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Types of Partnerships
Description
Partnerships can be categorized based on their duration, purpose, an
d the liability of the partners involved. Understanding these different t
ypes is crucial for determining the legal and operational framework of
the business.
Key Terms and Important Points
Partnership for a Fixed Period:
Exists for a predetermined duration. (Fixed period)
Particular Partnership:
Formed to carry out a specific business venture. (Particular Partner
ship)
Partnership at Will:
The duration is not specified in the partnership agreement. (Partne
rship at will)
Can be created under the following conditions:
Indefinite (Unlimited) period
Expiry of a fixed period
Completion of a particular work
Limited Partnership:
Governed by the Limited Partnership Act 1907/2017. (Limited Partner
ship)
Requires at least one partner with limited liability and one with unli
mited liability.

Nominal Partners
Description
Nominal partners, also known as quasi-partners, lend their name to a
firm without contributing capital or sharing in the profits or losses. The
ir involvement is purely for the reputation they bring to the business.
Key Terms and Important Points
Nominal Partner (Quasi Partner):
Does not invest capital. (Q3)

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Does not share in profits or losses. (Q3)

Does not actively work in the firm. (Q3)
Their name is used to enhance the firm's reputation. (Q3)

Minor Partners
Description
A minor, someone under the age of 18, can be admitted into a partner
ship with the consent of all existing partners. However, their liability is li
mited to the extent of their shares in the business.
Key Terms and Important Points
Minor Partner:
An individual under 18 years of age. (Q4)
Can become a partner with the mutual consent of all partners. (Q
4)
Liability is limited to the extent of their shares. (Q4)
Upon reaching adulthood, the minor partner must decide their stat
us within 6 months. (Q4)

Partnership Deed
Description
A partnership deed is a formal agreement among partners that outlin
es the terms and conditions of their partnership. It serves as a crucial
document for clarity and governance.
Key Terms and Important Points
Partnership Deed:
An agreement outlining the terms and conditions of the partnershi
p. (Q5)
Specifies profit and loss sharing ratios. (Q5)
Covers aspects like salary, interest on capital, and drawings. (Q5)
Addresses the admission of new partners. (Q5)
Contains necessary rules and regulations for running the partners
hip. (Q5)

Optimal Partnership Agreement

Description
The most effective partnership agreement is one that is written, regist
ered, and signed by all partners. This ensures that all parties are awar

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e of their rights, duties, and responsibilities, and it helps prevent future

disputes.
Key Terms and Important Points
Best Partnership Agreement:
Must be written. (Q6)
Must be registered. (Q6)
Must be signed by all partners. (Q6)
Deals with potential areas of confusion, disagreement, or change.
(Q6)

Dissolution of Partnership
Description
Dissolution refers to the termination of a partnership. It can occur thro
ugh various means, either with or without a court order.
Key Terms and Important Points
Dissolution Ways/Modes: (Q7)
Without Order of Court:
By Agreement: All partners agree to dissolve the firm. (Q7)
By Notice: In a partnership at will, any partner can give a 14-day w
ritten notice to dissolve. (Q7)
By Breach of Partnership Deed: If a partner wilfully breaches the p
artnership deed. (Q7)
By Contingent Event: Events like insolvency, expiry of period, comp
letion of work, death of a partner, or unlawful business. (Q7)
With Order of Court (Compulsory):
Insanity of a partner. (Q7)
Exploitation or misuse of rights by a partner. (Q7)
Non-performance of duty. (Q7)
Continuous losses. (Q7)
Breach of agreement. (Q7)

Compulsory Dissolution of Partners

hip
Description
Compulsory dissolution occurs when a court orders the termination of
a partnership due to specific circumstances.
Key Terms and Important Points
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Grounds for Compulsory Dissolution: (Q8)

1. Partner becomes of unsound mind or insane. (Q8)
2. Partner exploits the rights of other partners. (Q8)
3. Partner becomes permanently incapable of performing duties. (Q
8)
4. Partner is guilty of misconduct in carrying on business. (Q8)
5. Partner is not using powers positively. (Q8)
6. Partner transfers entire share without consent. (Q8)
7. Continuous losses make it impossible to carry on the partnership.
(Q8)
8. Partner wilfully breaches agreements. (Q8)

