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have served to aggrandize some millionaire who has been able to purchase, on his own terms, from the wretched man, who may have spent years in perfecting the creation of his intelligence and knowledge. Which of the great discoveries and inventions that have, within the last century, effected so mighty a revolution in human affairs, has not been at first, and some for very many years, regarded as entirely theoretical-mere visionary schemes, and certainly regarded as anything but reasonable speculations Why, when the legislature, by granting to rail. way, and other, companies, Private Acts, limiting the liability of the shareholders, recognizes and acts on the principle for which we contend, should this advantage be so confined, and what fair grounds are there for drawing any distinction between limited and extensive undertakings? The reply to this question brings us to the consideration of the two principal, we may add, almost the only reasons which are offered to the proposed change. It is considered that such a system as the commanditaire partnerships would expose both the individuals composing such partnerships, and the general public trading with such firms, to fraud. That small capitalists would be cheated, or, rather, would cheat themselves, by trusting too readily their money to adventurers, and that if they were not robbed by their acting partners, if the gerans did not all turn out swindlers, yet that, induced by the desire of large profits, and knowing their liability to be limited, they would embark their capital in the most desperate undertakings. Further, it is contended that this desperate trading, in cases where it was successful, would be ruinous to the creditors of such firms, whilst under the present law the creditors can sue each of the partners to his last penny, and compel him to answer the engagements of the partnership. It was likewise stated that this very necessary and useful check on rash, or over, trading, could not be removed without endangering the community. For our part, so far as the individuals composing the firm are concerned, we cannot see the necessary consequence that a man will be quite reckless as to losing half his fortune, and in order to render him prudent he must be exposed to utter ruin. We cannot say, unless you make a capitalist liable to his last penny he will chuck his money into the wildest and most extravagant schemes, which must sweep away all that he has invested, and bring ruin on hundreds who have traded with the firm, calculating on his unlimited liability, and know

ing him to be a man of capital. Such an argument, so far from being reasonable, is opposed to all probability. After setting aside the sum that may be necessary for the support of his family, it certainly appears to us that no man of ordinary sense will rush wildly into every desperate speculation with that sum which is intended as a portion for his children, and which he has realized after years of labor, because, forsooth, he may not be stripped of his last shilling. We are not to legislate as if our traders were so incompetent as to fall victims to the first knavish speculator who presents himself. We must assume that men will exercise, in the investment of their capital, the same prudence necessary in the conduct of all the affairs of life, and any system which would attempt to force them must inevitably fail. If this be so, how absurd is it to allow a determination of attaining this impossible end to stand in the way of a great improvement, the benefit of which cannot be disputed.

We find in the evidence of Messrs. Lietch and Field* a practical illustration of the manner in which this unlimited liability fails in protecting the partners or shareholders, and imposing on them that caution which, it is argued, is so efficacious in saving men from dangerous speculations, and protecting them from fraud. The former gentleman states that, of his own knowledge, Scotch joint stock banks have proceeded to a frightful extent re-discounting bills, being enabled to do so through the unlimited liability of the unfortunate shareholders. The capitalists who re-discounted these bills were well aware that it was not part of the legitimate business of the bank, and that the directors were exceeding their honest course of trade when obliged to ask such assistance. Those discounting, however, looked to the more stable of the shareholders, and depended on their being unlimitedly liable, and, without the slightest scrutiny as to the character of the paper they were taking, they re-discounted the bills freely, and with safety to themselves. Mr. Lietch's evidence is unimpeachable, he gives tine, and place, and circumstances. He states,

"I could enlarge to a very great extent upon the evils arising from the unlimited liability of parties in joint stock banks, and the system I have mentioned of obtaining credit improperly: I mean to say credit upon what would be improper bankers' paper. I am, myself, in connexion with the North of England Bank, which stopped

See House of Commons' Report-1851. Query 953 et seq., P. 145.

payment some years ago, and is now being wound up in the Court of Chancery, and I have had opportunities of having interviews with the managers of various joint stock banks both in England and Scotland creditors of that concern, and I have, myself, personally charged the managers with their having improperly extended credit to that establishment upon the re-discount or deposit of paper which, they must be very well aware, was not proper, legitimate, banking paper, and the answer that was given to me by them was, not by one but by many, that it was no matter to them, all they looked at, from time to time, was the composition of the share list. Had it not been for that system of unlimited liability such improper credit would never have been extended, because, when a private banker takes paper to re-discount, which he would very rarely venture to do, except under circumstances which he could explain when he takes the paper to rediscount, the bank, or discounting establishment, taking the paper scrutinizes its character; whereas in the case of the joint stock bank with unlimited liability, they look less to the character of the paper than to the credit of the innocent shareholders who know nothing of what is going on."

