13. I do not think limited liability is necessary to induce capitalists to embark in com- William Hawes mercial or trading pursuits in the United Kingdom or its colonies. Every day's experience proves this. But I think there are classes of associations which, under certain general rules, ought at all times to be able to obtain charters with limited liability; such associations or partnerships are not such as come under the denomination of ordinary trading or commercial partnerships.

Unlimited liability excludes to some extent the capital of professional men from trade and commerce; but it is a very grave question whether the law which imposes this restriction is not more valuable to trade and commerce, as the best means of checking overspeculation, than any advantage it would derive from a certain addition to its available capital.

14. The only restriction I would impose upon chartered associations with limited liability is that, except with the consent of the Board of Trade, the calls should not exceed a fixed proportion of the subscribed capital. Except in extreme cases, a limit of this kind would protect the creditors.

This remark does not apply to ordinary partnerships en commandite. I have already stated the only check I would impose on them if Parliament should sanction the principle. Insure to the public the knowledge of the kind of partnership they are dealing with, and I can see no principle upon which you are to encumber these associations with restrictions, any more than I can see one to justify their having privileges or special protection.

15. I have neither facts nor experience to enable me to reply to this question; but it must be evident that partnerships en commandite in speculative trades, and all of whose capital is invested in floating securities and produce, might in periods like 1845-6-7, when prices were at their maximum, have divided and withdrawn under commandite law profits far exceeding their capital, and holding the same stock have been (under this law) thoroughly insolvent in 1848. Can it be right that this apparent profit should be free from the penalty of the speculation which produced it, and that the creditors by whose capital it was realised should bear the loss?

16. Whether under limited or unlimited liability the greatest facility ought to be afforded to the transfer of shares. The debtors are, of course, responsible that the transfers be made to proper persons.

17. I am of opinion limited liability in trade or ordinary partnership en commandite would encourage hazardous and desperate speculations, to the great injury of individual character, of our mercantile morality, and, therefore, of our national character as upright men of business. All experience teaches us how much more men will assent to when done by others than they would do themselves.

The acts of unprincipled gérants would not be canvassed when profitable, and when unprofitable the satisfaction that the loss was no greater, and that it was limited, would palliate the fraud or error of judgment which caused the failure.

I can suggest nothing to prevent or to mitigate such results.

18. The checks here proposed I believe would be useless. Few shareholders in companies examine accounts, and how is any given amount of loss to be ascertained?

19. The principle of commandite is that none but the gérant should take part in the business. If any interference be allowed its limitation appears to me to be impossible.

20. I believe all registration of partnerships would be useless. It is sufficient for the public to know that a business is to be conducted on the commandite principle. If that he palpable and marked on every document issued, further checks and restrictions are, in my opinion, quite unnecessary. Public opinion would soon be expressed on their safety and

management.

21, 22. The reply to the last question meets this inquiry. The introduction of such restrictions would be an acknowledgment of the inferiority and danger of some kinds of such partnerships.

23. Yes; but the Act has been inoperative because it limited the division of the profits.

24. I hand herewith a series of answers to questions circulated by the City council for promoting the improvement of the law of debtor and creditor, relating to this subject, and by which it will be seen that in all countries where "commandite" is in use, the law of debtor and creditor is much more severe than in England.

and insurance offices will exhibit a much wider margin between the amount paid up and that for which cach share is liable.

In considering the alleged evils of unlimited liability in banks, it must not be forgotten that these institutions are of modern date, and when the facilities they afforded for speculation in 1835-6 and in 1841 are considered, before fixed rules for their management had been established; and when it is also recollected that most of these banks were established in direct opposition to powerful local interests and worked by untried directors and agents, and mostly in opposition to deeply rooted prejudices, the wonder is that the demands upon the shareholders have not been more frequent and more serious rather than they should have been confined to a few instances rendered notorious by their exceptional character, and the severity of the operation of which affords the best possible security for the exercise of caution in the future management of these valuable institutions; and surely there is more of justice in the shareholders bearing such losses than that they should fall upon innocent creditors.

William Hawes.

25. I cannot answer.

26. Where "genius" is combined with prudence and industry I believe it is very rarely long unaided by capital; but speculative inventors who arrogate to themselves the title of men of genius are rarely industrious and prudent, and often loudly complain of the want of that support to which they are not entitled.

27. One of the most important improvements required in the law of partnership is the repeal of that portion of the law which precludes the payment of persons employed by partnerships in proportion to the profits of the business.

Could this be done the security of every firm would be increased. Every one employed would have a direct interest in its welfare. Exertion would be encouraged, faithful service would meet immediate as well as its due reward; and good feeling between the employer and the employed, which the existing law almost discourages, would be promoted to the benefit of all. That evil of the present day, "strikes," would be undermined, and the master, the foreman, the clerk, and workman, would all feel equally interested in the prosperity of the business that occupied them.

