Bubble Act
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The Bubble Act 1720 (6 Geo. 1. c. 18) (also Royal Exchange and London Assurance Corporation Act 1719)[1] was an act of the Parliament of Great Britain passed on 11 June 1720 that incorporated the Royal Exchange Assurance Corporation and London Assurance Corporation, but more significantly forbade the formation of any other joint-stock companies unless approved by royal charter.
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The act gave the South Sea Company a monopoly over British trade with South America[4] until the South Sea Bubble "popped" in Britain's first major stock market collapse.
Background
Various motivations have been suggested for the act. They include the desire to prevent the speculation that produced the contemporary South Sea Bubble, an attempt to prevent smaller non-charter companies from forming and so reduce the importance of Parliament in regulating businesses; or the South Sea Company itself wanting to prevent other bubbles from forming that might have decreased the intensity of its own.[5]
Recent scholarship indicates that the last was the cause: it was passed to prevent other companies from competing with the South Sea Company for investors' capital.[5][6][7]
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Contents
The act declared "illegal and void" all business that raised money or offered shares in the manner of a chartered company without a charter from the royal government.[5] Under the terms of the act, the Royal Exchange Assurance Corporation and the London Assurance Corporation were granted charters to write marine insurance. Until 1824, they remained the only joint-stock firms with such a charter.
See also
- Template:Cite CommonLII - the only prosecution brought under the Act which, according to L.C.B. Gower, "decided nothing of importance".[10]
References
Further reading
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- Paul, H., Di Liberto, N., Coffman, D'M. (2023). The Bubble Act: New Perspectives from Passage to Repeal and Beyond, Palgrave MacMillan, ISBN 9783031318931.
- ↑ An Act for better securing certain Powers and Privileges intended to be granted by His Majesty by Two Charters for Assurance of Ships and Merchandizes at Sea, and for lending Money on Bottomry; and for restraining several extravagant and unwarrantable Practices therein mentioned, 6 Geo 1. c. 18
- ↑ An Act for restraining and preventing several unwarrantable Schemes and Undertakings in His Majesty's Colonies and Plantations in America, 14 Geo. 2. c. 37
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- ↑ An Act to repeal so much of an Act passed in the Sixth Year of His late Majesty King George the First, as relates to the restraining several extravagant and unwarrantable Practices in the said Act mentioned; and for conferring additional Powers upon His Majesty, with respect to the granting of Charters of Incorporation to trading and other Companies, 6 Geo. 4. c. 91
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