HISTORY OF COMPANY LAW FROM 1825 TILL TODAY
- INTRODUCTION
- OBJECTIVES
- MAIN CONTENT
- CONCLUSION
- SUMMARY
- TUTOR MARKED ASSIGNMENT
- REFERENCE/FURTHER READING
INTRODUCTION
After the repeal of the Bubble Act 1720 it would seem as if the position revents to the pre-Bubble Act days. The only form of authorization for company formation still remains the grant of a charter. However, the charter became very difficult and expensive to obtain, further, the difficulty of convincing the public of the many advantages of joint stock companies after the fraudulent era, and the total absence of any regulation led to a slump in use of the joint stock company system as a commercial vehicle at this time. In this unit we shall examine the developments of the joint stock system from 1825 till the present day.
OBJECTIVES
At the end of this unit the student will be able to learn the development of company law from 1825, particularly the different Acts enacted on company law till date.
MAIN CONTENT
TRADING COMPANIES ACT 1834
This Act, the Trading Companies Act was enacted in 1834 and was intended to extend the availability of corporate advantages. This Act actually empowered the crown to confer letters patent on companies without granting a charter, the companies can sue and be sued without a special Act to this effect, but they may only be sued in the name of their officers. The Act also made provisions for the registration of members of the company. There was however no limitation on the liability of the members but made further provision that the members continue to be liable for the debts of the company until three years after ceasing to be member of the company. In cases where the creditors obtain judgement against the company, execution may be levied against every member without leave of court.
In 1837, the Board of Trade instructed a chancery lawyer, H. Bellendenker to prepare a report on the law of partnership with particular reference to establishing limited partnerships. However, based on his report, the 1834 Act was re-enacted as the Chartered Companies Act of 1837 but with the reliable clarification that personal liability of members might be limited by the letters patent to a specified amount per share. The great limitation had been the unlimited liability of the members and the difficult of every a large number of people who are fluctuating every day.
In 1843, Gladstone, was appointed the President of the Board of Trade and also the chairman of the committee on joint stock companies of the parliament. The report of the committee which was declared to be “epoch making” by Gower, led to the enactment of the Joint Stock Companies Act 1844, and this Act had been called the Gladstone Act.
GLADSTONE ACT 1844
By this time, the Industrial Revolution was gathering momentum, and this was exerting pressure on government for charges in the legal area to meet the needs of commerce. Restrictions were being gradually lifted to allow ordinary people to incorporate companies. This was the position taken in the Gladstone Act of 1844. The Act introduced these main principles which has helped in the development of company how till today. The first point was to drew a distinction between Joint Stock Companies and partnerships, as it provided that any partnership of more than 25 members must compare ity register as a invited company; or with shares transferable without the consent of the members. The second very important improvement was that it provided or registration of companies without the necessity of applying for charter or Special Act of parliament. This is done by filing of a deed of settlement which will specify the purpose for which the company is incorporated; when the deed of settlement is not filed, then the registration is only provisional only. The third principle is that of publicity. The major reason for this is that where there is full publicity of the activities of the company there will be less likelihood of fraud being perpetrated by the promoters. The Act also established the Registrar of companies with whom all the particulars of the companies are filed, including annual returns. The personal liability of members was till retained, but he law provided that their personal liability will cease after three years of registered transfer of their shares; however, the creditors must first proceed against the company before they can proceed against the assets of the members, where the assets of the company cannot satisfy the debt.
In 1845, based upon a Bill prepare by Gladstone but passed after he left office, the companies clauses Consolidation Act of 1845 was passed. The provisions of the law was to be incorporated by reference, but it materially slaughtered and cheapened the powers of statutory incorporation which was still necessary in case of public utilities requiring the powers of compulsory acquisition. Gladstone during his short stenre succeeded in putting Joint Stock Companies on a sound legal footing.
JOINT STOCK COMPANIES ACT 1856
The 1855 Limited Liability Act was enacted that year to confer limited liability on companies the struggle will be discussed in the next unit. It remained in force for a few months until it was repealed and incorporated in the Joint Stock Companies Act 1856. This Act contains 116 sections and a schedule of tables and forms and can be classified as the first of the modern Companies Acts. There was no more provisional registration. The deed of settlements was replaced by the memorandum and articles of associations, it also has provisions for counting up, which was hitherto had been subject of another Act. The manner of incorporation was simplified as any seven or more persons may join and informing a company by simply subscribing to the memorandum of and articles of associations. There was no more minimum paid up capital or stoke value. Directors were still to be liable if they paid dividends knowing the company to be insolvent, this is still the position today. The word “limited” must be added to the name of the company. There are also provisions for registration and publicity. The word “limited” is used as a wearing signal to alert unwanyoutsiders dealing with the company to dewore. All companies are required to add ‘Ltd’ as part of its name, and this practice is still followed till today.
SUBSEQUENT DEVELOPMENTS
In 1857, a Companies Act was enacted which now brought Joint Stock Banking Companies within the scope of the Companies Act. In 1862, the various enactments were consolidated, e.g. An Act dealing with frauds by directors. Directors Liability Act 1890, the 1862 Companies Act remained the principal act until 1908. The Companies Act 1908 consist of 212 sections and three schedules. It also for the first time introduced the companies limited by guarantee which was useful for clubs and charitable organizations.
In England, the practice began by setting up committee to review the Company Act periodically and the report later forms the essence of the company law amendments that normal follow. In 1948 a Comprehensive Act was passed in England which incorporated all the new developments and court decisions and updated the company law at that time. Nigerian Companies Act 1968 was based on the 1948 English Companies Act.
Another important influence on English company law was the passing of the European Communities Act 1972 upon the joining of the European Union, to comply with minimum obligations under the Rome Treaty and section 9 made substantial but inelegant revisions to the company law to comply with the First Council Directive on publicity, pre- incorporation contracts and the capacity of companies and the authority of directors.
Another landmark legislation in England was the Companies Act 1985 which incorporated all the EEC directives and modernized company law. This was followed by the Companies Act 1989.
The current comprehensive legislation in England is the Companies Act 2006.
CONCLUSION
The period from 1825 till today had been very rapid developments in company law. As the economic activities and commence generally improved through the use of technology, company law responds most admirably to new trends and manage to keep pace with the yearnings of the society. The innovations that was brought about within this period and the use of this innovation till today attests to the very important contributions of this period to company law today.
SUMMARY
After the repeal of the Bubble Act, there was a slump in economic activities. And as the Trading Companies Act 1834 was enacted and folloed by the Joint Stock Companies Act of 1844, and 1845 with innumerable innovations chief of which is the simple registration of companies. The road was cleared for more public participation and interest. The Joint Stock Companies Act of 1856 thereafter lay the foundation for the current position of the law. Virtually all the current principles and procedures were established firmly, and we can assertively say the 1856 Act was the begging of the Modern Companies Act we have today.
TUTOR MARKED ASSIGNMENT
Trace the historical development of company law from 1825 till the present day.