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viding for themselves: some may, by other means than their own exertions, he already provided for: and impartiality may therefore require that the rule observed should not be one of equality, but of compensation. Even when equality is the object, there are sometimes better means of attaining it, than the inflexible rules by which law must necessarily proceed. If one of the coheirs, being of a quarrelsome or litigious disposition, stands upon his utmost rights, the law cannot make equitable adjustments; it cannot apportion the property as seems best for the collective interest of all concerned; if there are several parcels of land, and the heirs cannot agree about their value, the law cannot give a parcel to each, but every separate parcel must be either put up to sale or divided: if there is a residence, or a park or pleasure-ground, which would be destroyed, as such, by subdivision, it must be sold, perhaps at a great sacrifice both of money and of feeling. But what the law could not do, the parent could. By means of the liberty of bequest, all these points might be determined according to reason and the general interest of the persons concerned; and the spirit of the principle of equal division might be the better observed, because the testator was emancipated from its letter. Finally, it would not then be necessary, as under the compulsory system it is, that the law should interfere authoritatively in the concerns of individuals, not only on the occurrence of a death, but throughout life, in order to guard against the attempts of parents to frustrate the legal claims of their heirs, under colour of gifts andother alienations inter vivos. In conclusion; all owners of property should, I conceive, have power to dispose by will of every part of it, but not to determine the person who should succeed to it after the death of all who were living when the will was made. Under what restrictions it should be allowable to bequeath property to one person for life, with remainder to another person already in existence, is a question belonging to general legislation, not to political

economy. Such settlements would be no greater hindrance to alienation than any case of joint ownership, since the consent of persons actually in existence is all that would be necessary for any new arrangement respecting the property.

§ 5. From the subject of Inheritance I now pass to that of Contracts, and among these, to the important subject of the Laws of Partnership. How much of good or evil depends upon these laws, and how important it is that they should be the best possible, is evident to all who recognise in the extension of the co-operative principle in the larger sense of the term, the great economical necessity of modern industry. The progress of the productive arts requiring that many sorts of industrial occupation should be carried on by larger and larger capitals, the productive power of industry must suffer by whatever impedes the formation of large capitals through the aggregation of smaller ones. Capitals of the requisite magnitude, belonging to single owners, do not, in most countries, exist in the needful abundance, and would be still less numerous if the laws favoured the diffusion instead of the concentration of property: while it is most undesirable that all those improved processes, and those means of efficiency and economy in production, which depend on the possession of large funds, should be monopolies in the hands of a few rich individuals, through the difficulties experienced by persons of moderate or small means in associating their capital. Finally, I must repeat my conviction, that the industrial economy which divides society absolutely into two portions, the payers of wages and the receivers of them, the first counted by thousands and the last by millions, is neither fit for, nor capable of, indefinite duration: and the possibility of changing this system for one of combination without dependence, and unity of interest instead of organized hostility, depends altogether upon the future developments of the Partnership principle.

Yet there is scarcely any country whose laws do not throw great, and in most cases, intentional obstacles in the way of the formation of any numerous partnership. In England it is already a serious discouragement, that differences among partners are, practically speaking, only capable of adjudication by the Court of Chancery: which is often worse than placing such questions out of the pale of all Taw; since any one of the disputant parties, who is either dishonest or litigious, can involve the others at his pleasure in the expense, trouble, and anxiety, which are the unavoidable accompaniments of a Chancery suit, without their having the power of freeing themselves from the infliction even by breaking up the association.* Besides this, it required, until lately, a separate act of the legislature before any joint-stock association conld legally constitute itself, and be empowered to act as one body. By a statute passed a few years ago, this necessity is done away; but the statute in question is described by competent authorities as a "mass of confusion," of which they say that there "never was such an infliction" on persons entering

* Mr. Cecil Fane, the Commissioner of the Bankruptcy Court, in his evidence before the Committee on the Law of Partnership, says: "I remember a short time ago reading a written statement by two eminent solicitors, who said that they had known many partnership accounts go into Chancery, but that they never knew one come out. . . . Very few of the persons who would be disposed to engage in partnerships of this kind" (co-operative associations of working men) "have any idea of the truth, namely, that the decision of questions arising amongst partners is really impracticable.

"Do they not know that one partner may rob the other without any possibility of his obtaining redress ? — The fact is so; bnt whether they know it or not I cannot undertake to say."

This flagrant injustice is, in Mr. Fane's opinion, wholly attributable to the defects of the tribunal. "My opinion is, that if there is one thing more easy than another, it is the settlement of partnership questions, and for the simple reason, that everything which is done in a partnership is entered in the books; the evidence therefore is at hand; if thorefore a rational mode of proceeding were once adopted, the difficulty would altogether vanish."—Minutes of Evidence annexed to the Report of the Select Committee on the Law of Partnership (1851), pp. 83-7.

into partnership.t When a number of persons, whether few or many, freely desire to unite their funds for a common undertaking, not asking any peculiar privilege, nor the power to dispossess any one of property, the law can have no good reason for throwing difficulties in the way of the realization of the project. On compliance with a few simple conditions of publicity, any body of persons ought to have the power of constituting themselves into a joint-stock company, or societi en nom coUectif, without asking leave either of any public officer or of parliament. As an association of many partners must practically be under the management of a few, every facility ought to be afforded to the body for exercising the necessary control and check over those few, whether they be themselves members of the association, or merely its hired servants: and in this point the English system is still at a lamentable distance from the standard of perfection.