Limited Partnership (Defined)

Description
A limited partnership is a specific type of partnership formed under th
e Limited Partnership Act, characterized by having at least one partne
r with limited liability and one with unlimited liability.
Key Terms and Important Points
Limited Partnership: (Q9)
Formed under the Limited Partnership Act 2017/1907. (Q9)
Registration is compulsory. (Q9)
Must use "Limited Liability Partnership" in its name. (Q9)
Becomes a separate legal entity with perpetual succession upon r
egistration. (Q9)
Partners' liability becomes limited. (Q9)
Uses a common seal. (Q9)

Contents of Partnership Deed/Agree

ment
Description
The partnership deed should include key details to ensure clarity and
prevent disputes among partners.
Key Terms and Important Points
Main Contents: (Q10)
1. Name of the firm
2. Profit and loss sharing ratio
3. Nature of Business
4. Capital
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5. Duration
6. Name of partners
7. Date
8. Location of business

Partnership: Definition and Features

Description
Partnership is a business structure involving two or more individuals w
ho agree to share in the profits or losses of a business. It has several d
efining features that distinguish it from other business forms.
Key Terms and Important Points
Definition:
"The relationship between two or more persons who have agreed t
o share the profits and losses of a business carried on by all or any
of them acting for all." (Q11)
Features/Characteristics: (Q11)
1. Agreement: A contract between partners, preferably written, to av
oid disputes.
2. Number of Partners: Minimum of two, maximum of twenty (ten in
banking).
3. Object: To earn profit.
4. Unlimited Liability: If unregistered, partners have unlimited liability,
potentially risking personal assets.
5. Transfer of Rights: Shares cannot be transferred without the conse
nt of all partners.
6. Legal Entity: Unregistered partnerships lack a separate legal entit
y.
7. Payment of Tax: The firm pays tax on its profit, and the remaining
profit is distributed among partners tax-free.
8. Audit: Registered firms must conduct annual audits.
9. Partnership Act: Governed by the Partnership Act 1932.
10. Management: All partners can participate in managing the busine
ss.
11. Co-operation: Mutual co-operation and trust are essential for suc
cess.
12. Share in Capital: Partners contribute capital, skills, or abilities.
13. Agent: Every partner acts as an agent, able to enter into contracts.
14. Registration: Not compulsory but provides legal protection.

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15. Profit and Loss Distribution: Profits and losses are shared accordin
g to the agreement.
16. Dissolution: Can occur due to bankruptcy, death, agreement, or ill
egal activities.

Advantages of Partnership Registra

tion
Description
Registering a partnership offers several advantages, enhancing its op
erational capabilities and credibility.
Key Terms and Important Points
Advantages of Partnership: (Q12)
1. Larger Capital: Partners pool capital, enabling larger-scale operati
ons.
2. Mutual Consultation: Collaborative decision-making reduces the r
isk of losses.
3. Division of Work: Partners contribute based on their abilities, prom
oting specialization.
4. Personal Interest: Unlimited liability encourages diligence and hon
esty.
5. Contact with Customers: Direct customer interaction allows for de
mand-responsive production.
6. Less Risk of Fraud: Partners can oversee business activities and ch
eck accounts.
7. Easy Formation: Fewer legal formalities compared to joint-stock c
ompanies.
8. Credit Facility: Registered partnerships have better creditworthine
ss.
9. Better Decision: Mutual consultation leads to more informed decisi
ons.
10. Services of Experts: Access to expert services for problem-solving.
11. Flexibility: Easier to change volume, size, policy, and nature of busi
ness.
12. Expansion of Business: New partners can be added to increase ca
pital.
13. Reduction in Loss: Losses are shared among partners.
14. Admission and Withdrawal: Decisions made with mutual consent.
15. Reduction in Competition: Partners prefer collaboration over com
petition.
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16. Minority Protection: All matters decided with the consent of all par
tners.
17. Secrecy: No requirement to publish accounts, maintaining busines
s secrets.
18. Public Confidence: Registered partnerships enjoy greater public tr
ust.
19. Easy Dissolution: Dissolution can occur with mutual consultation a
nd minimal legal formalities.

