The Sun.
London, England, 1856-06-20 00:00:00

LIMITED LIABILITY BILL.

The following protest against this bill has been signed
by Lords Overatone and Monteagle :
" 1. The measure is wholly unnecessary, inasmuch as
every concern has the means of limiting its liability by
trading upon its own capital, and not upon the borrowed
capital of others. Liability is not necessarily incident to
trading or to the application of capital to the pursuits of
industry: itis the result of taking credit or trading upon
borrowed capital. Limited liability, therefore, is a mea.
sure of protection, not to the capitalist great or small,
but to the speculator, who wishes to trade for his own
profit, but with the capital and at the risk of others.
"2. The principle of limited liability is antagonistic
to, and will probably prove seriously destructive of, the
sober and substantial virtues of the mercantile character.

By weakening in the mind of the trader the sense of full
responsibility for the consequences of all his actions, and
limiting the obligation which now rests upon him, to
return in full all that he has borrowed from others,

the general tone of commercial morality must be deteri-
orated. By limiting the unfortunate consequences of
failure, while no corresponding limitation is placed upon
the gains which may attend success, the due equipoise
between the restraints and the stimulants to enterprise

and speculation, upon which depend the solidity and
safety of the commercial system, must be disturbed. By
enabling parties to put a fixed limit to the amount of
possible loss the chief incentive to caution or vigilance in
the conduct of business will be taken away or seriously
weakened, while by leaving the hope of gain unrestricted
and indefinite a gambling principle will be introduced
into commercial transactions, and the risks of trade will

assimilate themselves to the chances of the lottery-wheel

rather than to what they now are, the legitimate results
of hopeful industry and cautious enterprise.
" 3. The measure in its present form, unaccompanied
by safeguards or any attempt to obviate the clear and
acknowledged danger of abuses to which the principle of
limited liability must be exposed, is not only in opposi-
tion to the report of the Royal Commission appointed
to inquire into the subject, but is contradictory to the
practice and experience of every country in the world
which bas admitted the principle of litaited liability into
its commercial code.

"In every other country the privilege of limited lia-
bility is surrounded by restrictions which are intended
to guard against the danger—first, of excessive and reck-
less enterprise, naturally generated by the sense of strict
limitation of risk ; and, second, of fraudulent abstrac-
tion under the form of interest or profits, of that specific
and fixed amount of capital which is alone appropriated
as the security of the honest creditor.
"These restrictions indicate the universal conviction
of all other countries that against these sources of abuse
it is necessary that some proper safeguard be provided.
If it be deemed impossible to render such safeguards
efficient and satisfactory, the conclusion necessarily
arises that a measure ought not to be persisted in which
does not admit of effectual protection against injuitic3
to the honest creditor and injury to the public interests.
" 4. The effect of the bill will be to give legal protec-
tion, and therefore to hold out moral encouragement, to
dishonest practices in trade.
"Profits in trade consist of interest upon capital, re-
muneration for labour and skill, and premium of insur-
ance on risk. In proportion as the risk in any business
is great profits are usually high, but of these high profits
a large share is by every honest trader set aside as the
premium reserved against high risks. An unfortunate
tradesman coming before the Bankruptcy Court would
not be very leniently dealt with should it appear that,
carrying on a very riskful business, he had year by year
spent all the great apparent profits, making no reserve
out of them to meet the high risks he was incurring.
Now, this is the very practice which this bill direotly
sanctions, and therefore encourages.
" The object of the measure is to enable concerns to
limit their liability to a certain fixed sum, which has no
reference to the varying magnitude of the risks which
they incur, or to the high profits which, through those
risks, they are appropriating to themselves, but not re-
serving for the honest protection of their creditors.
" They are, in fact, appropriating and misapplying
the premium of insurance, which, under the form of high
profits, they year by year receive, and in this immoral
course they will have the authority and sanction of the
bill.

