Bubble Act
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| Territorial extent | Great Britain Later extended to Colonies, including: |
|---|---|
Status: Repealed | |
Bubble Act 1720 (also Royal Exchange and London Assurance Corporation Act 1719) (6 Geo I, c 18) was an Act of the Parliament of Great Britain passed on 11 June 1720 that incorporated the Royal Exchange and London Assurance Corporation, but more significantly forbade the formation of any other joint-stock companies unless approved by royal charter. Its provisions were extended later by the Bubble Schemes, Colonies Act 1740 (14 Geo. II, c. 37) to include its colonies, particularly Massachusetts.[1]
Background
Various motivations have been suggested for the Act. They include the desire to prevent the speculation that produced the contemporary South Sea Bubble, an attempt to prevent smaller non-charter companies from forming and so reduce the importance of Parliament in regulating businesses; or the South Sea Company itself wanting to prevent other bubbles from forming that might have decreased the intensity of its own.[2] Recent scholarship indicates that the last was the cause: it was passed to prevent other companies from competing with the South Sea Company for investors' capital.[2][3]
In fact, the Act was passed in June 1720, before the peak of the bubble. The Act was repealed in 1825.
Contents
The most significant provision read:
All undertakings... presuming to act as a corporate body... raising... transferrable stock... transferring... shares in such stock..., either by Act of Parliament or any charter from the Crown,... and acting under any charter... for raising a capital stock... not intended... by such charter... and all acting... under any obsolete charter... for ever be deemed illegal and void.[2]
Under the terms of the act, the Royal Exchange Assurance Corporation and the London Assurance Corporation were granted charters to write marine insurance. Until 1824, they remained the only joint-stock firms with such a charter.
See also
- R v Cawood (1724) 2 Ld. Raym. 1361, the only prosecution brought under the Act which, according to L.C.B. Gower, (Principles of Modern Company Law, 4th Ed., 31) "decided nothing of importance".
Notes
- ^ Max Savelle, Empires to Nations: Expansion in America, 1713-1824, p.43 (1974)
- ^ a b c Ron Harris, 'The Bubble Act: Its Passage and Its Effects on Business Organization' The Journal of Economic History, Vol. 54, No. 3. (Sep., 1994), pp. 610-627
- ^ Cooke, Corporation Trust and Company at 82; Gower (1952) 68 LQR 214
References
- J Carswell, The South Sea Bubble (London, Cressett Press 1960).