What is JSC: the main advantages and disadvantages

The needs of the modern world economy created the conditions for the development of enterprises of such an organizational form as an open joint-stock company (OJSC). It gives its participants great opportunities and many privileges.

What is JSC

An open joint-stock company is an organization that consists of individuals and legal entities entitled to conduct joint business activities. The authorized capital of such a company is divided into shares belonging to its participants. An important feature and distinctive feature of the OJSC is that shareholders bear responsibility for obligations strictly within the limits of the value of the shares they own. And the joint-stock company itself is not responsible for the property obligations of its participants.

According to the law, OJSC is considered a legal entity, has the right to a name with a mandatory indication of the form of the organization. The society must have its own charter, which is drawn up and approved by its participants. This document identifies the rights and obligations of shareholders and contains the main items governing the activities of the Company. The branch is a structural unit of the company and must act in accordance with the charter.

What makes JSC different from CJSC

Many confuse these two organizational forms. In order to understand the differences, it is necessary to determine what JSC and CJSC are.

Both organizational forms are commercial organizations, the authorized capital of which consists of shares. A characteristic feature of a closed joint stock company (CJSC) is the restriction of the right to own shares. That is, securities of an enterprise can be owned only by persons who created such an organization. No one else has the right to acquire shares and dispose of them. And if one of the participants of the CJSC decided to leave the organization and sell its own securities, then such a deal can only be made with other shareholders of the company.

The founders of the JSC may be persons in limited quantity, and virtually any person or legal entity has the right to acquire shares. Each owner of an open type securities company may assign its own shares to third parties without the consent of other shareholders. Also, the company is obliged to periodically publicly provide its financial statements.

To answer the question about what JSC is, you should understand all the features of this organizational form.

The advantages of JSC

Open joint-stock company has great opportunities in comparison with other organizational forms. The fact is that the property of the company is formed from the proceeds from the sale of shares and profits from the activities of the enterprise. Thus, the organization's capital is accumulated by issuing securities and selling them to all comers. The company receives the received funds for long-term use and has the right to apply for a variety of purposes: paying loans, investing in new production, research. This is very profitable, because you do not have to pay interest on a fixed date, as in the case of using borrowed funds.

An important advantage of this form of organization is the possibility of attracting additional sources of financing by issuing bonds. So, the company can raise funds for 10 years or more, paying interest on bonds from the organization's gross profit . For comparison, dividends on AO shares must be paid out of net profit. For this reason, bonds are considered a more profitable financial instrument.

An essential advantage of the company is the possibility of motivating the personnel with the help of the same securities. So, the company's management can offer managers in the future to buy a stake at relatively low prices. This tool allows to create motivation for effective activity of the enterprise, as managers will try to work more productively. After all, the higher the market value of the shares of the company, the more the staff will be able to earn. This feature is the key argument explaining what JSC is.

There are other advantages. For example, the word "open" means the public status of the organization. Due to this, JSC has the opportunity to expand its popularity, develop prestige and prestige in the market. In addition, the company's securities of this form of organization are sold on financial exchanges, which allows daily quoting of shares and bonds of the company. And this means that each shareholder can sell his securities at any time. Financial markets best illustrate what OAO is.

Negative aspects of OJSC

The organizational form of the company also has some shortcomings, which are manifested during the activity. The most serious problem is double taxation. The fact is that the company must pay income tax, and then still transfer to the state budget a percentage of dividends. If the tax rates are high, then the existence of society is quite expensive.

Negative moment of the Company is also considered insufficient flexibility and efficiency in making decisions by the management of the enterprise, and even the possibility of transferring control over society to the hands of competitors.