BOOK THE FIFTH.

OF PARTICULAR PARTNERSHIPS.

CHAPTER I.

OF JOINT STOCK COMPANIES IN GENERAL.

COMPANIES, not trading upon a joint stock, or, in other words, regulated companies, have existed from very early times. Perhaps the most ancient is that of the Merchants Adventurers, better known in modern times by the name of the Hamburgh Company (a). The privileges of this company, which were obtained from John Duke of Brabant, were confirmed by letters patent of King Edward the Third, and have been, it is believed, uniformly recognised by succeeding monarchs (b). The East India Company, which was established in 1599, was one of the first which traded upon a joint stock. That company, however, likewise partakes of the nature of a regulated company; and it has not been, until comparatively

(a) Anderson's Hist. Commerce, Vol. 1, p. xxv. When companies do not trade upon a joint stock, but are obliged to admit any person properly qualified, upon paying a certain fine, and agreeing to submit to the regulations of the company, each member trading upon his own stock and at his own risk, they are called regulated companies. Smith's Wealth of Nations, Book 5, chap. 1; and see Encyc. Brit. tit. Com

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pany; Montefiore, tit. Company. Dr. Adam Smith enumerates several regulated companies, which are all for foreign commerce; but he observes, that regulated companies resemble, in every respect, the corporation of trades so common in the cities and towns of all the countries of Europe. In fact, there seems to be no difference between them.

42.

(b) Malyne, Lex Mercat. chap.

modern times, that joint stock companies, in the popular sense of the expression, have been in any degree encouraged. These, however, have become, of late years, so numerous and important, that it seems proper to trace the legal opinions which have from time to time existed respecting them; and to that end, to examine, as concisely as possible, the circumstances of their origin, suppression, and revival. In subsequent sections we shall endeavour to point out in what manner and to what extent they are affected by the general law of partnership.

It ought, however, to be premised, that our remarks on trading associations will be confined to this last class of companies, they alone coming within the scope and design of this Treatise. By joint stock companies, therefore, is here intended those which are unincorporated, and which trade upon a joint stock (a).

SECTION I.

History of the Bubble Act, and Remarks on the Legality of Joint Stock Companies.

IN the year 1711, the debts of the Navy being found to amount to more than five millions, and there being other public debts of a large extent, Harley formed the scheme of raising a fund for the payment of £6 per cent. interest on those debts, by making permanent all the duties on wines, vinegar, tobacco, India goods, wrought silks, whale fins, &c. With a view to give further satisfaction to the public creditor, he formed the additional project of granting a monopoly of a trade to the South Sea, or coast of Spanish America, to the

(a) As to the rights and liabilities of companies which are incorporated and trade upon a joint stock, see Beverley v. Lincoln Gas Light Company, 6 A. & E. 828, and the several cases there cited. It appears that these companies may now be sued in indebitatus assumpsit for

goods sold and delivered, though the contract be not under seal; but that they cannot be sued on their acceptance, unless they have a power given to them expressly or impliedly from the object of the corporation to accept bills.

several proprietors of this funded debt, and of incorporating them for the purposes of such trade (a).

Accordingly, by the 9 Anne, c. 21, s. 1, reciting the various debts, and that "her Majesty's most dutiful and faithful subjects, the Commons, being duly affected with the deepest sense of the happiness they enjoyed under her Majesty's most gracious and wise administration; and being truly desirous to do all that became dutiful and faithful subjects, to render happy and glorious the reign of the best of sovereigns; and having taken into their most serious consideration all the said debts and deficiencies, and the many ill consequences which might arise to the public thereby, if not timely remedied; and being heartily zealous to preserve the honour of her Majesty and the nation, and to establish the public credit, and to enable her Majesty to prosecute the war so necessarily entered into, with the utmost vigour, until such a peace should, by the blessing of Almighty God, be obtained, as might be for the honour of her Majesty and the lasting security of her kingdoms," &c., it was enacted, that the impositions we have mentioned on wines, &c., should be in full force for ever. By the 25th section of the same act, reciting that it would be for the great ease and advantage of the persons concerned in the said debts and deficiencies, that they should be made one company; and to "the end and intent that the trade to the South Seas, and other parts within the limits thereinafter mentioned, might be carried on, for the honour and increase of the wealth and riches of the realm," it was enacted, that her Majesty might, by letters patent, incorporate the persons interested in the public debts intended to be provided for by the act. The subsequent sections relate to the powers, constitution, and management of the company, and the limits of their trade.

