Innovation & Wealth › Trading companies & early capitalism › South Sea Company and its bubble
Bubble Act
1720–1825· Law or policy· Laws, labor & antitrust
Well documentedSolid records, texts or physical evidence.
A 1720 British law forbidding companies to issue transferable shares without a royal charter or Act of Parliament; repealed in 1825.
See it on the Innovation & Wealth map →What happened
Passed in June 1720, at the height of the South Sea boom, it targeted the scores of unchartered 'bubble' companies selling shares to the public, some for doubtful projects. It also chartered two marine insurance companies, which paid for the privilege. In August the South Sea Company used legal writs against rival firms, a move that may have helped trigger the crash. Afterward a charter was slow and costly to get, so most businesses stayed partnerships until reforms of 1825–1856.
Impact on society and the economy
It was an early securities regulation, aimed at fraud but shaped by a company protecting its market, and it kept the corporate form scarce in Britain for a century.
How we know
The statute text (6 Geo. I c. 18), parliamentary journals, the August 1720 writs against rival companies, and the first prosecution under it, in 1808.
Still debated
Historians debate how much it actually held back business, since it was rarely enforced, and whether it was mainly South Sea lobbying or a genuine anti-fraud measure.
Connections (2)
▸Bubble Act was passed partly to protect South Sea Company and its bubbleWell documented
The connection
Dozens of unchartered companies were selling shares in 1720, competing with South Sea stock for investors' money. The Act, passed in June with the company's support, outlawed such firms. In August the company had writs issued against several rivals; the selling that followed spread to its own shares and may have helped start the crash.
When and how
London, June–August 1720; Parliament, South Sea directors, and rival firms such as the York Buildings Company.
How we know
Parliamentary journals, the August 1720 legal writs, and studies by Ron Harris and others of the Act's origins.
Debates
Historians disagree whether the Act was mainly South Sea lobbying or a genuine anti-fraud measure, and whether the writs truly triggered the crash.
▸Bubble Act delayed the rise of Limited liability company lawsMostly agreed
The connection
Passed during the South Sea frenzy of 1720, the Bubble Act banned companies from selling transferable shares without a royal charter or Act of Parliament. That kept incorporation costly and political for a century. After its repeal in 1825, reformers pushed for simple registration, won in 1844, and for limited liability, granted in 1855–56.
When and how
Britain, 1720–1856; repealed 1825, followed by the Joint Stock Companies Acts of 1844 and 1856.
How sure are we?
The statute and its repeal are documented; how much it actually restrained business has been assessed by legal historians such as Ron Harris.
Debates
Harris and others find the Act was rarely enforced and lawyers built trust-based workarounds, so its real drag on company formation is disputed.