Sec. 11] CAPITAL ACCOUNTS 83
liability,” so that the only assets which can be considered
in determining solvency are those on the balance sheet of
the company. However, in some cases, as in the case of
national banks, the stockholders are liable for double the
amount of the capital. In the case of a partnership, on
the other hand, the partners are liable for almost all of
their private property, so that the individual member of
the firm has always to reckon w.th a contingent liability
to the creditors of the firm.
Originally, before business was separated from private
iife, all of a debtor’s assets, even including his own person,
were regarded as pledged to the payment of a debt. The
attitude of the law and public opinion toward this matter
has changed greatly. Only a few generations ago an insolvent
debtor was imprisoned, the theory being that insolvency
was a crime. When intentional, or due to gross
negligence, it is; but when due to the ordinary chances of
business it is not. To put a debtor in prison did not of
course help him to pay his debts. When this practical point
was admitted, special bankruptey acts were passed to relieve
insolvency if very widespread, as after a panic. Such
acts were at first merely temporary, and regarded as
justified only under extraordinary circumstances. To-day,
however, laws exist by which a bankrupt may be discharged
free of further liability, and without the necessity of any
special legislation. The Ray Act in the United States, under
which. our present system of bankruptey has been worked
out, was passed as late as 1898. In some places, as in
France, the older view of limited lability still prevails;
but the English and American system is not only sounder
in practice, as shown by its results in encouraging legitimate
enterprise, but is also based on sounder theory, for it
recognizes the fact that the creditor is a risk-taker. This
has always been and is necessarily the case, however much
the debtor may try to safeguard his creditors’ interests.
The capital of a company exists, as we have seen, for the
