Bubble Act

Bubble Act 1720 (also Royal Exchange and London Assurance Corporation Act 1719)[1] was an Act of the Parliament of Great Britain passed on 11 June 1720 that incorporated the Royal Exchange and London Assurance Corporation, but more significantly forbade the formation of any other joint-stock companies unless approved by royal charter. Its provisions were extended later by the Bubble Schemes, Colonies, Act 1740[2] to include its colonies, particularly Massachusetts.[3] The act gave the South Sea Company a monopoly over British trade with South America [4] until the South Sea Bubble "popped" in Britain's first major stock market collapse.

Bubble Act
Territorial extentGreat Britain

Later extended to Colonies, including:

Status: Repealed


Various motivations have been suggested for the Act. They include the desire to prevent the speculation that produced the contemporary South Sea Bubble, an attempt to prevent smaller non-charter companies from forming and so reduce the importance of Parliament in regulating businesses; or the South Sea Company itself wanting to prevent other bubbles from forming that might have decreased the intensity of its own.[5]

Recent scholarship indicates that the last was the cause: it was passed to prevent other companies from competing with the South Sea Company for investors' capital.[5][6]

In fact, the Act was passed in June 1720, before the peak of the bubble. The Act was repealed in 1825.[7]


The Act declared "illegal and void" all business that raised money or offered shares in the manner of a chartered company without a charter from the royal government.[5] 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.

See alsoEdit

  • R v Cawood (1790) 2 Ld Raym 1361, 92 ER 386 (1 January 1790) - the only prosecution brought under the Act which, according to L.C.B. Gower, "decided nothing of importance".[8]


  1. ^ An Act for better securing certain Powers and Privileges intended to be granted by His Majesty by Two Charters for Assurance of Ships and Merchandizes at Sea, and for lending Money on Bottomry; and for restraining several extravagant and unwarrantable Practices therein mentioned, 6 Geo I, c. 18
  2. ^ An Act for restraining and preventing several unwarrantable Schemes and Undertakings in His Majesty's Colonies and Plantations in America, 14 Geo. II, c. 37
  3. ^ Savelle, Max (1974). Empires to Nations: Expansion in America, 1713-1824. Minneapolis: University of Minnesota Press. p. 43. ISBN 0-8166-0709-5.
  4. ^ Castelow, Ellen. "The South Sea Bubble of 1720". Historic UK. Retrieved 2019-07-31.
  5. ^ a b c Harris, Ron (1994). "The Bubble Act: Its Passage and Its Effects on Business Organization". The Journal of Economic History. 54 (3): 610–627. doi:10.1017/s0022050700015059. JSTOR 2123870.
  6. ^ Cooke, Colin Arthur (1951). Corporation, trust and company: an essay in legal history. Harvard University Press. p. 82.; Gower, L.C.B. (1951). "A South Sea Heresy?". Law Quarterly Review. 68: 214.
  7. ^ An Act to repeal so much of an Act passed in the Sixth Year of His late Majesty King George the First, as relates to the restraining several extravagant and unwarrantable Practices in the said Act mentioned; and for conferring additional Powers upon His Majesty, with respect to the granting of Charters of Incorporation to trading and other Companies, 6 Geo. IV, c. 91
  8. ^ Gower, L.C.B. (1979). Principles of Modern Company Law (4th ed.). London: Stevens And Sons. p. 31. ISBN 0-42044580-3.

Further readingEdit