This principle is to some extent acknowledged in our naval and military services, where prize money gained by the bravery and discipline of all is divided between the commander and the men.

28, 29. My inquiry abroad does not lead me to the belief that partnerships en commandite have been advantageous to the lower or middle classes. Here, of course, we have no experience. I think, however, much more good would be done by increasing the facilities of making small investments in the funds, in shares, and especially in land.

Trading associations of working men are sure to be led by some clever and designing foreman, who eventually turns them to his own exclusive advantage. Such associations ought not to be encouraged by special privileges, and on the other hand I would not discourage them by restrictions.

30.

31. The usury laws no doubt require further modification. I believe any restriction upon the rate of interest which a borrower is inclined to give and able to pay, or which the lender is inclined to lend his money for, is unwise and inconsistent with the principles of free trade.

The law is now evaded in various ways, so that the less scrupulous man often obtains an advantage over his rival whose actions are restrained by law. A bill of less than twelve months' date can now be discounted at any rate. The principle of a fluctuating rate of interest is thereby adopted, and I cannot see any sound reason why bills at longer dates should not have equal privileges.

I would not, however, introduce any restrictions upon the repayment of such loans. There can be no reason why a loan of money is to be subject to other restrictions than a loan of goods. If you create such a distinction all loans of money will assume the form of sales of goods at long dates.

Such an alteration of the usury laws would render necessary the repeal of the law which gives bond debts priority, in case of failure, over ordinary trade debts.

Privileges or restrictions upon or to loans, are both unsound. There is no real difference between a debt contracted for money lent and one contracted for goods sold; value is given for both, and the law ought not to create a difference. So long as the usury law obliged every one to lend money at 5 per cent. when it was worth 10 per cent. there was a plausible reason for a preference; but so soon as the proper function of money is acknowledged such preferences will be swept away.

I believe the removal of all restrictions upon the lending of capital would render any change in the law of the liability of partners unnecessary.

Postscript. The law relating to arbitration, which has a most important bearing upon the law of partnership, is not referred to in these questions.

Almost all deeds of partnership have an arbitration clause which provides that all disputes are to be settled by a reference, but it is well known that although the performance of every other clause in the deed can be enforced this cannot.

In this respect great improvement is required, and the sooner compulsory reference is imposed upon all parties to such deeds the better.

The law of unlimited liability would be deprived of half its terrors if, the moment disputes arise between partners, the reference provided in the deed could be enforced.

Henry Ashworth.

No. 51.-HENRY ASHWORTH, Spinner and Manufacturer.
(Selected by the Chamber of Commerce of Manchester.)—January, 1854.

I hold the opinion that the present unlimited responsibility for partnership debts should in no degree be changed or modified; and the following are the reasons upon which that opinion is based.

It will be allowed that the present is a matured period of our history, when the British Henry Ashworth. name is deservedly holding the most honoured distinction as a great commercial people. On this account it becomes of the utmost importance that our legislature should guard and cherish our exalted position, and not allow anything to be done to impair it.

It is well known to those who have studied the subject, that this commercial preeminence has not been the creation of the mere material success which has attended our trading pursuits, but that it has been largely indebted to the admixture of the moral elements; to the stern unbending probity of our mercantile class, in the honest fulfilment of pecuniary obligations of every kind, whether partnership or otherwise; and to the discountenance given to delinquency by a painful sense of dishonour and loss of caste.

Under a system always rigid in its exactions our manufactures and commerce have not only flourished, but have reached their present unexampled extent; and it has ever been found, that those who have been themselves the most actively engaged in creating by slow degrees their large establishments have not been slow, when experience has indicated the propriety, in manifesting avidity in the extension of their concerns; and they are persons who have no desire in any way to shrink from the responsibility in which they know that they involve the whole that they possess for the full payment of their partnership debts. Let it be borne in mind that our mercantile pursuits, unlike our learned professions, are not sheltered by law from open competition; nor is access to them rendered difficult by tests of fitness or other privileged exclusions; on the contrary, they are free and open to all who may choose to enter upon them, and are subjected only to those conditions and penalties, moral and pecuniary, which overtake disaster in the conducting of them.

A class of persons are seeking to enter our trading pursuits on easier terms, and plead to be exonerated from an inconvenient portion of their partnership responsibilities.

It will become the duty of Parliament to consider whether the individual interests of the parties to this application are entitled to any exemption from the ordinary trading risks of other mercantile men, and whether such a scheme, if adopted, would not inflict injustice and permanent injury upon our present commercial system.

