A joint-stock company is a form of corporation that acquires legal personality from the date of its incorporation and is commonly used for the conduct of business. The company's share capital consists of the total contributions of its shareholders. The shares can be publicly traded, which provides an incentive for investors needed for further business development. At the time of the incorporation of the company, the shareholders can declare it a closed company, which means that shares can be transferred to any person, but the current shareholders must have a prior disclaimer. At the time of incorporation, shares may be issued in a variety of forms, including bearer, registered, or preferred.

Functions of a joint-stock company
The ultimate goal of all businesses is to run a business and make a profit. A joint-stock company is a useful type of company for attracting investors and additional funding in return for the investor receiving shares that give the right to dividends. Stock corporations often grow into large corporations. They are most commonly found in the financial services sector – credit institutions, banks, insurance companies and other payment and financial institutions are very often public companies. These companies obviously need financial stability and plentiful funds in an emergency.

Advantages and disadvantages of a joint stock company
The advantage of this type of incorporation concerns the liability thresholds. In principle, the shareholders of a stock corporation are only liable up to the amount of their contribution to the company. So if the company goes bankrupt, creditors cannot claim compensation or seek damages from the shareholders personally. Conversely, the company is not liable for the liabilities of its partners. The strict separation between shareholder and corporate liability follows the principle of the legal person.

Another benefit is the ability to raise the necessary funds to start the business. In the start-up phase, it can be difficult for a company to obtain seed capital. However, if few business partners make an investment to achieve a single goal, the business start-up plans are likely to be more realistic. At the same time, joint investments are directly linked to joint profit sharing. So if the company is making a profit, the dividends should be paid pro rata to each shareholder.

The duties and powers of a board of directors of a company are based on the applicable commercial law and the articles of association of the company. A public company typically has a two-tiered board of directors, which helps to control day-to-day decision-making and prevent mistakes, but a complicated governance structure can hamper the speed of decision-making at times when rapid response is required.

If you are planning to set up a company in the form of a public company, we strongly recommend that you contact us beforehand. We will inform you comprehensively and in detail about tax planning options and the most efficient corporate structure for your company.