Limitations of Joint Stock Company

In spite of many advantages of the company form of business organization, it also suffers
from some limitations. Let us note the limitations of Joint Stock Companies.
(i) Difficult to form: The formation or registration of joint stock company involves a
complicated procedure. A number of legal documents and formalities have to be
completed before a company can start its business. It requires the services of
specialists such as Chartered Accountants, Company Secretaries, etc. Therefore,
cost of formation of a company is very high.
(ii) Excessive government control: Joint stock companies are regulated by
government through Companies Act and other economic legislation. Particularly,
public limited companies are required to adhere to various legal formalities as
provided in the Companies Act and other legislation. Non-compliance with these
invites heavy penalty. This affects the smooth functioning of the companies.
(iii) Delay in policy decisions: Generally policy decisions are taken at the Board
meetings of the company. Further the company has to fulfill certain procedural
formalities. These procedures are time consuming and therefore, may delay action
on the decisions.
(iv) Concentration of economic power and wealth in few hands: A joint stock
company is a large-scale business organization having huge resources. This gives a
lot of economic and other power to the persons who manage the company. Any
misuse of such power creates unhealthy conditions in the society, e.g., having
monopoly over a particular business or industry or product; exploitation of workers,
consumers and investors.