The Sun.
London, England, 1855-06-01 00:00:00

SPIRIT OF TILE PUBLIC JOURNALS.

(From the Times of this day.)

We have at length received the long-delayed measure
for limiting liability in partnership. The measure is
divided into two bills, the first limiting 'the liability of
members of certain joint-stock companies, the second re-
gulating the conditions on which a certain portion of
the profits of a partnership may be received, either by
way of interest or salary, without fixing the recipient
with the penalties of usilimited liability. The first bill
engrafts its provi,ions on those of the 7th and Bth of
Vict rig, c. 110, the Joint-stock Companies Act, which
applies to three classes of partnerships—first, partner-
ships, with whatever number of partners, having trans-
ferable shares ; secondly, insurance companies ; and,
thirdly, partnerships of more than 25 members.
The bill excludes inshrance companies from its opera-
tion, and requires that the partnerships to which it ap-
plies must, in addition to the requirements •of the Joint-
stock C iinpa,nies Act, possess a capital of 20,0001., divided
into shares of not less then 25/. each ; so that the opera-
tion of the bill is limited to companies with capitals of
20,0001. in shares of not less than 251, each, possessing
' transferable shares, with fewer shareholders than 25, or
with more members than 25, whether the shares be
transferable or not. Such a company, upon registering
its intention to be formed with limited liability, using
the word "limited" as the last in its name, introducing a
declaration to the same effect into the deed of settlement,
and procuring the execution of the deed by shareholders
holding three-fourths of the capital of the company, of
which 20. per cent. shall have .been paid up, shall be en-
titled to a certificate of limited liability, which shall
exempt the shareholders from any liability beyond the
amount of the capital for which they shall have sub-
seritia,

The second bill-seems to be intended to act as a sup-
plement to, the cases omitted in the first—that is, part-
nerships consisting of less than 25 members, where the
shares are not transferable. It provides that no lender
to a partnership shall be deemed to be a partner by rea-
son of receiving a portion of the profits in lieu of inte-
rest, if he complies with the conditions of the act—that
is, if he registers the name, residence, and-description of
the lender and borrower, the amount of the loan, and the
.proportion of profits to be received. For this immunity,
however, he is to pay heavily. If the borrower becomes
insolvent such a lender is to be postponed to the other
creditors, and be liable to refund besides, for their bene-
fit, all profits received by him a year before the failure,
and all portions of the principal repaid him, and all re-
payments of principal are to be taken to have been re-
paid within the year, unless the date of the registry of
payment shall establish the contrary.
Of the principle of these enactments we do not pro-
pose to say anything. It is now pretty generally
admitted that the liability of - the debtor to • the cre-
ditor is only one of the incidents of the debt itself, and
may be, like that debt, a proper subject of pontract, and
that there is no more reason to deprive mankind of their
natural liberty to contract with regard to their liability
than on any other subject of agreement. The question
to be decided is, how far the two projects of law of
which we have above given, an abstract fairly and com-
pletely carry out the desired principle ?
The first thing that occurs to us is, that' the selection
of that class of partnerships to which the privileges of
-the act may be extended is extremely arbitrary and en-
satisfactory. The principle of the freedom to contract
upon which the bill is founded extends obviously to
every agreement of partnership, and we have' a 'tight to
ask why such large classes of trading concerns are
entirely excluded from its application I It is far
more "easy to see 'how this exclusion occurred than
to suggest any principle upon which it oars be de-
fended. The exclusion occurred because it was thought
proper to engraft the proposed bill upon the Joint-
stock Companies Act of 1844: That act was restrictive
and prohibitive in its provisions, forbidding partnerships
most liable from the constitution to fraud and abuse.
from, acting as joint-stock companies without registering
themselves, and complying with other precautionary
rules. The propoSed measure is an enabling act, and
therefore ought to have applied either to all cases indis-
criminately, or at any rate by preference to those least
liable to suspicion or fraud. By the engrafting of one
upon the other, the privilege upon the disability,-the
enabling upon the restricting proiisions, the measure
introduces Cie strange anomaly of offering extended
powers 'to those very partnerships which, at the same
time, it treats as objects of caution and distrust...
The distinction is made the wrong wv ; but in
truth there is no need of any distinction at' all.
There' is something in the official mind which renders
it peculiarly prone .to .violate a principle at; soon' as
it has established it, and introduce exeeptienS so...large
as-to shake the.very foundation of-the rule. ,WI men
admitted free trade in Cotton, but denied its applicability
to corn, admitted it in corn but wbuld not extend it to
shipping, and now in shipping hut refuse to.extend it to
capital Partnerships with a certain number of mem-
bers, a large amount of capital, and a large *denomina-
tion of shares, are to be allowed that restriction of lia-
bility which so much facilitates their creati in, but are to
of
fe
ii;arrott,e,
ecrted
,hi
phsyw-ahn xc
icehwlouusivlde law fromhay.been the
created
c eatoodnipifettihti•eisie:
arbitrary restrictions had not existed. If 24 men put
down a thousand pounds n-piece for any undertaking,
and agree that no new partner shall be admitted without
the consent of the whole, they cannot have limited lia-
bility ; but, if 25 men do exactly the same' thing, they
can. Where is the sense or reason of this distinction ?
We object entirely to any restriction of the -right of
limited liability, to partnerships having a particular deno-
mination of shares, a particular number of shareholoers,
or to its depending in any way oti whether the shares
be transferable or not ; though, if we were to adopt a
rule on'this latter ground, we should rather.incline to
the contrary of the rule proposed. We maintain that
freedom of contract should be as wide as the contract of
partnership itself, and that no sound-principle can be
laid down for allowing the power of limiting their lia-
bility to some partnerships and taking it away from
others.
There will be many whose opinion is entitled to every
respect who will feel equally strong objections to'
requiring that the -terms of the partnership should be
registered in order to exempt the partners who have
stipulated for limited liability between each other,
from unlimited liability as regards third persons. To
us it appears that all that is wanted in order to
make the agreement, between the parties binding on
the public is to give the public notice of the con-
tents of the agreement, and we know no method by
which this can be so simply and so securely done as .by
a public registration, binding and conclusive upon all
who have access to it. Not to make such a registration,
but to leave the liability of partners to be determined
merely by their actions and admissions, would be to open
the door to innumerable frauds and perjuries, and to sow
the seeds of endless litigation.
The latter bill seems to us to belong to that doss of
measures the enactments of which are so jealously
fenced and guarded as to be totally inaccessible to those
for whom they are designed. The usury laws are abol-
ished, and if a man likes to lend money to a partner-
ship at 50 per cent. he is entitled not only to receive
back his principal and interest in full, if there are funds,
but to prove for them on a bankrupt estate pari pante
with the other creditors. It would be insanity in such
a person to lend on the terms of 'being paid by a share
of the profits, in order that, in consideration of less in-
terest, he might be postponed Wall other creditors, and
liable to refund his principal - and interest, if received
within a year of the bankruptcy. '1 he bill effectually
prohibits the transaction it affects to facilitate. ‘With
these observations, we commend the measure to the
careful consideration of the mercantile and legal public.