Stephen M. Bainbridge and M. Todd Henderson: Limited Liability: A Legal and Economic Analysis

Publication Date01 June 2017
Date01 June 2017
AuthorDavid Campbell
Book Reviews
(Cheltenham, Edward Elgar, 2016, xvii and 315 pp., £90.00)
This book attempts to justify the place now almost always enjoyed by limited
liability as the most important doctrine of (to adopt the British usage)
company law. The authors, two noted American contributors to the law and
economics of company law, concentrate on the United States law. But the
book is by no means addressed only to specialists and it accessibly introduces
that law ± the foundations of which are the same as the United Kingdom law ±
to other than American readers. The book also accessibly puts the law in the
context of the basic doctrine of limited liability (ch. 1), the history (ch. 2) and
general justification of that doctrine (ch. 3), its exceptions (chs. 4±6), its
related doctrines (chs. 7±8), and the law of other jurisdictions (ch. 9). Limited
liability and its exceptions are then extensively evaluated from an ultimately
Posnerian law and economics pers pective. This book can readily be
recommended to that part of the readership, including more advanced
students, of this journal who have an interest in (United States) company law
or in law and economics as such. It is unfortunate, then, that one imagines the
book will have few personal, rather than institutional, purchasers, as its
hardback price is daunting even by contemporary standards.
I do not mean by these remarks to imply that this book dumbs down. It
must be said that a history of limited liability, for example, which is of only 24
pages is bound to be in some respects superficial, and it was perhaps unwise to
start this history so far back as with what Plutarch tells us of Numa Pompilius,
who, succeeding Romulus, was the second King of Rome (p. 21). But if one
accepts that chapters like this and the one on comparative law were to be
included, then what is said is similar to what is said of such things in well-
regarded company law textbooks and perfectly defensible at the intended
level. And when the book turns to the detailed law, it is not open to this sort of
criticism. The criticism one is obliged to make is of a different sort.
The authors accept the principal justification long given for limited
liability (pp. 14±15, 47±51, 302±4), though some questions which have been
raised about this justification are, rather gesturally (pp. 51±2), taken up.
Given the scale and scope of the large companies which have become the
principal institutions of capitalist growth, investment in those companies
would place great risks on private investors if that investment meant that all
of those investors' personal assets could be used to satisfy claims on com-
panies which had incurred liabilities greater than the company's own assets.
ß2017 The Author. Journal of Law and Society ß2017 Cardiff University Law School

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