Limited Responsibilty of Partnerships.

Any statutory contrivance to curtail the pecuniary responsibility of partners would profferthe inducement, if it did not actually invite, the adventure of the indiscreet. By this means plausibility would be raised to a premium, and caution would stand at a discount.

Inroads upon the honourable pursuits of commerce would be made for the chances of grasping unlimited profits, out of resources purposely limited.

Failure of success would be shielded from reproach; the law would become the refuge of the trading skulk; and, as a mask, cover the degradation and moral guilt of having recklessly gambled with the interests of creditors; and thus would the stain which now attaches to bankruptcy cease to exist.

Limited responsibility would be the enactment of "protection" to the money capital, a class-a gross injustice, and an uncalled-for violation of those sound principles o legislation we have so recently and so advantageously adopted.

In a new country where commercial capital is scarce, and the resources of nature abundant, such a policy might be had recourse to by way of inducement to adventure. Or in any country where large masses of capital, beyond individual means, are required to be raised for railways or other large public undertakings, the exception in favour of limited liability might be allowable; but in this country, where money capital is notoriously abundant, always in search of investment, and often "dirt-cheap," it cannot be needful for us to be raking together our small savings for trading purposes, and to offer them special exemption from the vicissitudes which are common to all.

The result to be anticipated from any relaxation of the existing responsibility of partners would be an increase of investments beyond existing wants.

Any stimulus thus given would cause a reduction in the money value of their own investments, and disappoint their own expectations of profit. But the extent of loss which these adventurers would bring upon themselves would appear insignificant, when compared with the far greater loss and injury to profit which would thus be inflicted upon all classes of traders who had previously embarked their whole property; and who, having vested their sole reliance upon the success of their pursuits, would find themselves overwhelmed and helpless.

Let not this aspect of the affair be deemed a mere speculative assertion. Let it be supposed that in the conducting of some one of our branches of trade, or manufacture, a capital of fifty millions sterling has already found employment and at a remunerative scale of profit; and that, by reason of some sort of inducement held out, there should be some two or three millions, or five per cent., of additional capital expended in its enlargement; this amount of outlay would bring a glut upon the market, and every trader knows from painful experience, that less than five per cent of over-production will convert profit into In this way, a mis-directed outlay would bring havoc without advantage.

Henry Ashworth.

Under our existing system of "unlimited responsibility," there can be no doubt that the money capital of the country is far more than adequate to all our commercial wants, and that it now is, and can hereafter be wielded by persons who are possessed of enterprise and energy of character, and who are willing to encounter and equal to sustain the shocks and the reverses of any trading emergency.

In the hands of men of this class the pursuits of our commerce and manufactures have hitherto been conducted, in the generality of cases, with commendable ability; their dealings have been characterised by enlightened self-interest, and their demeanour by an independent self-respect, leading to the enjoyment of position and wealth.

The question to be determined is, whether in a social and national point of view it would be for our advantage or our disadvantage that we should abandon the guarantee, moral and pecuniary, which we now possess; and accept a lower standard of partnership obligations.

The position of our mercantile character is a treasured object, and demands the best security we can obtain for the upholding of it. On that account we cannot hesitate to prefer the security of the man who, without reservation, offers the stake of his whole property and the treasured estimate of his own respectability upon the result of his trading success, as against the pretensions of another who requires to be fenced by conditions.

Out of deference to the wishes, not only of the parties to limited liability but of other persons also, I think that the repeal of the usury laws, and some modification of the laws relating to partnerships would meet all our existing wants, and would not be pregnant with disaster.

Edward Ede.

No. 52. EDWARD EDE, Merchant. (Selected by the Chamber of Commerce of
Manchester.)-Manchester, 23d November 1853.

Having had an opportunity of seeing the working of partnerships with limited liability, or so-called commandites, on the Continent, and the abuses arising from them, I do not approve of such partnerships; therefore in reply to question

No. 1. I do not consider that the law of unlimited responsibility of partners for partnership debts should be altered. Further reasons for this opinion will be given below

see 13.

2. I am of opinion that the unlimited responsibility of partners for partnership debts should not be modified, on the grounds stated below, in reply to other questions.

3. The first part of this question appears to be answered above; but in reply to

(1.) If limited responsibility be permitted, it will probably give rise to numerous joint stock companies, or so-called commandites, which would unduly interfere with the free competition of industry on the part of individuals or partnerships with unlimited liability. (2) & (3) do not require a further answer, inasmuch as I do not approve of partnerships with limited liability in any shape.

4. There would be much danger to creditors against which it would be necessary to guard, such as secretly withdrawing of capital, &c., and I do not see what measures could be adopted to prevent it.

