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 interests than they will themselves be; provided no false representation is held out, and they are aware from the first what they have 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 that such 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 circumstances 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 VOL. II.-72

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 facts being known, and becoming the subject of comments by which the credit of the body would be 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.

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.+

* See the Report already referred to, pp. 145-158.

+ The quotation is from a translation published by Mr. II. C. Carey, in an American periodical, Hunt's Merchant's Magazine, for May and June 1845.

"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 a société anonyme 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 société anonyme 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 seek for information. Thus all is fixed, recorded, known, of the capital and debts in the case of the société anonyme, 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, as 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 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 société anonyme. 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 enforced; 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 en 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 not allowed by English law: 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 joint-stock 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 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