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4.3.2 Economic Trends and Insolvency
At the end of the seventeenth century, encouraged by the possibility of trade
overseas, companies began to venture into stock trading. 155 This scheme was
initiated by the success of the South Sea Company. When the company collapsed,
the assets and stock prices in public credit plummeted. 156 The effect then spread to
the whole trade and industries sector and later the economy declined into the depths
of a depression. 157 The government reacted to the crisis by passing the Bubble Act
1720 which was to restrict the formation of companies. 158 The deed of settlement
company was later set up as a form of evasion technique developed by businessmen
to overcome the restriction placed under the Bubble Act. 159
The deed of settlement companies were unincorporated companies made up of
various shareholders and a trustee(s) where parties agreed to observe the provisions
of the deeds. 160 Founders of this type of company would include various provisions
in the deed with the aim of making them as close as possible to corporations. The
covenant would include provisions which stated the company would have a specific
name comprised of person who held shares in its capital. 161 In addition, the
agreement would make shares in the company transferable and the management of
the company was handed to a select body of directors, to the exclusion of the
members generally, in order to ensure the continuity of the company was not
affected by death or bankruptcy of members while properties were vested in
155 Farrar and Hannigan above n7 at 17.
156 Ibid.
157 Julian Hoppit “Financial Crises in Eighteenth-Century England” (1986) 39 Econ. Hist. Rev 39 at
47.
158 Schmitthoff Palmer’s Company Law above n39 at 7
159 Ibid.
160 .Ibid.
161 Ibid.
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