stock company are personally liable for all debts incurred by the company.
- True
- False
Why are joint stock companies better suited for large-scale production than partnerships?
- Joint ownership of property.
- Larger capital resources and professional management.
- Direct involvement of shareholders in management.
- Fewer legal requirements for incorporation.