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GMGT 3030 (6)
Lecture 6

lecture 6.docx

2 Pages

General Management
Course Code
GMGT 3030
David Balkin

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The UK Bubble Act 1720's prohibition on establishing companies remained in force until its repeal in 1825. By this point theIndustrial Revolution had gathered pace, pressing for legal change to facilitate business activity. The Bubble Companies, etc. Act 1825 was the beginning of gradual lifting on restrictions, though business ventures such as those chronicled by Charles Dickens in Martin Chuzzlewit under primitive companies legislation were often scams. Without cohesive regulation, proverbial operations like the "Anglo-Bengalee Disinterested Loan and Life Assurance Company" would be undercapitalised ventures promising no hope of success except for richly paid promoters. Then in 1843, William Gladstone took chairmanship of a Parliamentary Committee on Joint Stock Companies, which led to the Joint Stock Companies Act 1844. For the first time it was possible for ordinary people through a simple registration procedure to incorporate. The advantage of establishing a company as a separate legal person was mainly administrative, as a unified entity under which the rights and duties of all investors and managers could be channeled. The most important development, was the Limited Liability Act 1855, which allowed investors to limit their liability in the event of business failure to the amount they invested in the company. These two features - a simple registration procedure and limited liability - were subsequently codified in the first modern company law Act, the Joint Stock Companies Act 1856. This was subsequently consolidated with a number of other statutes in the Companies Act 1862, which remained in force for the late century, up to and including the time of the decision in Salomon v A Salomon & Co Ltd. Most corporate charters were, and still are, regulated by the states. Prior to the late 19th century, most companies were incorporated by a special bill adopted by legislature. By the end of the 18th century, there were about 300 incorporated companies in the United States, most of them providing public services, and only eight manufacturing companies In the early 19th century, states began to enact corporation laws. New York was the first state to enact a corporate statute in 1811. The 1811 New York corporate law allowed for the formation of limited liability corporations with a simple registration system; however, this was only available for manufacturing companies. New Jersey followed New York's lead in 1816, when it enacted its first corporate law In 1837, Connecticut adopted a general corporation statute that allowed for the incorporation of any corporation engaged in any lawful business. Delaware did not enact its first corporation law until 1883. These early state corporation laws were all restrictive in design, often with the intention of preventing corporations for gaining too much wealth and power Investors generally had to be given an equal say in corporate governance, and corporations were required to comply with the purposes expressed in their charters. Therefore, some large-scale businesses used other forms of association; for example, Andrew Carnegie formed his steel operation as a limited partnership and John D. Rockefeller set upStandard Oil as a corporate trust. Until the late 19th century, the f
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