Partnership vs. Other Business Orga

nizations
Description
Partnerships are often considered superior to sole proprietorships due
to several factors, including registration benefits, legal entity status, a
nd larger capital pools.
Key Terms and Important Points
Reasons Partnership is Better than Sole Trader: (Q13)
1. Registration: Legal entity with perpetual succession, can sue and
be sued, limited liability, and better credit facilities.
2. Legal Entity: Separate from its members, with limited liability.
3. Limited Liability: Members only pay their share value in case of los
s.
4. Larger Capital: Greater capital for larger-scale production.
5. Management: More people managing business affairs.
6. Audit: Necessary for registered firms.
7. Mutual Consultation: Reduces the chances of loss.
8. Division of Work: Specialization and contribution based on abilitie
s.
9. Decision Making: More effective and accurate decisions.
10. Shared Responsibility: Distribution of work reduces burden and err
ors.
11. Burden of Loss/Reduction in Loss: Losses shared among partners.
12. Durability: Longer lifespan compared to sole traders.
13. Credit Facility: Better creditworthiness in the financial market.
14. Expansion of Business: Easier to enlarge business by adding new
partners.
15. Services of Experts: Access to expert knowledge for problem-solvi
ng.
16. Public Confidence: Greater public trust in registered partnerships.
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17. Flexibility: Easier to change business aspects with mutual consult

ation.

Methods of Dissolution of Partnershi

p Firm
Description
The dissolution of a partnership firm involves ceasing business activiti
es, realizing assets, and settling liabilities. It can occur through various
methods, both with and without court intervention.
Key Terms and Important Points
Dissolution/Liquidation of Partnership Firm: (Q14)
Definition: Stopping the activities of partnership business, realizing
assets, and paying liabilities.
Dissolution Ways/Modes:
1. Without the Order of Court:
By Agreement: Partners mutually agree to dissolve the firm.
By Notice: In a partnership at will, a 14-day written notice is given.
By Breach of Partnership Deed: Wilful breach of the partnership d
eed.
Contingent Dissolution:
Insolvency: Partner declared insolvent.
Expiry of Period: Fixed-term partnership expires.
Completion of Work: Specific venture is completed.
Death of Partner: Partner's death.
Unlawful Business: Business becomes illegal.
Retirement of Partner: Partner leaves or retires.
Business with Enemy Country: Dealing with an enemy country.
2. With the Order of Court:
Insanity of Partner: Partner becomes of unsound mind.
Exploitation: Partner exploits the rights of others.
In-Capability of Partner: Partner becomes permanently incapabl
e.
Misconduct of Partner: Partner is guilty of misconduct.
Misuse of Powers: Partner misuses powers.
Transfer of Shares: Partner transfers shares without consent.
Continuous Loss: Business cannot be carried on without loss.
Breach of Partnership Act: Partner breaches agreements.

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Joint Stock Company: Multiple Choi

