Stock Exchange, Railways and Company Law - Essay Example

The liability of the investors that have provided funds for the company is limited to these funds. Managers are elected to protect shareholders' interests and their main task is to increase their wealth with employees being a functional daily segment of this task. Big joint stock companies usually trade their shares to the public and thus the ownership and distribution of the benefits of the company can change over time. The fist joint stock companies occurred in the UK and in Europe and mainly dealt with trade.

At the beginning of 19th Century the UK corporate law had no clear statement of whether corporation was a private or public person as the majority of the shares within such companies were held by private individuals and not by the state. US had experienced at this time some court cases which lead to the decision that identification of the separate corporate personality must be cleared. Industrial revolution has lead to enormous capital accumulation which was a very favorable field for development of joint stock companies which at the beginning of the nineteenth century in the UK industry prevailed in the sectors of insurance, utilities, transportation and shipping2 and were legally viewed as partnerships and not as corporations.

The major faults within such a legal entity were the "inability to sue and be sued using a joint name, the lack of power to proceed in common law against one partner, the fact that one partner could bind the whole against their will, the difficulty of getting rid of an unwanted partner, and generally the ease of fraud amongst partners"3. Liverpool's bill after numerous debates made the metal joint stock companies present annual report on their actions to the House of Parliament. Shares were then personal property selling of which was a formal transaction and only after 1815 more than 140 company shares were quoted on stock exchange which increased the need for legalization of such trade and has lead to rising sues.

Some scholars argue that some sort of limited liability which is now one of the joint stock company features, already existed in the late seventeenth century as shareholders could not be arrested for their debt and be subject to bankruptcy charges, and the shareholders were not liable by personal possessions for the debt of the company. This may have lead to promoting incorporating of businessmen and unincorporated companies were in disadvantage comparing to the former. The law of the early eighteenth century was more tolerant to creditors rather than debtors as the latter could be put into prison for minor debt and thus people who made up the incorporated company were as the legal body of the company themselves.

Only in the middle of the 19th century the reform had brought the corporate personality separation where the persons within incorporated companies were different from the joint stock venture entity, while investors within unincorporated company were as one. This difference can be seen even from the referral to such companies in the press and literature, where until the middle of the nineteenth century incorporated and unincorporated companies were both referred to as "they".From the middle of the