" 5. The tendency of the measure must be to encou-
rage and promote the transference of capital from trad-
ing concerns now constituted and conducted with the
caution and prudence which the sense of unlimited lia-
bility necessarily generates to joint-stock companies,
trading with small paid-up capitals, and embarking,
under the protection of limited liability, upon risks which
no person would otherwise venture to encounter. When
loss occurs a heavy portion of it will be made to fall
upon the unfortunate creditor, who deserves our sym-
pathy, whille the adventurers, who ought to be the vic-
tims of their own reckless speculations will remain com-
paratively safe under the *gni of limited liability. Mean-
while the sober calculations and legitimate transactions
of real trade will give way to a general spirit of specu-
ation, in hazardous enterprises, and jobbing in shares—
a state of things of which the history of 1824 and 1825
affords a practical illustration, and, at the same time,
holds out a warning example.
" 6. Many very important advantages arise from the
high moral character and commercial credit founded
upon the full and punctual discharge of all its obligations
which this country at present enjoys throughout the
world. If the effect of the measure shall be, as is pre-
dicted by the supporters, to restrict rather than to in-
crease credit, by filling the community with a mass of
concerns notoriously undeserving of public conVence,
the consequence must be serious injury to our cemmer-
cial character abroad, a diminution of the confidence
which other countries repose in the engagements of our
merchants and trade', an interruption to the ease and
freedom with which all our trading intercourse with the
world is at present conducted, and, in the end, absolute
pecuniary loss to the country.
"7. The measure is singularly inappropriate to the
present state of this country as regards capital and en-
terprise. There is abundance of capital in this country.
We are the lenders of our surplus capital to every nation
of the world. Any sudden demand, any new opening
for speculation is at once supplied with inexhaustible
funds, while we are subject to the frequent recurrence of
periods of undue and dangerous inflation of credit and
speculation. When these periods occur the tendency of
the measure must be to extend and intensify these
by giving facility for the wide-spread introduction of
joint-stock companies, reckless in their procedure be-
cause protected by limited liability, and fillinz the com-
munity with the in-truments of gambling in the form of
shares upon which little or nothing has been paid up.
The real want of the country is cempetent and du.y
qualified men (in whom confidence is duly blended with
caution, and the spirit of mercantile enterprise is regu-
lated by experience and the sense of respansibility) to
wield successfully the vast resources of capital and credit
which the country is prepared to place at their command.
"The evil to the correction of which the bill is appar-
ently directed,—namely, insufficient supply of capital to
meet the demands of industry and enterprise, does not,
in fact exist ; while the real difficulty is one which legis-
lation cannot effectually remedy.
"8. The period chosen for the introduction of this
measure is peculiarly unfavourable to the safety of the
experiment. After a long-continued heavy drain of the
precious metals from this country the reflux has appa-
rently commenced. A great accumulation of bullion
may be reasonably anticipated. Under such circum-
stances credit and a blind spirit of speculation are always
developed to a dangerous extent. On the present occa-
hion this danger will be renderd more formidable by the
effect, the character and extent of which is yet to be
ascertained, of the recent extraordinary discoveries of
gold. The time is therefore approaching, according to
all probability, at which the prudence and firmness of
the community will, through the natural course of
events, be subjected to a severe trial.
"At such a moment it is eminently inexpedient and
dangerous to introduce a change in the law seriously
affectnig the mutual relation of the debtor and creditor
interest., and which mast, in the first instance at least,
exercise a powerful influence on credit and speculation.
Important changes of the laws which affect our monetary
or commercial system, however sound may be the prin-
ciples on which they rest, are almost invariably followed
by rapid and excessive development, leading to temporay
but serious embarrassment.
" The crisis of 1525 was preceded by, and was int

mately connected with, the rapid development of the
warehousing system which resulted from the acts passed
in 1822.
" fhe crisis of 1837-9 was closely connected with the
sudden and excessive expansion of the joint-stock bank-
ing system which occurred in the years immediately
preceding.
"The crisis of 1847 followed closely upon the extensive
reduction of import duties introduced by Sir R. Peel and
the sudden outburst of the railway system.
" Experience, therefore, compels us to anticipate a
similar crisis as the necessary result of the first devel. p-
went of that great change in our monetary and corn-
tnercial system which is involved in this abrupt and
unqualified introduction of the principle of limited lia-
bility.
" If this crisis occurs simultaneously with the effect of
a strong influx of the precious metals on the return of
peace, and of the extraordinary addition to the total
amount of the precious metals through the gold disco-
veries, the firmness and prudence of the country may be
subjected to a trial too powerful to be withstood, and an
artificial expansion of credit may ensue, causing mone-
tary embarrassment and great mercantile disasters.
" 0 VERSTONE.
" MONTEAGLE OF BRANDON."

PlBAot.—At the Central Criminal Court, yesterday,
William Lewis, 25, was indicted for feloniously en-
deavouring to incite a seaman named Walter Bolitho
to run away with a vessel, and with intent piratically
to take possession of the vessel and the goods and mer-
chandise on board. His lordship having summed up,
the jury returned a verdict of Guilty. Sentenced to
transportation for life.
A letter from Genoa of the 14th, in the Consti-
tutionnel, says :—" Vessels are arriving every day
at La Spezia with troops from the Crimea but as
the health of the latter is good, it is not con-
sidered necessary to put them into camp at
the Point of Possono and on the small Ilot of
Santa Maria, as was at first intended. One of
the vessels which has arrived from. Balaklava
has brought the two monumental stones
erected at that port by the ancient Genoese. Ge-
neral de Lamarmora obtained them from the Eng-
lish Commander-in-Chief. They are about to be
placed in the old Palace of the Doges. One of
them, bearing the date of 1200, was erected by the
patrician family of Passane, as appears from the
arms on the escutcheon. The other was placed by
the Genoese Government which was in power at
- Balaklaya, and bears the date of 1300."