5. I do not see how such partnerships as are spoken of here could prove beneficial to the community, inasmuch as there is no lack of capital at present for developing new trades in cases where a fair prospect of profit can be shown.

6. I think there would be great perils to both partners and creditors in concerns of this nature, because the managers and directors, in their anxiety to pay good dividends, would be led into reckless speculations and over-trading; and I don't see how this could be prevented.

7. A number of trading concerns so established would have an injurious effect by raising a competition against individuals, and against firms of copartnership with unlimited liability.

8. Joint stock associations with unlimited liability, having a numerous and wealthy list of shareholders, are not likely to lead to an undue amount of confidence, because the public know that they have not only the capital of the company to look to, but also the private property of every individual shareholder as security.

This confidence may, however, lead to consequences such as spoken of in the 2d and 3d clauses of this query.

9. If a number of such companies were started, they might produce the effect spoken of. 10. I am not prepared to answer the first query; but as regards the second, the present law of unlimited liability certainly does prevent prudent persons of property from becoming shareholders.

11. From what I have already said, the two first queries do not call for further reply ; but I am of opinion that all joint stock companies should be established on one common principle as to their liabilities and responsibilities.

12. The above is a reply to this question, as I believe no good reason can be given for making distinctions.

13. Having regard to the commercial enterprise and capital of this kingdom, I do not think that partnerships with limited liability are necessary. Parties wishing to embark a portion of their property in trade can attain the same end by loaning it to individuals, or copartnerships, with even better security to themselves than that offered by limited liability; because in the latter case, in case of bankruptcy, all the paid-up capital would be lost, whereas in the former the party would get his dividend the same as other creditors; and as to the question of profit, such rates of interest might be stipulated for (if the usury laws do not prevent) as might be considered equivalent to a share in the profits. 14. See what precedes.

15. I have no means of answering this question.

16. Disapproving of limited partnerships, it follows that no reply is necessary.

17. I think the cases stated in this question very likely to arise, and I do not see what remedy could be provided.

18. Parties approving limited partnerships are best qualified to answer these points. 19. If limited partnerships are to be permitted, the limited partners ought to have perfect liberty to take part in the firm by counselling and advising the unlimited partners.

20. In any law permitting limited partnerships, all the queries under this head ought to be made indispensable parts thereof (except the third, about which I am not prepared to reply).

21. I do not consider that the public would be entitled to a publication of the accounts of such firms, more than that of firms of unlimited liability, nor do I see how accuracy would be secured, and error or fraud prevented.

22. Answered above in No. 21.

23. I was not aware of any such law in Ireland.

24. In Austria they may have been advantageous to the partners, but certainly not to the public. On the contrary, they have been greatly abused by the clandestine withdrawal of capital, transfers, &c., &c.

The credit of limited partnerships, or commandites, is certainly not so good as that of unlimited partnerships.

25. In Austria there is doubtless a register of bankruptcies preserved. I don't know what distinctions may be made in such registers. It is out of my power to answer the two last queries.

26. I know of no cases in which men such as here described have been aided by limited partnerships. Such persons have seldom much difficulty in finding parties ready to avail of their services.

27. Such parties will almost always be sought after and paid in proportion to their abilities.

28. I understand that generally speaking the lower and middle orders, especially operatives, have not been benefited by partnerships of any kind. Savings banks and banks of deposit doubtless afford sufficient facilities for making small investments.

29. Doubtless much safer.

30. Joint stock companies have a tendency to encourage undue speculation.

31. If the laws of usury limit the amount of interest to be charged on loans, they ought to be modified, as they prevent capitalists from loaning their money in the manner spoken of in reply to question No. 13.

No. 53. JOHN SLAGG, Merchant. (Selected by the Chamber of Commerce of

Manchester.)-Manchester, 30th November 1853.

1. I should say there should be no change in the present law of unlimited liability of partners for partnership debts, and for the following reasons, viz. :—

1. Establishments with limited liability of partners would have to be conducted by one or more of the partners conversant with the business, and, from experience, I know that a balance sheet can always be produced to delude the other share holders, thus leading people to invest their money believing in the truth of th said statement or balance sheet.

2. The shareholders would very soon give all power to the managing partners, and they, from their limited liability, would be induced to enter into hazardous speculations, in hopes of large profits to themselves and their partners; thus creating undue competition, to the injury of individual traders. With few exceptions, any attempts to carry on joint-stock business (even where each shareholder was liable to the extent of his whole property) have proved failures in Manchester.

2. Such partnerships could not get the same credit or buy on the same terms as houses of known respectability and wealth; and this in itself would bring ruin on any such company.

Edward Ede.

John Slagg.