Bubble Act

The Bubble Act of 1720 (Officially titled the Royal Exchange and London Assurance Corporation Act 1719) was an Act of the Parliament of Great Britain (citation 6 Geo. 1, c. 18) that forbade all joint-stock companies not authorised by royal charter. Various motivations have been suggested for the Act. These include the desire to prevent speculation such as that which produced the contemporary South Sea Bubble; an attempt to prevent smaller non-charter from forming and so reduce the importance of Parliament in regulating businesses; or that the South Sea Company itself wanted to prevent other bubbles from forming that might have decreased the intensity of its own.Ron Harris, "The Bubble Act: Its Passage and Its Effects on Business Organization", "The Journal of Economic History", Vol. 54, No. 3. (Sep., 1994), pp. 610-627] Recent scholarship indicates that the last of these was the cause: it was passed to prevent other companies from competing with the South Sea Company for investors' capital [Cooke, "Corporation Trust and Company" at 82; Gower (1952) 68 "LQR" 214] . In fact, the Act was passed in June 1720, before the peak of the bubble. The Act was repealed in 1825.

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.

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External links

*Ron Harris, [http://www.jstor.org/stable/2123870?seq=2 'The Bubble Act: Its Passage and Its Effects on Business Organization'] (1994) 54(3) "The Journal of Economic History", 610-627