DISADVANTAGES OF THE JOINT STOCK COMPANY
Conflicts are a necessary aspects of human organization. However, differences among shareholders of a limited liability companies and management can easily pluralize the company’s operations. This can result from differences in opinions as to how the company should be managed and how the company’s profit must be used. conflicts may also come from views on how the company should deal with a hostile take-over.
- Difficult to start
It often more difficult to start a Joint Stock Company than a sole ownership enterprise for example. This is due to the fact that starting a Joint Stock Company requires huge capital investment. Registering a Joint Stock Company also demands that the shareholders provide a lot of documents and go through a maze of procedures before the company get registered or incorporated. The bureaucracy and red-tapism at the Registrar-General’s department may result in some owners of a Joint Stock Company to compromise business ethics to get things through.
- Detachment of directors from management
Unlike the sole proprietor, the shareholders and or directors joint stock company are mostly detached from management, this can minimize management’s interest and commitment to advance the companies objectives.
- Undermines privacy
Joint Stock Companies also have the problem with keeping company’s operation away from public view. this because by law the accounts of a Joint Stock Company are opened to public scrutiny. Further, important information pertaining to the company must be made available to the Registrar of companies during and sometimes after the company is registered.