Limited Liability Act of 1855

Examines the Limited Liability Act 1855 and highlights its significance in the formation of the modern company's legal framework. Looks at the background to the Act, which was repealed after a few months and incorporated in the Joint Stock Companies Act 1856 in an amended form. Considers the Act's legacy in extending the general principle of limited liability for corporate debts to shareholders of registered companies, including its implications in allowing a greater diversification of shareholders.

Legal liability, government intervention, and auditor behavior : evidence from structural reform of audit firms in China

This paper investigates how legal liability influences audit quality and audit fees, particularly in the presence of government intervention. Since 2010, all Chinese audit firms were required to transform from a structure of limited liability company (LLC) to limited liability partnership (LLP), which removes the cap on the liability exposure of negligent auditors. By adopting this natural experiment, we document the following findings: first, after audit firms reorganize as LLPs, auditors are more likely to (1) issue modified audit opinions and going-concern opinions, (2) constrain clients’ earnings management, and (3) charge a premium in audit fees, which suggest that exerting unlimited legal liability on negligent auditors improves both audit quality and audit fees. Second, the effect of the LLP adoption is more pronounced when auditors are from local audit firms, and clients are controlled by local governments. Further analyses suggest that the stock prices of clients positively react to the reform event, which indicates that LLP adoption improves the overall value of audits. In summary, our empirical findings are consistent with the argument that legal liability is able to effectively shape auditor behavior in emerging markets where the other institutional mechanisms are relatively weaker and government intervention is heavy.

Financial characteristics of Australian initial public offerings from 1994 to 1999

A variety of financial characteristics of Australian initial public offerings (IPOs) for the period 1994-1999 are explored. A number of previous Australian studies have investigated the initial day underpricing and longer term underperformance of IPOs and this study updates those papers. This paper partitions the IPO data into no liability/limited liability; share option/no share option; underwriter option/no underwriter option and dividend reinvestment/no dividend reinvestment characteristics to better understand the types of IPOs that list on the Australian Stock Exchange. The data supports the findings of previous studies in that IPOs are underpriced at the time of listing and underperform the market in the first year following their listing.

Do you really want to ask an underwriter how much money you should leave on the table?

This paper analyses whether the owners of companies seeking to list will leave less money on the table if underwriters are employed to price and market the issue. Our findings indicate that limited liability and Industrial company initial public offerings (IPOs) that have used underwriters have left
more money on the table than those not employing underwriters. Not only is there a direct cost in employing an underwriter but this study suggests there might also be an indirect cost. We also find that a positive forecast earnings per share yield may be useful in reducing the amount of money left on the table.

Promise more, leave less

Following Kim and Ritter (1999) who find that earnings forecasts provide more accurate valuations of IPOs, this paper analyses whether the owners of companies seeking to list will leave less money on the table if positive dividend per share (DPS) yield forecasts are made in the prospectus. Our findings indicate that DPS yield forecasts by directors of Industrial company IPOs have been an important ingredient in the amount of money left on the table. A similar result is found for Limited Liability IPOs and those that do not offer options to subscribers to buy more shares. The offer of an operational dividend reinvestment plan in the prospectus does not appear significant in reducing the amount of money left on the table.

Definition and quantification of assets

The word ‘asset’ was originally taken into the English language, from the Latin ‘ad satis’ and French ‘asez’, as a term used at law meaning sufficient estate or effects to discharge debts. It later came to be used in the sense of property available for the payment of debts. Assets were understood to be property (objects owned and rights of ownership) that could be exchanged for cash. The importance of factual knowledge of the money equivalents of property and debts, in managing mercantile affairs, was emphasised in accounting manuals during the eighteenth and nineteenth centuries. The rights of investors and creditors to factual up-to-date information about the financial state of affairs of companies, given the advent of limited liability, underscored the early company legislation that required the preparation and auditing of statements of property and debts. During the latter part of the nineteenth century the emphasis in accounting moved away from assets as exchangeable property to assets as deferred costs. Expectations took the place of observables. The abstract (expectational) notion of assets as ‘future economic benefits’ was embraced by accountants in the absence of rigorous definitions of the elements and functions of dated statements of financial position and performance. Assets are quantified financially by a heterogeneous mass of potentially inconsistent rules that, by and large, have no regard for the empirical nature of measurement. Consequently, accountants have failed to provide the community with up-to-date factual information about the financial state of affairs and performance of business entities - and, hence, with an informative basis for financial action.