So much for the value of the present law in protecting rash, and careless, persons, and fencing them round with safeguards from fraud. We see here that the limited liability system, instead of removing the safeguards which, it is argued, unlimited liability imposes, would extend a much greater protection to the partners, or shareholders. We do not contend that a limited liability would save men from fraud. Limited liability, or unlimited liability, there will be dupes and knaves to the end. Indeed, an instance of the insufficiency of the unlimited liability law to make speculative individuals act with due caution has come within our own knowledge. A small company was recently organized for working a mine in this country on the cost book principle, and in the list of directors appeared the names of one or two men well known as persons of intelligence and character. After a very short period had elapsed the shares were at a considerable premium in the market, and were largely bought by people in this city. Suddenly the shares began to fall, until at length they were at more than fifty per cent discount, and then, for the first time, people began to question as to the constitution of the company. Some had enrolled their names, and made themselves liable as shareholders, but the great majority were merely the holders of the scrip. A call was made, and this, coupled with the extraordi nary depreciation of the shares, caused enquiries to be made as to the management of the company. The secretary refused to give any answers until the querist had paid his call, and

had his name enrolled. A meeting was called in Dublin, and one of the shareholders was despatched to London, for the purpose of making enquiries before the scrip holders should commit themselves, or pay their money; and then, and only then, it was learned that the director whose name was principally looked to, in this country, had declined taking any shares, or acting; that the directors had made themselves a present, by the deed of incorporation, of £300 worth of shares each (and this in a very small undertaking). It was further discovered that there was a very serious item for stockbroker's charges in getting off the shares, and one, also, for buying in their own shares to give them a fictitious value in the market. So much of the evil is at present known, and amongst these shareholders more than one has gone to the trouble and expense of visiting the mine personally, to enquire into its prospects, though they never gave one thought to the management until it was too late. What difference would it have made in this case, as far as prudent precaution is concerned, whether the liability was limited or unlimited? None-the parties would have been equally careless.

The second objection, that the public would not be protected in their dealing with such firms, if the liability of its shareholders were limited, and that it is unjust that those who share the profits should not bear the losses, is by much the most specious of those put forward by the opponents of the commanditaire system. We have already shewn, that if the money be advanced by the capitalist in form of a loan to traders as it necessarily is at present, the creditors of the firm are in a much worse position than if that capitalist had been a commanditaire partner: we have not before us now any statistics which would show the proportion between the sums advanced by way of loans to trade, and the sums invested by partners, but we should be within the mark in asserting, that for one man who continues a partner, and thus furnishes a firm with means, there are twenty who advance the money by way of loan. Loans, it will hardly be disputed, in the great majority of cases are the form in which capital is now joined to trade and manufactures: if we had a limited liability law of partnership the partners would be to the lenders in the inverse ratio to that in which they at present stand, and thus in the greater number of cases. would a better provision be made for the general public in their dealing with firms organized on this principle. Independent

of this, with proper provisions as to punishing fraud or breaches of faith, and making generally known the capital of the firm, it will be seen that persons entering into contracts with these companies by taking a little reasonable care, will be amply protected. These parties know the amount of the subscribed capital of such a firm; they know what contracts would be within the scope of their finances, and if the firm should become bankrupt they have a safe-guard against suppression of property, as there is a sum registered, and which must be forthcoming or accounted for, to answer the liabilities of the partnership. We must confess that the present system of unlimited liability, supposing that loans were entirely out of the case, seems to ensure, better than any other, third parties in their dealings with partnerships. We cannot, however, see on what principle of equity or justice such a liability as that at present imposed is based; neither can any reason be given why such extraordinary care should be taken for the protection of rash, or careless, or roguish persons, in their dealings with firms, to the very great detriment of the community. With proper precautions the limited liability system would give all reasonable and fair security to honest traders who chose to act with ordinary care and circumspection. It is for such the legislature is to provide; its duty is not to place unnatural and unreasonable power in the hands of men who will act rashly and carelessly, even whilst that power is created for their protection. Mr. Commissioner Fane, who from his experience in the Bankruptcy Court ought to be a high authority, speaks most favorably of the introduction of this commanditaire system; and Sir G. Rose, one of the masters in Chancery, in England, in his written reply to the queries addressed to him as to the propriety of limiting the liability of partners, providing at the same time guards against fraud and over-speculation, gives his opinion in the following brief and accurate manner :- "Well guarded by proper regulations, I am of opinion that the measure suggested (the introduction of commanditaire partnerships) would be a great improvement, subject as aforesaid, I see no reason why it should not extend to banking or to any employment of capital. The essence of such an alteration should be, that all persons should have the easy means of knowing the amount of commandite capital invested by the respective contributors, so as to judge of the liability and means of those with whom they may contract."

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