Abstract
The purpose of this paper is to clarify the contents and significance of the regulations implemented by local governments prior to the enforcement of the initial commercial law in 1893, when Japanese corporations introduced the concept of limited liability, the fundamental characteristic of corporation law. Taking up the cases of Tokyo and Osaka as examples, this paper discusses how the regulations urged newly established corporations to complete their capitals.
During the depression after 1882, not a few corporations went into bankruptcy and some of the promoters committed fraud. Under such circumstances, the judiciary denied the corporations' limited liability to protect creditors. This, however, had considerable adverse effects on the general stockholders who had extensively invested in the stock market.
The governments of Tokyo and Osaka immediately implemented two measures to address this issue. First, they executed the inquiries into the properties of the promoters. This measure was expected to prevent the authorized initial stockholders from committing fraud, failing to pay the money for acquiring stocks, and committing embezzlement. In addition, the investigation into the promoters' properties eventually compelled them to make an initial payment to acquire the companies' stocks at the time of the formation of the companies. As a result, the companies' assets were secured. Such a practice was imperative in propagating the idea of the limited liability in general. The second measure was the instructions for the companies to amend their rules of operation. This regulation was to ensure that the rules conform to the fundamental provisions of a corporation, that is, the limited liability, the payment of stocks, and the organization of the corporation. This measure also had the effect to secure the assets of the corporations.
In conclusion, the above-mentioned regulation eventually propagated the idea of the limited liability. This conclusion can be verified by the fact that the Tokyo Appellate Court, which had previously denied the limited liability of the stock companies, was forced to amend its ruling.