Going negative : what to do with negative book equity stocks

A firm's book equity is a measure of the value held by a firm's ordinary shareholders. Increasingly, it is being reported as a negative number. Because a firm's limited liability structure means that shareholders cannot have negative value, negative book equity has no obvious interpretation. Consequently, both practitioners and academics typically omit such stocks in their analysis .While these stocks are small in number, they are disproportionately represented in extreme growth-value sectors and, therefore, can have an impact on applications where value is defined in terms of book equity. The authors propose a new approach that classifies negative book equity stocks across the growth-value spectrum by considering how close their returns correspond to those of stocks that fit more obviously into these classifications .They find that this new value factor, which includes negative book equity stock, is economically and statistically different from the old value factor that excludes such stocks. Although they illustrate how this approach can be used to classify negative book equity stock, the approach is quite general and may be used whenever particular accounting data are unavailable or otherwise suspect.

Jones -v- Bartlett: landlords` liability to tenants and members of their household in negligence

According to the latest available statistics, in 1997-98, of the total of seven million Australian households, two million were renting their dwelling from a State housing authority or private landlords.Therefore, the decision on the scope of landlords' liability to tenants, members of their households, and guests in the right of the tenant handed down by the High Court of Australia in November 2000 was not only of legal, but also of social and economic significance. This note will discuss the Jones v Bartlett case in the context of the traditional common law approach to landlords' liability and the ground-breaking, if flawed, case of Northern Sandblasting Pty Ltd v Harris.

Quo iure? Defendants' liability to rescuers in the tort of negligence

The year 2001 marks the 80th anniversary of Cardozo J's judgment in Wagner v International Railway Co 232 NY 176 (1921). This article examines theoretical and procedural problems associated with the concept of duty of care as a foundation for the defendant's liability in negligence to altruistic rescuers, and suggests that Cardozo J's judgment did not establish the principle that defendants owe rescuers a duty of care in negligence. It is argued that subsequent judgments failed to provide the duty of care owed to rescuers under tortious negligence with proper jurisprudential foundations. Conceptual difficulties inherent in a jurisprudential principle that would provide physically injured rescuers with a legal right to a duty of care from the defendant under the tort of negligence were compounded once compensation for negligently occasioned pure emotional distress became available. This article analyses various theories of recovery for pure psychiatric injury and the classification of rescuers into primary and secondary victims. It proposes a solution in the form of a separate cause of action on the case for liability to injured rescuers, partly based on the principle of necessity that governs the Roman action for negotiorum gestio. Cases from the United States, England and Australia are used to illustrate the similarities and differences in the development of and approaches to, the law of rescue.

Home-range use by the brush-tailed phascogale (phascogale tapoatafa) (marsupialia) in High-quality, spatially limited habitat

Nine phascogales (7 females, 2 males) were radio-tracked between March and July 1999 to investigate the spatial organisation of this species in spatially limited habitat near Euroa, Victoria. In this area, approximately 3.6% of the original woodland vegetation remains after 150 years of agricultural clearing. Most wooded habitat is confined to narrow linear strips along roads and streams. However, these remnants are on fertile soils and, because they have not experienced intensive harvesting, the density of large old trees is over 10 times that found in nearby State Forests and Parks. Female phascogales were monitored for 13–38 days over periods of 5–15 weeks. The size of home ranges of females was 2.3–8.0 ha, and averaged 5.0 ha. This value is one-eighth the mean home-range size previously recorded for the species in contiguous forest in Victoria. All individuals used multiple nest trees, with nests generally located in trees >80 cm diameter at breast height. Although fragmented and spatially limited, the stands of large old trees on productive soils near Euroa provide a network of well connected, high-quality habitat for phascogales. The relatively dense population of phascogales in these remnants suggests that prior to agricultural clearing and timber harvesting, phascogales may have been much more common in Victoria than at present.

Unsafe leased residential premises: a landlord's liability in negligence to injured occupants

This article examines the law relating to the liability of landlords in negligence for unsafe residential premises, focusing in particular on the recent High Court decisions in Northern Sandblasting Pty Ltd v Harris and Jones v Bartlett. The author concludes that the High Court in Jones v Bartlett has placed sensible limitations on landlords' liability, by limiting liability to defects in the premises that were known or ought to have been revealed on a reasonable inspection by the landlord. The author points out that there are compelling policy considerations supporting the court's conclusion in that case that the landlord should not be required to arrange for the premises to be inspected by expert tradespeople.