Incorporated Business / Joint Stock Companies

Incorporated Business
We have so far looked at unincorporated business and have seen the main features of such business is that they do not have a separate legal existence from the owners.
We shall now focus on business units that are legally viewed as separate and distinct units from their owners. Such businesses are called in co-operated or joint stock companies. Incorporated business organizations are legally separate and distinct from their
owners or members.
The main forms of incorporated business or joint stock company include;

  • Companies
  • Co-operative societies
  • Public co-operation

These are advanced forms of companies where a group of people pull their savings together and contribute as capital to set up a business enterprises or companies. These companies are governed by Acts of parliament under the Kenya all joint
stock companies fall under the Kenya Companies Act = (cap 486) of 1948. The Act lays down the formation and general conduct of joint stock companies.

A company is a business registered by the registrar of companies Act. The Act of registering a company is known as incorporation.
Incorporation. This is a process that creates an organization separate and distinct from the person forming it (owners). The organization is known as a body corporate and registered company is known as a cooperation

NB companies are business organizations or units formed to carry out a specific activity.
They are organized by processing an existence that is separate and distinct from the persons who own it. Companies have rights and obligations of a natural person.

Rights and Obligations of Companies
1. It can own and dispose off property.
2. It can enter into a contract on its own name
3. It can borrow and lend money in its own capacity
4. It can hire and fire employees
5. It can sue and be sued in its own right
6. It can form subordinate agencies and its authority
7. It can spread information.

Features of a Company
It is an artificial person created through legal process. A company has rights and obligations of natural person e.g. holding and disposing property. A company has a perpetual life independency of the owners lives i.e. has perpetual succession. A company has a separate legal identity from the owner. A company is created for a particular purpose The owners of a company enjoy limited liability

Types of Companies
There are basically two types of companies. Namely

  • Public limited companies
  • Private limited companies

Public Limited Companies

A public limited company has a minimum number of 7 members with no maximum membership. The maximum membership normally is determined by the number of authorized shares (capital) of the company. In Kenya a public limited company has the term limited at the end.

Characteristics/features of a Public Limited Company.
1. Minimum membership is 7 with no maximum
2. Invites members of the public to subscribe to its shares
3. The shares are easily transferable among shareholders
4. It has a minimum of 3 directors
5. It has authorized minimum capita figure.

NB authorized share capital is to the total shares that have been legally authorized by the government during the company’s registration

A public limited company starts to operate after receiving a certificate of commencement ( trading)

A private Limited Company
This is a company with a minimum of 2 persons and a maximum of 50 persons excluding all past and present employees. A private limited company should have name ending with limited.

Characteristics of a Private Limited Company.
1. Has a minimum of 2 members and maximum 50 members
2. It does not invite the members of the public to subscribe its shares.
3. It’s shares are not easily transferable unless with consent with other share holders.
4. Operates with only one director.
5. Its shares don’t have authorized minimum capital figure It can start its operations after receiving its certificate

Limited liability Concept in Companies
This is the fact that the liability of companies of owners is restricted to he amount of investment of a company plus any other amounts that to be undertaken to be contributed towards payment of one companies debt. The word limited indicates that the liability of the owners of members in respect to this amounts (capital contributed) and not their personal property.
A company may be limited by-:

  • Shares
  • Guarantee.

Companies Limited by Shares
This is a company where member’s liability is limited to the value of shares held. The liability of members is limited to the share contributed.

Company limited by guarantee
This is a company whose members liability is limited to the amount that members have undertaken to contribute to the business debts.
These contributions may cover for;-

  • Court charges and
  • Any other expenses.

Formation of Companies
A company may be formed by any person or persons associating for a legal purpose through registration with a registrar of companies under the companies Act.

Although a limited company is a legal person it can only act through human agents who must register it with registrar of companies and for a company to be

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