Agency Houses in Bengal and the Indigo Bubble

The passage of the Bubble Act has been argued to have had little impact on Britain. Following the passage of the act, by the early 1800s, unincorporated companies searching for yield in Britain and elsewhere in the world engaged in commodity trade, banking, shipbuilding, and insurance. Taking the case of Bengal, Britain’s first trading post in colonial India, the chapter argues that the passage and repeal of the Bubble Act had little, if any, direct impact on the growth and trade of business in Bengal. The aftermath of the global crisis of 1825 had spill-over effects on mercantile agency houses in India, resulting in a spate of failures. These failures had a systemic impact on local businesses and financial institutions, prompting a debate on banking legislation and the importance of limited liability. Using the 1825 crisis as an example, we argue that a confluence of factors—both global, such as recessionary conditions in Britain, and local—spurred a debate on legislation for limited liability corporations. Eventually, replicating legal developments in Britain, the Companies Act was passed in India in 1850, with the benefit of limited liability extended to banking companies in 1860.