Chapter

Limited Liability and Company Dissolution

Mark Freeman, Robin Pearson and James Taylor

in Shareholder Democracies?

Published by University of Chicago Press

Published in print December 2011 | ISBN: 9780226261874
Published online February 2013 | e-ISBN: 9780226261881 | DOI: http://dx.doi.org/10.7208/chicago/9780226261881.003.0007
Limited Liability and Company Dissolution

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This chapter considers the ways in which companies sought to safeguard the “financial” interests of their investors, which were coming to predominate as the joint-stock economy and the secondary market for shares grew. In particular, it examines the issue of shareholder liability, which exercised legislators, political commentators, company promoters, and individual shareholders. Although clumsy methods of shareholder protection could be resorted to by insurance companies, these are more suitable in some sectors than in others. Alternative protective mechanisms required transparent governance, which was often noticeably absent in banking. Greater oversight of company affairs is not only increasingly necessary but also increasingly difficult as the number and size of joint-stock companies grew. The chapter concludes that fundamental governance failures in unincorporated companies undermined the potential benefits of unlimited liability and thus strengthened the arguments for general limited liability.

Keywords: company dissolution; joint-stock economy; secondary market; shareholder protection

Chapter.  12307 words.  Illustrated.

Subjects: Economic History

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