Bubble Act 1720 (6 Geo I, c 18) 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 it.
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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.[1] 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.[1][2] In fact, the Act was passed in June 1720, before the peak of the bubble. The Act was repealed in 1825.
The most significant provision read:
All undertakings ... presuming to act as a corporate body ... raising ... transferrable stock ... transferring ... shares in such stock ..., either by Act of Parliament or any charter from the Crown, ... and acting under any charter ... for raising a capital stock ... not intended ... by such charter ... and all acting ... under any obsolete charter ... for ever be deemed illegal and void.[1]
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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