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directors as trustees. 162 Members were held to be liable for debts and liabilities only
to the extent of their means. 163
In the late eighteenth century, there were many areas of economic development in
fixed capital projects, both domestically and overseas. 164 High risk investment
contributed to the rapid expansion of domestic industry and trade, but it also sparked
the working capital crisis. 165 Overseas traders, meanwhile, demanded that credit be
extended for a long time and for long gestation periods. 166 The instability of working
capital had affected public confidence in the market and contributed to the general
collapse of business credit. 167 Businessmen found it difficult to obtain credit and,
consequently, businesses suffered. This was evident during the economic downturn
in Australia which followed after the economic boom in the 1880s.
Economic growth began to slow down during the first half of the 1880s and there
was a significant number of corporate collapses. 168 It started with the collapse of land
companies and building societies, and later spread to trading banks. The collapse of
trading banks prompted the government to declare a five-day bank holiday for
restructuring during which most banks resumed their normal activities after having
remained closed for a month. 169 The disruptions to the financial system by banks‟
closure worsened the economy and affected investors‟ confidence and, as a result,
the flow of capital both locally and overseas declined. 170
162 Ibid.
163 Ibid.
164 Hoppit above n157 at 52.
165 Ibid.
166 Ibid.
167 Ibid, at 53.
168 Waugh “Company Law and the Crash” above n128 at 360-363.
169 Ibid, at 366.
170 Ibid, at 367.
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