Calling Time On Company Law

When something becomes very large, far more complicated in form and goes well beyond local or even national governance then instead of being beneficial then it might begin to do the opposite with many unforeseen and uncontrollable consequences.

This kind of statement could apply to many and various things at present in the public mind, under scrutiny, causing controversy and where many people think that what has happened or is going on should not have done.

My latest suggestion on matters like this has been sparked by an item in Nick Shaxon’s web site Treasure Islands dot org on Monday 11^th February where he refers to Professor Prem Sikka’s article “UK Banking Reform Bill Won’t Curb Reckless Risk Taking” on the theconversation dot edu dot au web site.

Briefly, he suggests that given the way investment banking operates at the present time perhaps the only effective check may be to require Unlimited Liability for this type of financial organisation.  This arises from the way that those responsible for the losses entailed seem to lose little leaving others to pay.

For a while now the thought has been in my mind that the business basis of Limited Liability for shareholders has gone past its effective usefulness and the way it is employed as a device for fraud and malpractice and the distortions are now both damaging and potentially destructive. 

There may be some scope to retain it for a small number of very specific purposes but as a general facility for the conduct of business it has become hopelessly compromised.  The history of Limited Liability is a long and complicated one but there is a short Wikipedia article that gives a summary.

This is not just a matter of banking.  Looking around it occurs at all levels.  It would take a book to attempt to deal with this, or at least a long learned article that casts its net widely.  But what is essential is that while it does serve some as it is supposed to, this is now increasingly a minority element in a dangerous world.

Part of the problem has been how easy it has become to form companies in many places, how they are interwoven and how monies and liabilities are shifted to avoid scrutiny, regulation, tax  or where the activity is illegal, the force of law.

There is a huge amount of information now out there on the web about the large scale problems and the never ending stories of scandals, frauds and manipulation tell us how much has been and is badly wrong in so many sectors from mortgages to meat.

At lower levels, it is all too often that amongst the professions and supposed service sectors there is a lot of activity that enables bad service at too high a price without much in the way of protection for the individual and customer.

Even at the lowest levels the misuse of limited liability can be astonishing.  Companies House has registered hundreds of thousands of companies and a turnover that is increasing.  Many never submit accounts, many are struck off, many are simply devices for both illegal and dishonest activity. 

Yet almost none are investigated.  In many sectors if you look at who owns the shares and for what purpose it is increasingly rarely the ordinary single person and the norm is other companies or agencies looking to pure financial gain without bothering much about true accounting or the rules.

It is time now to recast our ideas about shares, company ownership, and the way it is may be working for some but not for either the many or society in general.

In its present form and in reality largely beyond regulation or the law it is time for Limited Liability to go and be replaced by a better and more transparent system.