§ 6. Whatever facilities, however, English law might give to associations formed on the principles of ordinary partnership, there is one sort of jointstock association which until the year 1855 it absolutely disallowed, and which could only be called into existence by a special act either of the legislature or of the crown. I mean, associations with limited liability.

Associations with limited liability are of two kinds: in one, the liability of all the partners is limited, in the other that of some of them only. The first is the Anonymous Society of the French law, which in England had until lately no other name than that of "chartered company:" meaning thereby a joint-stock company whose shareholders, by a charter from the crown or a special enactment of the legislature, stood exempted from any liability for the debts of the concern, beyond the amount of their subscriptions. The other species of limited partnership is that known to the French law under the name of commandite; of this, which,

t Beport, ut supra, p. 167.

in England is still unrecognised and illegal, I shall speak presently.

If a number of persons choose to associate for carrying on any operation of commerce or industry, agreeing among themselves and announcing to those with whom they deal that the members of the association do not undertake to be responsible beyond the amount of the subscribed capital; is there any reason that the law should raise objections to this proceeding, and should impose on them the unlimited responsibility which they disclaim? For whose sake? Not for that of the partners themselves; for it is they whom the limitation of responsibility benefits and protects. It must therefore be for the sake of third parties; namely, those who may have transactions with the association, and to whom it may run in debt beyond what the subscribed capital suffices to pay. But nobody is obliged to deal with the association; still less is any one obliged to give it unlimited credit. The class of persons with whom such associations have dealings are in general perfectly capable of taking care of themselves, and there seems no reason that the law should be more careful of their interest than they will themselves be; provided no false representation is held out, and they are aware from the first what they have to trust to. The law is warranted in requiring from all joint-stock associations with limited responsibility, not only that the amount of capital on which they profess to carry on business should either be actually paid up or security given for it (if, indeed, with complete publicity, such a requirement would be necessary) but also thatsuch accounts should be kept, accessible to individuals, and if needful, published to the world, as shall render it possible to ascertain at any time the existing state of the company's affairs, and to learn whether the capital which is the sole security for the engagements into which they enter, still subsist unimpaired: the fidelity of such accounts being guarded by sufficient penalties. When the law has thus afforded to individuals all practicable means of knowing the cir

cumstances which ought, to enter into their prudential calculations in dealing with the company, there seems no more need for interfering with individual judgment in this sort of transactions, than in any other part of the private business of life.

The reason usually urged for such interference is, that the managers of an association with limited responsibility, not risking their whole fortunes in the event of loss, while in case of gain they might profit largely, are not sufficiently interested in exercising due circumspection, and are under the temptation of exposing the funds of the association to improper hazards. It is, however, well ascertained that associations with unlimited responsibility, if they have rich shareholders, can obtain, even when known to be reckless in their transactions, improper credit to an extent far exceeding what would be given to companies equally ill-conducted whose creditors had only the subscribed capital, to rely on.* To whichever side the balance of evil inclines, it is a consideration of more importance to the shareholders themselves than to third parties; since, with proper securities for publicity, the capital of an association with limited liability could not be engaged in hazards beyond those ordinarily incident to the business it carries on, without the fact's being known, and becoming the subject of comments by which the credit of the body would bo likely to be affected in quite as great a degree as the circumstances would justify. If, under securities for publicity, it were found in practice that companies, formed on the principle of unlimited responsibility, were more skilfully and more cautiously managed, companies with limited liability would be unable to maintain an equal competition with them; and would therefore rarely be formed, unless when such limitation was the only condition on which the necessary amount of capital could be raised: and in that case it would be very unreasonable to say that their formation ought to be prevented.

* See the Beport already referredto, pp. 145-168.

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It may further be remarked, that although, with equality of capital, a company of limited liability offers a somewhat less security to those who deal with it, than one in which every shareholder is responsible with his whole fortune, yet even the weaker of these two securities is in some respects stronger than that which an individual capitalist can afford. In the case of an individual, there is such security as can be founded on his unlimited liability, but not that derived from publicity of transactions, or from a known and large amount of paid-up capital. This topic is well treated in an able paper by M. Coquelin, published in the Eevue des Deux Mondes for July 1843.*

