The needs of the modern world economy have created the conditions for the development of enterprises of such an organizational form as an open joint-stock company (OJSC). It gives its members great opportunities and many privileges.
What is OJSC
An open joint stock company is an organization that consists of individuals and legal entities vested with the right to conduct joint business activities. The authorized capital of such a company is divided into shares owned by its participants. An important feature and distinguishing feature of the OJSC is that shareholders are liable for obligations strictly within the value of the shares they own. And the joint-stock company itself is not liable for the property obligations of its participants.
According to the law, an OJSC is considered a legal entity, has the right to a name with a mandatory indication of the form of organization. The company must have its own charter, which is drawn up and approved by its participants. This document indicates the rights and obligations of shareholders and contains the main points governing the activities of OJSC. The branch is a structural unit of the company and must act in accordance with the charter.
What is the difference between JSC and CJSC
Many confuse these two organizational forms. To understand the differences, it is necessary to determine what OJSC and CJSC are.
Both organizational forms are commercial organizations whose authorized capital consists of shares. A characteristic feature of a closed joint-stock company (CJSC) is the restriction of the right to own shares. That is, only persons who created such an organization can own the securities of an enterprise. No one else has the right to acquire and dispose of shares. And if one of the participants in the company decided to leave the organization and sell its own securities, then such a deal can only be made with other shareholders of the company.
Founders of OJSCs can be persons in limited numbers, and practically any person or legal entity has the right to purchase shares. Each holder of securities of an open company can transfer its own shares in favor of third parties without the consent of other shareholders. Also, OJSC is obliged to periodically publicly submit its financial statements.
To answer the question of what an OJSC is, you should understand all the features of this organizational form.
Advantages of OJSC
An open joint-stock company has great opportunities in comparison with other organizational forms. The fact is that the property of OJSC is formed from income 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 everyone. The company receives the funds received for long-term use and has the right to apply it for a variety of purposes: paying loans, investing in new industries, and research. This is very beneficial because you do not have to pay interest on fixed dates, as in the case of using borrowed bank funds.
An important advantage of this form of organization is the ability to attract additional sources of financing by issuing bonds. So, an JSC can raise funds for 10 years or more by paying interest on bonds from the gross profit of the organization. For comparison, the dividends on shares of the company must pay out of net profit. For this reason, bonds are considered a more profitable financial instrument.
A significant advantage of OJSC is the ability to motivate staff using the same securities. So, the management of the enterprise can offer managers in the future to buy a block of shares at relatively low prices. This tool allows you to create motivation for the effective operation of the enterprise, as managers will try to work more productively. Indeed, the higher the market value of the shares of the company, the more staff can earn. This feature is the key argument explaining what OJSC is.
There are other advantages. For example, the word “open” means the public status of an organization. Due to this, the company has the opportunity to expand its fame, develop credibility and prestige in the market. In addition, securities of an enterprise of this form of organization are sold on financial exchanges, which allows daily quotation of shares and bonds of the company. And this means that every shareholder can sell his securities at any time. Financial markets best illustrate what OJSC is.
Negative sides of OJSC
The organizational form of the company also has some disadvantages that appear during the activity. The biggest 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 tax rates are high, then the existence of society is quite expensive.
A negative point of the OJSC is also considered insufficient flexibility and efficiency in decision-making by the enterprise management, and even the possibility of transfer of control over the company to competitors.