ce Questions
Description
These multiple-choice questions cover fundamental concepts related
to joint-stock companies, including their legal status, ownership, man
agement, and financial aspects.
Key Terms and Important Points
1. Which type of business organization has separate legal status apart
from shareholders?
c. Joint stock company
2. The owners of the company are:
c. The shareholders
3. The persons who manage the affairs of the company are called:
d. The directors
4. The persons who work for the formation of the company are called:
c. The promoters
5. Liability of the shareholders in a joint stock company is:
a. Limited
6. Which of the following companies can be listed in stock exchange?
d. Public company
7. Which business organization requires legal permission for business
commencement?
c. Joint stock company
8. The profit that is distributed among the shareholders is called:
a. Dividend
9. Joint Stock Company is formed under company ordinance:
c. 1984 AD
10. A joint stock company has all the following characteristics EXCEPT.
d. Unlimited liability
11. Shares issued to the promoters are called:
c. Deferred shares
12. The holding company is a company which has:
c. more than 50% shares of other company
13. The maximum capital stated in the memorandum of a company:
c. Authorized capital
14. A company can sell its shares on the following prices:
d. All the above
15. Which company requires a certificate of commencement?
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a. Public company
16. The debentures which can be converted into ordinary or preference
shares of the company:
b. convertible debentures
17. That part of the capital which the company has decided by special r
esolution shall not be called up unless there is a particular event or t
he company being wound up is called:
d. Reserve capital
18. Which of the following documents CANNOT be altered without the p
ermission of Court and Central Government?
b. Memorandum of Association
19. The audit of a public limited company is:
a. Necessary on yearly basis
20. A statutory meeting is called ____________ of getting the certific
ate of commencement.
c. After 3 months and before 6 months
21. Which of the following is an object of Ordinary resolution?
a. Appointment of the auditors
22. What is the time duration in which a public company is bound to cal
l general meeting of shareholders after getting the certificate of inco
rporation?
d. Within 18 months
23. The notice of special resolution must be given to members of the co
mpany _______before.
a. 21 days
24. First meeting of the shareholders of a company is called ________
______ meeting.
d. Statutory meeting
25. The minimum number of directors in a public ltd company:
d. Two
26. Debenture holders of a company are called:
b. Creditors
27. The directors are selected by:
a. Shareholders
28. The shareholders should be informed about the statutory meeting a
t least:
b. 21 days before
29. The public Ltd. Company is included in the list of:
c. Stock exchange
30. Which company issues shares to the public?

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b. Public Limited Company

31. The amount which a company issues for subscription is called:
b. Issued Capital

Limited vs. Unlimited Liability in Join

t Stock Companies
Description
The concept of limited and unlimited liability is crucial in understandin
g the risk and financial exposure of shareholders in a joint-stock com
pany.
Key Terms and Important Points
Limited Liability:
Shareholders are liable only up to the amount of their purchased s
hares. (Q2)
Personal assets are protected from company debts. (Q2)
Unlimited Liability:
Shareholders' personal assets can be used to cover company debt
s and losses. (Q2)

Joint Stock Company as an Artificial

Person
Description
A joint-stock company is considered an artificial person because it is
created by law and possesses legal rights and responsibilities similar
to a natural person, but without physical attributes.
Key Terms and Important Points
Artificial Person:
Created by law. (Q3)
Does not have physical attributes. (Q3)
Registered and a separate legal entity from its shareholders. (Q3)
Can own assets, enter into contracts, and sue or be sued. (Q3)
Has a common seal. (Q3)

Features of a Joint Stock Company

Description
Joint stock companies have distinct characteristics that define their s
tructure and operation.
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Key Terms and Important Points

Main Features: (Q4)
1. Separate legal entity
2. Long life compared to other businesses
3. Large-scale business
4. Shareholders can transfer their shares
5. Collects a large portion of its finance
6. Distributes profit as dividend
7. Management entrusted to the board of directors
8. Can borrow finance in its own name

Advantages of Joint Stock Compan

y
Description
Joint stock companies offer several advantages over other forms of b
usiness organizations, particularly in terms of capital, liability, and lon
gevity.
Key Terms and Important Points
Advantages: (Q5)
1. Larger Capital: Due to a large number of members.
2. Limited Liability: Liability limited to the purchased shares.
3. Long Life: Continues to exist regardless of changes in shareholders.
4. Expert Services: Can afford qualified experts and R&D department
s.
5. Democratic Set Up: Business matters settled by majority decisions.

Private vs. Public Company

Description
Private and public companies differ significantly in their structure, sha
reholder base, and regulatory requirements.
Key Terms and Important Points
Feature Private Company Public Company
Minimum Share
2 7
holders
Maximum Share
50 Unlimited
holders

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Stock Exchange
Shares not traded Shares traded
Trading
Minimum Direct
2 7
ors
Certificates Nee Certificate of Incor Certificate of Incorporation and C
ded poration ommencement

Capital Sources of a Public Compan

y
Description
Public companies have various sources of capital to fund their operati
ons and growth.
Key Terms and Important Points
Capital Sources: (Q7)
1. Shares: Total authorized capital divided into small units.
2. Debentures: Certificates issued against borrowed money.
3. Savings: Amount kept aside as "Reserve Fund" from the profit.

