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The Joint Stock Companies Act 1856
(19 & 20 Vict. c.47) was a consolidating statute, recognised as the founding piece of modern United Kingdom company law
United Kingdom company law is the body of rules that concern corporations formed under the Companies Act 2006. Also regulated by the Insolvency Act 1986, the UK Corporate Governance Code, European Union Directives and court cases, the company is the primary legal vehicle to organise and run business...
Unlike other Acts of Parliament that preceded it, the 1856 Act provided a simple administrative procedure by which any group of seven people could register a limited liability company for themselves.
The Joint Stock Companies Bill was introduced to Parliament by the then Vice President of the Board of Trade
The Board of Trade is a committee of the Privy Council of the United Kingdom, originating as a committee of inquiry in the 17th century and evolving gradually into a government department with a diverse range of functions...
, Mr Robert Lowe
Robert Lowe, 1st Viscount Sherbrooke PC , British and Australian statesman, was a pivotal but often forgotten figure who shaped British politics in the latter half of the 19th century. He held office under William Ewart Gladstone as Chancellor of the Exchequer between 1868 and 1873 and as Home...
. In doing so he proclaimed the right of every citizen to have freedom of contract
Freedom of contract is the freedom of individuals and corporations to form contracts without government restrictions. This is opposed to government restrictions such as minimum wage, competition law, or price fixing...
and with it obtain limited liability for operating a business. Companies had until recently been prohibited, as a result of the Bubble Act
Bubble Act 1720 was an Act of the Parliament of Great Britain that forbade all joint-stock companies not authorised by royal charter. It was passed on 9 June 1720, and was also known as the Royal Exchange and London Assurance Corporation Act 1719, because those companies were incorporated under...
and the stock market panics of the early 18th century. There was still a lot of suspicion of companies, so Lowe refuted the idea that a limited company is inherently subject to fraud, and proposed the suffix of "Ltd" to make businesses aware of limited liability.
The Third Reading of the Bill took place on 2 June 1856, and passed easily.