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Limited Liability Act

Limited Liability Act. This legislation was introduced in the United Kingdom in the 1850s and consolidated in an Act of 1862. Prior to this anyone owning a share in a commercial activity was responsible for any debts incurred in the case of bankruptcy without limit and this was an obvious deterrent to potential investors. The legislation limited the extent of this liability to the amount initially invested. But as a restraint on uncontrolled expansion, companies claiming limited liability were required to have 15 per cent of their nominal capital paid up, to have at least 25 shareholders, and to have 25 per cent of the capital fully subscribed.

Clive H. Lee

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