Shareholders vs. Debenture Holders

Description
Shareholders and debenture holders have different roles and rights wi
thin a company.
Key Terms and Important Points
Shareholders:
Owners of the company. (Q8)
Can participate in management. (Q8)
Receive dividends and bonuses. (Q8)
Elect directors. (Q8)
Bear the risk of the company. (Q8)
Debenture Holders:
Creditors of the company. (Q8)
Cannot participate in management. (Q8)
Receive fixed interest. (Q8)
Debenture is a risk-free investment. (Q8)

Comparison of Shareholders and De

benture Holders
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Description
A detailed comparison highlights the key differences between shareh
olders and debenture holders in terms of ownership, participation, ret
urns, and risk.
Key Terms and Important Points
Feature Shareholder Debenture Holder
Status Owner Creditor
Participati Can participate in manage Cannot participate in manage
on ment ment
Returns Dividend and bonuses Fixed interest
Bears the risk of the compa Does not bear risk of the comp
Risk
ny any

Debentures as a Secure Investment

Description
Debentures are considered a secure investment due to their fixed inte
rest rate and priority in repayment.
Key Terms and Important Points
Security of Debentures: (Q10)
Receive interest at a fixed rate.
Can withdraw principal amount after a fixed period.
Paid before any payment to shareholders.
Receive interest even if the company faces a loss.

Shares of a Company and Their Kind

s
Description
Shares represent ownership units in a company, and they come in diff
erent types, each with specific rights and privileges.
Key Terms and Important Points
Definition:
Total authorized capital divided into small units. (Q11)
Kinds of Shares: (Q11)
1. Preference Shares: Preferential rights on dividend distribution and
capital repayment.
2. Ordinary Shares: Paid after preference shareholders.
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3. Deferred Shares/Founders Shares: Issued to promoters, dividend

paid after all other shares.

Debentures: Definition and Kinds

Description
Debentures are certificates of debt issued by a company to raise long
-term funds. They come in various forms, each with different features
and conditions.
Key Terms and Important Points
Definition:
A certificate issued by a public limited company as a receipt of bor
rowed amount. (Q12)
Kinds of Debentures: (Q12)
1. Ordinary debentures
2. Mortgage debentures
3. Registered debentures
4. Bearer debentures
5. Convertible debentures
6. Redeemable debentures
7. Irredeemable debentures

Mortgage Debentures
Description
Mortgage debentures are secured by the company's assets, providin
g debenture holders with a claim on those assets in case of default.
Key Terms and Important Points
Mortgage Debenture: (Q13)
Secured by immoveable fixed assets of the company.
Debenture holder has the legal right to sell the mortgaged propert
y to recover his amount if the company fails to repay.

Terms for the Issuance of Shares

Description
Shares can be issued at different prices relative to their face value, aff
ecting the company's capital and investor returns.
Key Terms and Important Points
Terms of Issuance: (Q14)

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1. At Par: Sold at face value.

2. At Premium: Sold above face value.
3. At Discount: Sold below face value.

Issued vs. Subscribed Capital

Description
Issued and subscribed capital represent different stages in the proce
ss of raising capital through shares.
Key Terms and Important Points
Feature Issued Capital Subscribed Capital
Amount Larger amount Smaller amount
Relation Part of Authorized capital Part of Issued capital
Subscripti Can be subscribed and unsubs Can be called up and unc
on cribed alled

Nepotism and Monopoly in Joint Sto

ck Companies
Description
Despite their advantages, joint stock companies can be susceptible t
o issues like nepotism and the creation of monopolies.
Key Terms and Important Points
Nepotism: (Q16)
Directors offer jobs to inefficient relatives.
Can lead to company losses.
Monopoly: (Q16)
Large size and resources can create market dominance.
Can exploit consumers and small businesses.

