BUBBLE INSURANCE COMPANIES.

Marlborough Express, Volume III, Issue 119, 30 May 1868, Page 4

BUBBLE INSURANCE COMPANIES.

To the Editor of the Marlborough Expi-e.s». But, —On the sth May, at a meeting held at the Athenaeum in Wellington, it was resolved to apply to the Assembly next session, for an Act to. establish a Eire Insurance Company in Wellington, with limited liability. The principal promoter, Mr. J. H. Wallace, valued house property'll! Wellington at £397.000; goods in warehouse at £>1,000,000 ; public buildings, £IOO.OOO ; total, £>’ 1,500,000 ; and the company is to be established in the first instance lor local purposes. Mr. Wallace stated that the New Zealand Insurance Company was one of limited liability, and that all the paid-up capital was £6 per share. Mr. Owen admitted that £6 per share Was the whole paid-up capital of'the New Zealand Company, out contended that the principle of limited liability for Insurance Coni panics was unknown; and Mr. Cleland Joined in the same view. The meeting, however, approved ot limited liability, and it was stated that the Christchurch people also intend to apply for a similar Act. If; as stated at the Wellington meeting, the New Zealand Company has only a paid-up capital 01. £6 per share, it follows that it is a company. wiilr a capital of 16,000, pot £250,0.00 as stated; in its advertisements ; but one tiling is certain, the liability of its shareholders is unlimited. The Government re-i turns state this; and also that its nominal capital is £260,000, or 2,600 shares of, £IOO each. The system of having a large, nominal capital when the liability unlimited, ,is downright humbug; If •Only ,£15;000 bk paid up, that is the Capital of the company,'audit is of no consequence whether the nominal capital is that or twenty millions. The liability vof the ehareholders is the real security. The kuditqrs’late deedred?so.long as any shareholder is able to anoet culls, the good' paying for the bad. t E.v£n this'inn matter* of insurance does nbt always pay 20s. in :the pouudi Un ? 1818'sevhrab'Marine Insurance. Companies. were, wound up in-: London.: In, one (the. General Maratime). the creditors re-; Iceiyed^dPsrtlie; pound, on,.claims,-of over; ; in,.another (the Merchant'. Traders) f he crethtprs were paid in full. Lord Ingestre held-a lews hares, which cost bis Lordship.dear ; in both cases ’.the liability was dnlimited.: In the cake,of thd-General,"Maritime, the-’dbminal papital; was pf ; £IOO Cach. The investigation : prbved'that bh1y : 5,'7 ! 60 shares had ever been subscribed. and a call of £lO paid. The total paid-up capital-was £60,000; yet the'pblicles were'headed — "■*‘f Capital, 1 'ohe-' million," In' none of- these- compadies:was there : sixpence of assets at the time of theirrstbppajge; Colonial Banks of Issue of Colonial proprietary are of limited liability, but their full nomidal capital is paid up; and the shareholders are-

each liable for double the amount of his subscription. instance the Bank of New Zealand ; capital nominal, and paid up 50,000 shares of .£*lo each ; further liability of shareholders, £2O per share. In case of failure, this- amount is the extent of each shareholder’s liability. When a Joint Stock Company (ails, a great many shareholders have not the means of paying up with unlimited liability, the good must pay for the bad; dishonored liquidators’ culls are added to new calls on solvent shareholders. The same is the case with limited liability up to the limits. The Wellington scheme is £5 shares, £1 to be called up. Mr. Plimmer remarked that no one would take shares in a company with unlimited liability ; perhaps not. But then the reason is there is the possibility of failure Limited liability relieves the shareholders at a certain stage of tfie winding up, but then the loss must fall on the auditors. As .Mr. Taylor very rightly remarked, for undertakings which involved a probable loss of £200,000 or £300,000, it was" better to rely on the old country, as were a great lire to occur in Wellington, and a large part of the property insured with a company of this description, the whole place would be ruined. Perhaps Canterbury and Wellington have a right to get up bubble companies and ruin themselves; but they cannot do so without procuring a repeal of the clause of the Joint Stock Companies Act, which prohibits limited liability for insurance Companies. The action of these two provinces has already indicted a loss of £‘50,000 per annum for five years on this colony by the Panama contract, if the law is to be changed, let it be for the provinces of Canterbury and Wellington only. Ut coarse no one out of these provinces would trust these unsound local companies. Yours, &c., Henry Cooke. Blenheim, May 28th, 1868. P.S. —I believe Mr, Owen was right in affirming that there is not such a thing as a limited liability Insurance Company in the world. The risk is very great of heavy loss coming all at once. Wellington has been comparatively free from fire fora long time; only lust week they had one. Had the South Sea Hotel, Kano’s, &c., been insured in a small local company like this, it would have shaken them at once. If they have not capital to run the risk of unlimited liability in tree insurance, they had better leave it alone.—H.C.