The Limited Liability Act 1855 ( 18 & 19 Vict. c. 133) was an act of the

Parliament of the United Kingdom The Parliament of the United Kingdom of Great Britain and Northern Ireland is the supreme legislative body of the United Kingdom, and may also legislate for the Crown Dependencies and the British Overseas Territories. It meets at the Palace ...

that first expressly allowed

limited liability Limited liability is a legal status in which a person's financial Legal liability, liability is limited to a fixed sum, most commonly the value of a person's investment in a corporation, company, or joint venture. If a company that provides limi ...

for

corporations A corporation or body corporate is an individual or a group of people, such as an association or company, that has been authorized by the State (polity), state to act as a single entity (a legal entity recognized by private and public law as ...

that could be established by the general public in England and Wales as well as Ireland. The Act did not apply to Scotland, where the limited liability of shareholders for the debts company debts had been recognised since the mid-18th century with the decision in the case of ''Stevenson v McNair''. Although the validity of the decision in that case had come to be doubted by the mid-19th century, the Joint Stock Companies Act 1856, which applied across the UK, put the matter beyond doubt by settling that Scottish 'companies' could be possessed of both separate legal personality and limited liability.

Overview

Under the Act,

shareholders A shareholder (in the United States often referred to as stockholder) of corporate stock refers to an individual or legal entity (such as another corporation, a body politic, a trust or partnership) that is registered by the corporation as the ...

were still liable directly to

creditors A creditor or lender is a Party (law), party (e.g., person, organization, company, or government) that has a claim on the services of a second party. It is a person or institution to whom money is owed. The first party, in general, has provided ...

for the unpaid portion of their

shares In financial markets, a share (sometimes referred to as stock or equity) is a unit of equity ownership in the capital stock of a corporation. It can refer to units of mutual funds, limited partnerships, and real estate investment trusts. Sha ...

. The modern principle that shareholders are liable to the corporation was introduced by the Joint Stock Companies Act 1844. The 1855 Act allowed limited liability to companies of more than 25 members (shareholders).

Insurance Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to protect ...

companies were excluded from the act, though it was standard practice for insurance contracts to exclude action against individual members. Limited liability for insurance companies was allowed by the

Companies Act 1862 The Companies Act 1862 ( 25 & 26 Vict. c. 89) was an act of the Parliament of the United Kingdom regulating UK company law, whose descendant is the Companies Act 2006. Provisions *s 6 'Any seven or more persons associated for any lawful purpos ...

Debate

In the House of Lords, a considerable amount of opposition existed to the idea that companies should have the advantage of limited liability. Many peers objected to what appeared to them as the government rushing through the bill as if its urgency was connected to the effort in the

Crimean War The Crimean War was fought between the Russian Empire and an alliance of the Ottoman Empire, the Second French Empire, the United Kingdom of Great Britain and Ireland, and the Kingdom of Sardinia (1720–1861), Kingdom of Sardinia-Piedmont fro ...

. Earl Grey was one of them:

Earl Granville Earl Granville is a title that has been created twice, once in the Peerage of Great Britain and once in the Peerage of the United Kingdom. It is now held by members of the Leveson-Gower family. First creation The first creation came in the Pee ...

replied to those concerns:HL Debs, vol ?, col 1903 (7 August 1855)

Bibliography

*Gibbons, David
The Limited Liability Act, 18th & 19th Victoria, Cap. 133.
John Weale. High Holborn, London. 1855. *Paterson, W (ed). "Limited Liability Act". The Practical Statutes of the Session 1855. John Crockford. Essex Street, Strand, London. Page
556
to 570. * * * *

Notes

* https://api.parliament.uk/historic-hansard/lords/1855/aug/07/limited-liability-bill#S3V0139P0_18550807_HOL_4 {{Authority control Public liability United Kingdom Acts of Parliament 1855 History of corporate law United Kingdom company law

Overview

Debate

See also

Bibliography

Notes