The Innovation Of Joint-Stock Company System During The Industrial Revolution

The company is the main business organization form in the business activities of modern society. Generally speaking, the company has four characteristics which are the legal person status, shareholder protection, the issuance and transfer of shares and authorization management system. At the beginning of the Industrial Revolution, the British limited the investors to set up a joint-stock company. The British permitted the citizens to register a joint-stock company since 1844. After the Bubble Act passed in 1720, Britain restrained citizens to set up a joint-stock company. In 1844, the Company Law allowed citizens to set up a joint-stock company by registration. Therefore, the period from 1720 to 1844 can be regarded as system reform time. At the same time, the Industrial Revolution had fulfilled in British. Without application of company, the technological innovation in Industrial Revolution will not be so great. It is necessary for us to review the application of the company system in the Industrial Revolution.The forms of business organization before 1760 included the partnership, the sole proprietorship, the trust, the joint-stock company, the mutual company and other organization. The characteristics of the joint-stock company have the blood relationship with these ancient business organizations more or less. For example, the unincorporated joint-stock company got quasi-legal person status by the trustee system and practical issued shares through partnerships. Before the Industrial Revolution, the most important legislation for company was the Bubble Act in 1720 which prohibit unauthorized joint-stock company engaged in business activities. But the effect of the Bubble Act was varied in different time.Even with the constraint of the Bubble Act, the using of joint-stock company didn’t come to the end or reduce. Then the author focuses on the using of joint-stock company in different industry between 1760 and 1844. The industry of canal and insurance had the largest contribution to the form of joint-stock company system. The canal industry had widely used the joint-stock company system since 1750s because of the approval of the House of Common. In the insurance industry, the unincorporated company was the most important business organization. The unincorporated company was not joint-stock company. But it actually had some characteristics which joint-stock company owned. For example, the unincorporated company could get the quasi-legal person status by appointing trustee and issue and transfer of shares by signing the deed of settlement.The unincorporated company was illegal and it often got into judicial troubles. In the lawsuit involving the unincorporated company, the Bubble Act had not putted into use until 1808. Because most of the lawsuits about unincorporated company before 1808 were the dispute between partners. These lawsuits applied of the procedures and principles of common law generally. As the Bubble Act was applied in lawsuit, the judges had to face the dispute about the Bubble Act. But the judges both in the Court of Chancery and the common-law Court didn’t have a clear idea at first. Finally, the House of Common abolished the Bubble Act in 1825. It didn’t represent the establishment of the new system after breaking the old system framework. Therefore, the House of Common passed a series of law in order to constraint the business organization between 1825 and 1844. In 1844, the Company Law as the first company law had passed. It allowed the organization which had more than 25 investors to set up as a joint-stock company by registration.The opinions to the transfer of shares were changed along with the company system. Investors were afraid of the using of joint-stock system after the South Sea Bubble. Both the royal and the House of Common believed the reason of the South Sea Bubble was the using of joint-stock system. The Bubble Act was one of the legal ground when people suit the unincorporated company. In 1844, the Company Law allowed investors to set up the joint-stock company by registration. The stock market of British flourishes gradually. In short, it has a closed relationship between the change of views to the stock market and the development of company system. In addition, this thesis also discusses the relationship between the company system and economic growth.