Contents of Article of Association

Description
The Article of Association outlines the internal rules and regulations g
overning the management and operation of a company.
Key Terms and Important Points
Contents: (Q17)
1. Capital and its division into shares
2. Different types of shares

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3. Value of shares and their transfers

4. Method for the change in capital
5. Rights of the shareholders
6. Name and number of directors
7. Power and duties of directors
8. Methods to call the meeting
9. Voting powers of shareholders
10. Appointment of directors
11. Accounts and their audit
12. Appointment of auditors their rights and duties

Memorandum of Association
Description
The Memorandum of Association is a foundational document that def
ines the scope, powers, and objectives of a company.
Key Terms and Important Points
Definition:
A document that determines the rights, powers, and objectives of
a company. (Q18)
The foundation on which the structure of the company rests. (Q18)
Considered the legal document of the company. (Q18)
Requires court permission for alteration. (Q18)

Liquidation of a Company
Description
Liquidation, or winding up, is the process of terminating a company's l
egal existence by selling its assets and paying off its liabilities.
Key Terms and Important Points
Liquidation of Company: (Q19)
Ending the legal existence of the company.
Selling all assets and converting them into cash.
Ways of Winding Up: (Q19)
1. Compulsory (By Court)
2. Voluntary winding up
Members
Creditors
3. Voluntary winding up under the supervision of court

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Statutory Meeting
Description
The statutory meeting is the first meeting of a company's shareholder
s, aimed at informing them about the company's affairs and discussi
ng the statutory report.
Key Terms and Important Points
Statutory Meeting: (Q20)
First meeting of the company’s shareholders.
Informs shareholders about the company's affairs.
Discusses the statutory report.
Must be held within 3-6 months from the date of commencement
of business.
Requires at least 21 days’ notice to all shareholders.
Statutory report must be signed by auditors.

Disqualification of Company Directo

rs
Description
Directors can be disqualified from their positions for various reasons, l
eading to a vacation of office.
Key Terms and Important Points
Reasons for Disqualification: (Q21)
1. First directors (Promoters) resign in the first Annual General Meetin
g (AGM).
2. Director fails to get qualification shares.
3. Becomes of unsound mind.
4. May be declared insolvent.

Disqualification for Being a Director

Description
Certain individuals are ineligible to become directors of a company d
ue to specific disqualifications.
Key Terms and Important Points
Disqualifications: (Q22)
1. A minor

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2. A person of unsound mind

3. A person convicted by a court of law for an offence
4. A person who does not give written declaration as a director
5. A person who is not a member of a company

Resolution and Its Kinds

Description
A resolution is a formal expression of opinion in a meeting, obtained t
hrough majority votes.
Key Terms and Important Points
Definition:
The formal expression of opinion in any meeting obtained by the m
ajority votes of members. (Q23)
Kinds: (Q23)
1. Ordinary Resolution
2. Special Resolution
3. Extraordinary Resolution

Company Meetings and Their Kinds

Description
Company meetings are gatherings of individuals to address and reso
lve business issues.
Key Terms and Important Points
Definition:
When two or more persons sit together by a previous notice to solv
e any problem. (Q24)
Kinds of Meetings: (Q24)
1. Director’s Meeting:
Held at least 4 times a year.
21 days prior notice must be given to all directors.
2. Shareholder’s Meeting:
Annual General Meeting (AGM):
First AGM must be held within 18 months after getting certificate
of incorporation.
Interval between two AGMs should not exceed more than 15 mo
nths.
21 days prior notice must be given to all shareholders.
Statutory Meeting:

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Informs shareholders regarding the affairs of the company.

At least 21 days’ notice must be served to all shareholders.
Extra Ordinary Meeting:
Can be held anytime in between the year before AGM.

Joint Stock Company: Definition an

d Characteristics
Description
A joint-stock company is a legal entity separate from its shareholders,
possessing distinct characteristics that define its operation and struct
ure.
Key Terms and Important Points
Definition:
A Joint Stock Company is an artificial person as it does not posses
s any physical attributes of a natural person and it is created by la
w. (Q25)
It is registered and a legal entity apart from its shareholders. (Q25)
It can own assets, enter into contracts, sue or be sued. (Q25)
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