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Advantages of Limited Liability.

countries have hitherto recognised, to recover debts and enforce contracts, and the public of its power to obtain redress for injuries done.

The righteousness of such a law needs not now to be discussed. Much difference of opinion upon it has prevailed; but the Legislature having decided upon its expediency, and prescribed the manner of its adoption, the duty of the lawyer and the citizen is to give his best assistance towards accomplishing the object avowedly sought by the advocates of this law-the encouragement of speculation, by the offer of an unlimited chance of gain with only a limited risk of loss.

Advantages of Limited Liability.

The advantages thus offered by Limited Liability are enormous. Probably few, even of those who have given some thought to the subject, are aware of the full extent of the boon conferred upon persons who speculate under its protection, as compared with persons not so privileged. So great is it, indeed, that it is difficult for individual traders, saddled with liability to pay their debts, perform their contracts and make reparation for their wrongs, to compete with rivals who can trade without such liabilities.

The advantages to be enjoyed by reason of Limited Liability may be thus enumerated.

You are permitted to incur debts without limit, but to prescribe your own limit for payment of them. You may invest 201., and trade to the amount of 250,000l.; if you succeed, your profits will be enormous; if you fail, you can lose only your 201.; the rest of the loss must fall upon your creditors. You are placed by this law in the

Advantages of Limited Liability.

advantageous position of a man who has everything to gain and nothing to lose. It is obvious wisdom, in any game of chance or skill, where the sum staked by you is limited, but the sum for which you play is unlimited, to play for the highest stake upon the table. Limited Liability places you precisely in this desirable position. You cannot lose more than your 201., while it is open to you to speculate for 1,000l., or for 100,000Z. The reason why prudent persons have not so speculated hitherto has been their consciousness that they must stake, not merely the 201. they lay down, but also an amount equal at least to the sum played for. Released by the law from that liability, and your loss limited to your small stake, you have no longer need for caution, and not only may you safely speculate without limit, but, according to the well-known doctrine of chances, it will be the most prudent course for you to do so.

Again, it seems not to be generally understood that by Limited Liability you enjoy another privilege, greater even than that of speculating for unlimited profits with liability only for limited loss. As you are not liable for debts beyond your 20%., so you are equally exempt from performance of inconvenient contracts. Hitherto, if you had made a contract of any kind, performance of it might have been enforced, however inconvenient to you. If, for instance, you had contracted to take a thousand quarters of wheat on a day named, at a price named; as the law was for partners, and is still for individuals, you were obliged to take the wheat on the day, even although it had then so fallen in price that you must lose 5001. by your bargain. The same obli

Advantages of Limited Liability.

gation to abide by his bargain was imposed upon the seller. If the wheat had risen in price, still he was bound to deliver to you, though at a loss to himself of 5007. But, with Limited Liability, you are enabled to refuse to perform your contract, if the price has fallen, while the person with whom you deal,not being equally privileged with yourself, will be compelled to perform his contract, if it should be for your advantage to enforce it. This privilege to enforce advantageous contracts, without being liable to perform disadvantageous contracts, gives to Limited Liability partnerships an incomparable superiority over individual traders, and will continue to do so until all are put upon an equal footing by the extension of the same great privilege to individuals as partners now enjoy.

It is the like with other liabilities to which individuals are now subject, but from which partnerships with Limited Liability are exempt. There is a large class of liabilities, known to the law as wrongs, which in the course of business are often done accidentally, but for which the law, nevertheless, makes the doer answerable in damages, such as a stage-coach killing a passenger, a ship running down another ship, undermining a house, and so forth. For none of these acts is a Limited Liability Company responsible beyond the amount of its shares subscribed, and if those shares are paid up, nothing, not even costs, can be recovered by the person wronged if an action be brought; but, practically, no person will bring an action against a Company from which he can recover nothing.

Many other special advantages and immunities

The new Act.

flowing from the privilege of Limited Liability might be enumerated, but they will readily occur to every reader. These, however, will suffice to convey to persons unacquainted with this new principle and its application some conception of the extent to which it is capable of being enjoyed.

The new Act.

The new Act is designed to consolidate the entire Law of Joint Stock Companies, and to regulate their constitution, government, and winding-up.

It comes into operation on the 2nd of November next, with this exception, that existing Companies, not already registered under the Joint Stock Companies Act, 1856, or excepted from this act, are required to register themselves under the provisions of this act before the 2nd of November, 1862.

Hitherto, Insurance Companies have been excepted from the privileges of Limited Liability. This exception is now removed, and all Companies may henceforth avail themselves of the great privilege of exemption from responsibility for their debts, contracts, and wrongs.

Henceforth no Company, Association, or Partnership consisting of more than ten persons may be formed for the purposes of banking, or of more than twenty persons for the purpose of "carrying on any other business that has for its object the acquisition of gain," unless incorporated under this act: (sect. 4.)

Excepting only

1. Companies formed under Act of Parliament.

Its Operation on existing Companies.

2. Companies constituted by Letters Patent.
3. Companies for working mines within the
jurisdiction of the Stannaries.

These three classes of Companies may continue under their existing constitution; so that this act does not necessarily affect Railway Companies or Partnerships on what is called the Cost-book principle: (sect. 4.)

This act governs—

I. Companies already existing.

II. Companies hereafter to be formed.

It will be more convenient to treat of each separately.

Its Operation on existing Companies.

Section 181 thus defines an existing Company required to register under its provisions:

181. For the purposes of this part of this act, so far as the same relates to the description of Companies empowered to register as Companies limited by shares, a Joint Stock Company shall be deemed to be a Company having a permanent paid-up or nominal capital of fixed amount, divided into shares, also of fixed amount, or held and transferable as stock, or divided and held partly in one way and partly in the other, and formed on the principle of having for its members the holders of shares in such capital, or the holders of such stock, and no other persons; and such Company when registered with Limited Liability under this act shall be deemed to be a Company limited by shares.

And an Insurance Company is thus defined by sect. 3.

3. For the purposes of this act a Company that carries on the business of insurance in common with any other business or businesses shall be deemed to be an Insurance Company.

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