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The entire concept of the company was created for Limited Liability. Without that you are basically just a partnership.

You need limited liability or investment becomes a very risky prospect. Imagine investing to get a 10% stake in a startup company and they end up getting sued because they violate some patent accidentally?

The current situation all comes down to intent. The way it's supposed to work is that if someone was actually negligent in their duty, then, and only then, do they become personally liable.

You say the fact that it was stolen is irrelevant. Lets say someone ram raids the office, holds a gun to the CEOs head and demands the keys to the bitcoin. Do you think that he should be personally liable in that situation?

My point is that shit happens in business, debts can be created in unexpected ways and sometimes those debts can be far in excess of what was invested. It's not really reasonable to expect shareholders to be personally liable come what may.

"You say the fact that it was stolen is irrelevant. Lets say someone ram raids the office, holds a gun to the CEOs head and demands the keys to the bitcoin. Do you think that he should be personally liable in that situation?"

Well, that all depends on what sort of agreement I had with the institution in question. This is precisely the sort of thing that insurance is supposed to fix. If the owners failed to get insurance to cover whatever agreement they went in to, then yes, they should be held fully liable for the losses.

I agree that the concept of limited liability is critical to modern capitalism and entrepreneurship, but I think you may be mistaken about the history of companies.

The concept of corporations is based on a legal identity that is separate from any individual. Incorporation historically was a rare grant at the behest of the ruling monarch. This dates back to the Roman Emperors, who granted incorporation to municipalities, guilds, and religious groups. However, these corporations are distinct from what we would consider a company today. The typical business did not have access to incorporation.

Several of the oldest known companies, dating back to the 6th century, were Japanese companies that were family-owned, and were not legally limited in liability. The concept of joint-stock companies is based on transferable shares, and dates back to at least the 13th century. Limited liability was not really a legal concept (separate from royal charters) until the 19th century. The first joint-stock companies in England were unlimited liability, and the public was very much opposed to the concept of liability limitation. However, many joint-stock companies wrote liability limitation clauses in contracts with creditors, and these were considered legally enforceable. In the second half of the 19th century, most European and US states had adopted limited liability laws. Limited liability is a modern concept that has not existed for most of the history of companies.

>this sort of solution to the problem would never be instituted in our society. Precisely because it exposes flaws in our concept of the relation between debt and slavery.

Exactly. We have decided that you can't be placed into involuntary servitude without criminal charges being brought against you, due process, etc... I think this is a good thing.

Personal bankruptcy is an essential check on "freedom of contract" I think. Sort of how you aren't allowed to sign yourself into slavery.

Aside from giving someone who really screwed up a second chance, personal bankruptcy places some of the risk of a poorly considered loan on the creditor, which is fair, I think.

That said, we do need to be careful that corporate bankruptcy doesn't protect decision makers from criminal liability for their own actions. There are certainly some problems with the current implementation, but bankruptcy was never intended to protect you from criminal acts, fraud or otherwise.

But personal bankruptcy is essential, as you imply, because most of us feel that indentured servitude is enough like slavery that we don't want it in our society.

Commercial banks prior to the 1930s commonly issued assessable stock to their directors and officers -- a form of stock that allowed the corporation to levy the stockholder for additional funds. The liability of the shareholder was therefore not limited to their investment in the shares. With the passage of Glass-Steagall, which established the FDIC, this form of organization fell out of favor as it was assumed that commercial banks were safe and it was no longer needed.

Investment banks continued to be run as unlimited liability partnerships until the 1980s. The partners were personally responsible for all debts incurred by the bank, and unsurprisingly, the banks were very conservatively run. Goldman Sachs, one of the most conservative firms, retained this structure until 1999. What changed was that the NYSE altered its rules to allow public companies to be member firms, and the investment banks decided to go public, converting to C-corps and listing their shares on the stock exchanges. The side effect of these two changes was that the investment banks began engaging in riskier behavior, which almost certainly contributed to the financial crisis of 2008. Post-crisis, the introduction of clawbacks has partially returned the concept of personal liability.

Unlimited liability is not needed or desirable for corporations in general, because market forces can lead to desirable outcomes in an efficient market. However, there's an argument to be made that personal liability could play a role in systemically important institutions, because systemic risk is an externality or market failure which cannot be solved by market forces.

In the UK, if a company owner (Director) files for bankruptcy (Administration) then their conduct is investigated by the trustee and a report is sent to the Department of Trade and industry.

If anything is found, said owner can potentially be held liable for debts, or at the very least be disqualified from running a LLC again.

However, the owner can just then declare themselves bankrupt and escape making any payments, and use a puppet director in their next venture.

Assuming that a person putting money into an institution is gauranteed to get that back, given enough time, even in the case of bankrupcy, then it would be reasonable to expect them to fall into permanent debt.

But, if you've put money into an institution, knowing ahead of time how bankrupcy could affect you in that particular instance, and you want different laws after the fact, then you're shit out of luck.

Regardless of that, equating an individual's assets with a business's assets would discourage any growth of a business, given that the individual can no longer cover the fallout if it goes bankrupt, which suggests that the economy as a whole would suffer.

You're so off base it's not even funny. Most countries in Europe have enacted variants of 'personal bankruptcy' the last years/decades to get away from exactly the situation you are describing. There is no reason to keep chasing people with no prospects of ever being able to pay off their debt until they die. Regardless of the origin of the debt. This whole petty vengeance thing is quite barbaric, to be honest.

(I say this as someone who was notified last week of one of my debtors being declared bankrupt. Sucks that I lost my money (probably), but what good would it do if the guy would be chased by collection agencies for the next 40 years until he dies?)

"This whole petty vengeance thing is quite barbaric, to be honest." It's not vengeance, it's getting back what was stolen or defrauded from you. If you wish to pardon peoples' debts to you, then that's your humanitarian deed, but leave it at that.

Instead, you want to make a legal loophole for people to steal from you. And then people like you whine and complain incessantly about "the wall street wolf banksters and corporations that stole money" etc etc. Yeah, well that's a natural consequence of you making legal loopholes because you feel sorry for the poor and get taken advantage of.

Nobody would be willing to start a risky business if it could ruin you in case of failure.

That was the case for essentially all of human history, and remains largely the case today. Risky businesses have been starting, running, failing, and succeeding all along.

That's because they've formed LLCs to prevent the owners from being personally liable.

That's a very negative and demeaning view of humanity. I think we're way too ingenious and creative to let risk stop us from doing amazing things.

Perhaps if something is risky, then maybe it shouldn't succeed, ever thought of that? Perhaps risky things come with greater rewards precisely because they are more likely to fail?