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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 Revue 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 cannot 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

"* The quotation is from a translation published by Mr. H. C. Carey, in an American periodical, Bunfa Merchant'a Magazine, for May and June 1846.

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 the means of payment are as much less. Even this is not all. The same obscurity which has served him so well thus far, when desiring to magnify his capital and increase nis 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 t£at 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 thii 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 enf >rced; 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 commanditaires. Such partnerships are nut 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 P.E.

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 have shared with the other creditors in the residue of the estate, diminishing pro rata the dividend obtained by all. While 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 hiin 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; ha has. been oppressed by the high cost of patents; but his chief oppression has been the partnership law, which 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 N N

Anonymous Society," orany other form of joint-stock company, "in which he might be superseded as manager. He would stand, in such an association, on no better footing than any other shareholder, and he might be lost in the crowd; whereas, the association existing, as it were, by and for him, the management would appear to belong to him as a matter of right. Cases occur in which a merchant or a manufacturer, without being precisely an inventor, has undeniable claims to the management of an undertaking, from the possession of qualities peculiarly calculated to promote its success. So great, indeed, continues M. Coquelin, "is the necessity, in many cases, for the limited partnership, that it is difficult to conceive how we could dispense with or replace it:" and in reference to his own country he is probably in the right.

Where there is so great a readiness as in England, on the part of the public, to form joint-stock associations, even without the encouragement of a limitation of responsibility; commandile partnership, though its prohibition is in principle quite indefensible, cannot be deemed to be, in a merely eco

ofl'ered, however high it may he, is not an attraction. But if by the alteration of the law he could allow capitalists to take an interest with him and share the profits, while the risk should be confined to the capital they embarked, there is very little doubt at all that he would frequently get assistance from capitalists; whereas at the present moment, with the law as it stands, he is completely destroyed, and his invention is useless to him; he struggles month after mon,th; he applies again and again to the capitalist without avail. I know it practically in two or three cases of patented inventions; especially one where parties with capital were desirous of entering into an undertaking of great moment in Liverpool, but five or six different gentlemen were deterred from doing so, all feeling the strongest objection to what each one called the cursed partnership law." Iteport, p. 155,

Mr. Fane says, "In the course of my professional life, as a Commissioner of the Court of Bankruptcy, I have learned that the most unfortunate man in the world is an inventor. The difficulty which an inventor finds in getting at capital, involves him in all sorts of embarrassments, and he ultimately is for the most part a ruined man, and somebody else gets possession of his invention."—lb. p. 82.

nomical point of view, of the imperative* necessity'which M. Coquelin ascribesto it. Yet the inconveniences are not small, which arise indirectly from those provisions of the law by which every one who shares in the profits of a concern is subject to the full liabilities of an unlimited partnership. It is impossible to say how many or what useful modes of combination are rendered impracticable by this state of the law. It is sufficient for its condemnation that, unless in some way relaxed, it i» inconsistent with the payment of wages in part by a percentage on profits; in other words, the association of the operatives as virtual partners with the capitalist.*

It is, above all, with reference to the improvement and elevation of the working classes, that complete freedom iu the conditions of partnership is indispensable. Combinations such as the associations of workpeople, described in a former chapter, are the most powerful means of effecting the social emancipation of the labourers throughtheir own moral qualities. Nor is the liberty of association important solely for its examples of success, but fully as much so for the sake of attempts which would not succeed; but by thjir failure would give instruction more impressive than can be afforded by anything short of actual experience. Every theory of social improvement, the worth of which is capable of being brought to an experimental test, should be permitted, nnd even encouraged, to submit itself to that test. From such experiments the active portion of the working classes would derive lessons which they would be slow to learn from the teaching of persons supposed to have interests and prejudices adverse to their good; would obtain the means of correcting, at no cost to society, whatever is now erroneous in their notions of the means of establishing their independence; and of discovering the conditions, moral, intellectual, and indus

* It is considered possible to effect this through the Limited Liability Act, by erecting the capitalist and his workpecpleinto a Limited Company: as proposed Of Messrs. Briggs (supra, p. 465).

trial, which are indispensably necessary for effecting without injustice, or for effecting at all, the social regeneration they aspire to.*

The French law of partnership is superior to the English in permitting commandite; and superior, in having no such unmanageable instrument as the Court of Chancery, all cases arising from commercial transactions being adjudicated in a comparatively cheap and expeditious manner by a tribunal of merchants. In other respects the French system is far worse than the English. A joint-stock company with limited responsibility cannot be formed without the express authorization of the department of government called the Council of State, a body of administrators, generally entire strangers to industrial transactions, who have no interest in promoting enterprises, and are apt to think that the purpose of their institution is to restrain them; whose consent cannot in any case be obtained without an amount of time and labour which is a very serious hindrance to the commencement of an enterprise, while the extreme uncertainty of obtaining that consent at all is a great discouragement to capitalists who would be willing to subscribe. In regard to joint-stock companies without limitation of responsibility, which in England exist in such numbers and are formed with such facility, these associations cannot, in France, exist at all; for, in cases of unlimited partnership, the French law does not permit the division of the capital into transferable shares.