"While third parties who trade with individuals," says this writer, "scarcely ever know, except by approximation, and even that most vague and uncertain, what is the amount of capital responsible for the performance of contracts made with them, those who trade with an anonymous society can obtain full information if they seek it, and perform their operations with a feeling of confidence that caunot exist in the other case. Again, nothing is easier than for an individual trader to conceal the extent of his engagements, as no one can know it certainly but himself. Even his confidential clerk may be ignorant of it, as the loans he finds himself compelled to make may not all be of a character to require that they be entered in his day-book. It is a secret confined to himself; one which transpires rarely, and always slowly; one which is unveiled only when the catastrophe has occurred. On the contrary, the anonymous society neither can nor ought to borrow, without the fact becoming known to all the world—directors, clerks, shareholders, and the public. Its operations partake in some respects, of the nature of those of governments. The light of day penetrates in every direction, and there can be no secrets from those who

a * The quotation is from a translation published by Mr. H. C. Carey, in an American Seriodical, Hunt't Merchant't Magazine, for lay and June 1815.

seek for information. Thus all is fixed, recorded, known, of the capital and debts in the case of the anonymous society, while all is uncertain and unknown in the case of the individual trader. Which of the two, we would ask the reader, presents the most favourable aspect, or the surest guarantee, to the view of those who trade with them?

"Again, availing himself of the obscurity in which his affairs are shrouded, and which he desires to increase, the private trader is enabled, so long as his business appears prosperous, to produce impressions in regard to his means far exceeding the reality, and thus to establish a credit not justified by those means. When losses occur, and he sees himself threatened with bankruptcy, the world is still ignorant of his condition, and he finds himself enabled to contract debts far beyond the possibility of payment. The fatal day arrives, and the creditors find a debt much greater than had been anticipated, while tho means of payment are as much less. Even this is not all. The same obscurity which has served him so well thus tar, when desiring to magnify his capital and increase his credit, now affords him the opportunity of placing a part of that capital beyond the reach of his creditors. It becomes diminished, if not annihilated. It hides itself, and not even legal remedies, nor the activity of creditors, can bring it forth from the dark corners in which

it is placed Our readers can

readily determine for themselves if practices of this kind are equally easy in the case of the anonymous society. We do not doubt that such things are possible, but we think that they will agree with us that from its nature, its organization, and the necessary publicity that attends all its actions, the liability to such occurrences is very greatly diminished."

The laws of most countries, England included, have erred in a twofold manner with regard to joint-stock companies. While they have been most unreasonably jealous of allowing such associations to exist, especially with limited responsibility, they have generally neglected the enforcement of publicity; the best security to the public against any danger which might arise from this description of partnerships; and a security quite as much required in the case of those associations of the kind in question, which, by an exception from their general practice, they suffered to exist. Even in the instance of the Bank of England, which holds a monopoly from the legislature, and has had partial control over a matter of so much public interest as the state of the circulating medium, it is only within these few years that any publicity has been en'arced; and the publicity was at first of an extremely incomplete character, though now, for most practical purposes, probably at length sufficient.

§ 7. The other kind of limited partnership which demands our attention, is that in which the managing partner or partners are responsible with their whole fortunes for the engagements of the concern, but have others associated with them who contribute only definite sums, and are not liable for anything beyond, though they participate in the profits according to any rule which may be agreed on. This is called partnership in commandite: and the partners with limited liability (to whom, by the French law, all interference in the management of the concern is interdicted) are known by the name commanditairea. Such partnerships are not allowed by English law: in all private partnerships, whoever shares in the profits is liable for the debts, to as plenary an extent as the managing partner.

For such prohibition no satisfactory defence has ever, so far as I am aware, been made. Even the insufficient reason given against limiting the responsibility of shareholders in a jointstock company, does not apply here; there being no diminution of the motives to circumspect management, since all who take any part in the direction of the concern are liable with their whole fortunes. To third parties, again, the security is improved by the

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existence of commandite; since the amount subscribed by commanditaires is all of it available to creditors, the commanditaires losing their whole investment before any creditor can lose anything; while, if instead of becoming partners to that amount, they had lent the sum at an interest equal to the profit they derived from it, they would nave shared with the other creditors in the residue of the estate, diminishing pro rata the dividend obtained by all. vVhile the practice of commandite thus conduces to the interest of creditors, it is often highly desirable for the contracting parties themselves. The managers are enabled to obtain the aid of a much greater amount of capital than they could borrow on their own security; and persons are induced to aid useful undertakings, by embarking limited portions of capital in them, when they would not, and often could not prudently, have risked their whole fortunes on the chances of the enterprise.

It may perhaps be thought that where due facilities are afforded to joint-stock companies, commandite partnerships are not required. But there are classes of cases to which the commandite principle must always be better adapted than the jointstock principle. "Suppose," says M. Coquelin, "an inventor seeking for a capital to carry his invention into practice. To obtain the aid of capitalists, he must offer them a share of the anticipated benefit; they must associate themselves with him in the chances of its success. In such a case, which of the forms would he select? Not a common partnership, certainly;" for various reasons, and especially the extreme difficulty of finding a partner with capital, willing to risk his whole fortune on the success of the invention.* "Neither would he select the

* "There has been a great deal of commiseration professed," says Mr. Duncan, solicitor, "towards the poor inventor; he has been oppressed by the high cost of patents; but Ms chief oppression has been the partnership law, wmch prevents his getting any one to help him to develop his invention. He is a poor man, and therefore cannot give security to a creditor; no one will lend him money: the rate of interest

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