Such was the origin of the South Sea Company. But the advantages expected from this act of Parliament turned out to be visionary. By the peace of Utrecht, Spain and the Indies being confirmed to Philip the Fifth, that monarch was too jealous to admit the English to a free trade in the South Sca; and instead of the advantageous commerce which Harley had held forth, the company obtained only the assiento contract, or the privilege of supplying the Spanish colonies of America

(a) Coxe's Walpole, Vol. 1, p. 126; Tindal, Vol. 4, p. 204.
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with negrocs for thirty years, with the permission of sending to Spanish America an annual ship, limited both as to tonnage and value of cargo; of the profits of which the King of Spain reserved to himself one fourth, and £5 per cent. on the other three fourths (a). It is manifest from this, that the hopes which had been held out to the company, of a free trade to the South Seas, were delusive. The company was accordingly, from time to time, bolstered up by acts of favour on the part of the Monarch or of the Legislature (b), and ultimately was made the means of the most notorious deception and the most extensive ruin.

The King, at the commencement of the Session of 1719-20, had recommended the Commons "to turn their thoughts to all proper means for lessening the debts of the nation." To attain this end, the primary object of the Government was the reduction of the irredeemable annuities created in the reigns of William and Anne, for long terms of years, amounting to £800,000 per annum (c). A scheme was laid to reduce all the public funds into one. The South Sea Company and the Bank of England presented their several proposals to the House of Commons. The liberty of taking in the national debts, and consequently, of increasing their capital stock and yearly fund, was looked upon as a very valuable benefit. The contest, therefore, between these two companies was very great; but the South Sea Company being resolved at all hazards to enjoy the privilege held forth to them, made an offer amounting in the whole to £7,567,500 (d). The offer was accepted by the minister; and accordingly, the act of 6 Geo. 1, c. 4, was passed "for enabling the South Sea Company to increase their present capital stock and fund, by redeeming such public debts and incumbrances as are therein mentioned," &c.

At the time when this act was passed, the public rage for speculation was as its greatest height. It cannot, perhaps, be said that the conduct of the South Sea Company was the sole cause of the spirit of adventure which was abroad, because, a few years before this period, we read of bubbles sufficiently important to attract the notice of the Legislature (e). It is certain, however, not only that the acts of this company in

(a) Coxe, Vol. 1, p. 127. (b) Anderson's Hist. Commerce, Vol. 2, pp. 266, 277.

(c) Anderson, 285.

(d) Tindal, Vol. 4, book 27.
(e) Anderson, 250.

creased the prevailing excitement, but that they were unable to fulfil their engagement with Government, without further availing themselves of that love of gainful enterprise which had seized the public mind (a). Imaginary advantages were accordingly held forth; groundless and mysterious reports were circulated concerning valuable acquisitions in the South Sea; dividends of ten, thirty, and even fifty per cent. were voted, which the directors knew could never be paid, and for which there was no foundation. Nor were boastings and exaggeration confined to the profits of the scheme. Rumours were spread that the company, by monopolizing the national debt, would reduce the Government to the necessity of applying to them for loans, and might, possibly, even obtain a majority in the House of Commons, and make and depose ministers at pleasure (b).

The artifices which were thus resorted to, to support the credit of the South Sea adventurers, were attended, for a short time, with almost incredible success. Even then, however, says a judicious historian, there happened such sudden fluctuations in their stock, sometimes even in the space of a few hours, as might have given clear indications of its precarious value, notwithstanding the various acts daily practised to keep it constantly rising (c). But the immediate cause of the company's destruction is well known. The thirst for speculation was not confined to the proprietors of the South Sea scheme. The whole nation had become adventurers, and every day produced new commercial companies, some for useful, others for the most chimerical purposes; some founded on obsolete charters, and others, the most numerous, not affecting the least authority of that nature (d). The South Sea Company became jealous of these societies, which they denominated bubbles; and being desirous to monopolize all the money of the speculators, ob

(a) Coxe, 134.

(b) Ibid. and see Anderson, 287. (c) Anderson, 287.

(d) Id. 288. Tindal, Vol. 4, book 27. In Anderson, several hundreds of these speculations are enumerated. The recent bubble years were equally productive. At the end of

1825, the number of the various companies, (calculating for the two years, 1824 and 1825), may be stated thus:-established, 127; abandoned, 118; projected, 379; total, 624. See a Complete View of the Joint Stock Companies, by H. English. London, 1827. Boosey & Sons.