5 - The limitation of liability

Summary

It seldom happens that technical aspects of company law are seen as holding sway over national destiny, but in the mid-nineteenth century limited liability was believed by some of its more militant supporters and opponents to have just this power. It was variously claimed that limited liability would induce widespread economic and moral degeneration, and that it would liberate and stimulate industry and commerce throughout the entire nation. The issue was debated with vigour and passion, for it brought into high relief Victorian uncertainties about the natural order of the economic world; for some, limited liability was at the centre of a battleground between God and Mammon.

In the view of the political economist J. R. McCulloch, limited liability was unnatural and unnecessary:

In the scheme laid down by Providence for the government of the world, there is no shifting or narrowing of responsibilities, every man being personally answerable to the utmost extent for all his actions. But the advocates of limited liability proclaim in their superior wisdom that the scheme of Providence may be advantageously modified, and that debts and obligations may be contracted which the debtors, though they have the means, shall not be bound to discharge. Borrow, say they, as much as you please, and pay as little as you like, – the less, it would seem, the better!