The best existing laws of partnerehip appear to be those of the New

• By an act of the year 1852, called the Industrial and Provident Societies Act, for which the nation is indebted to the publicspirited exertions of Mr. Slaney, industrial associations of working people are admitted *o the statutory privileges of Friendly Societies. This not only exempts them from the formalities applicable to joint-stock companies, but provides for the settlement of disputes among thepartners without recourse to The Court of Chancery. There are still some defects in the provisions of this Act, which hamper the proceedings of the Societies in several respects; as is pointed lea in the Almanack of the Rochdale Equitobut Pioneers for 1861.

England States. According to Mr. Carey,f "nowhere is association so little trammelled by regulations as in New England; the consequence of which is, that it is carried to a greater extent there, and particularly in Massachusetts and Rhode Island, than in any other part of tho world. In these states, the soil is covered with compagnies anonymes—chartered companies— for almost every conceivable purpose. Every town is a corporation forthe management of its roads, bridges, and schools; which are, therefore, under the direct control of those who pay for them, and are consequently well managed. Academies and churches, lyceums and libraries, saving-fund societies, and trust companies, exist in numbers proportioned to the wants of the people, and all are corporations Every district has its local bank, of a size to suit its wants, the stock of which is owned by the small capitalists of the neighbourhood, and nonaged by themselves; the consequence of which, is, that in no part of the world is the system of banking so perfect—so little liable to vibration in the amount of loans—the necessary effect of which is, that in none is the value of property so little affected by changes in the amount or value of the cur-ency resulting from the movements of their own banking institutions. In the twostates to which we have particularly referred, they are almost two hundred in number. Massachusetts, alone, offers to our view fifty-three insurance offices, of various forms, scattered through the state, and all incorporated Factories are incorporated, and arc owned in shares; and every one thai has any part in the management ot their concerns, from the purchase of the raw material to the sale of the manufactured article, is a part owner; while every one employed in them has a prospect of becoming one. by the use of prudence, exertion, and economy. Charitable associations exist in largo numbers, and all are incorporated. Fishing vessels are owned in shares by those who navigate them; and the

t In a note appended to hia translation o£ M.. Coquelin's paper.

sailors of a whaling ship depend in a great decree, if not altogether, upon the success of the voyage for their romp nsation. Every master of a ves«el trading in the Southern Ocean is a part owner, and the interest he possesses is a strong inducement to exertion and economy, by aid of which the people of New England are rapidly driving out the competition of other nations for the trade of that part of the world. Wherever settled, they exhibit the same tendency to combination of action. In New York they are the chief owners of the lines of packet ships, which are divided into shares, owned by the shipbuilders, the merchants, the master, and the mates; which last generally acquire the means of becoming themselves masters, and to this is due their great success. The system is the most perfectly democratic of any in the world. It affords to every labourer, every sailor, every operative, male or female, the prospect of advancement; and its results are precisely such as we should have reason to expect. In no part of the world are talent, industry, and prudence, so certain to be largely rewarded."

The cases of insolvency and fraud on the part of chartered companies in America, which have caused so much loss and so much scandal in Europe, did not occur in the part of the Union to which this extract refers, but in other States, in which the right of association is much more fettered by legal restrictions, and in which, accordingly, joint-stock associations are not comparable in number or variety to those of New England. Mr. Carey adds, "A careful examination of the systems of the several states, can scarcely, we think, fail to convince the reader of the advantage resulting from permitting men to determine among themselves the terms upon which they will associate, and allowing the associations that may be formed to contract with the public as to the terms upon which they will trade together, whether of the limited or unlimited liability of the partners." This principle has been adopted as the foundation of all recent English legislation on the subject.

§ 8. I proceed to the subject of Insolvency Laws.

Good laws on this subject are important, first and principally, on the score of public morals; which are on no point more under the influence of the law, for good and evil, than in a matter belonging so pre-eminently to the province of law as the preservation of pecuniary integrity. But the subject is also, in a merely economical point of view, of great importance. First, because the economical wellbeing of a people, and of mankind, depends in an especial manner upon their being able to trust each other's engagements. Secondly, because one of the risks, or expenses, of industrial operations is the risk or expense of what are commonly called bad debts, and every saving which can be effected in this liability is a diminution of cost of production; by dispensing with an item of outlay which in no way conduces to the desired end, and which must be paid for either by the consumer of the commodity, or from the general profits of capital, according as the burthen is peculiar or general.

The laws and practice ot nations on this subject have almost always been in extremes. The ancient laws of most countries were all severity to the debtor. They invested the creditor with a power of coercion, more or less tyrannical, which he might use against his insolvent debtor, either to extort the surrender of hidden property, or to obtain satisfaction of a vindictive character, which might console him for the non-payment of the debt. This arbitrary power has extended, in some countries, to making the insolveut debtor serve the creditor as his slave: in which plan there were at least some grains of common sense, since it might possibly be. regarded as a scheme for making him work out the debt by his labour. In England, the coercion assumed the milder form of ordinary imprisonment. The one and the other were the barbarous expedients of a rude age, repugnant to justice as well as to humanity. Unfortunately the reform of them, like that of the criminal law generally, has been taken in

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