The various uses of law: The société anonyme in France, 1807-1867

The various uses of law: The société anonyme in France,
Jean Rochat
Department of Economic History
University of Geneva
Paper prepared for the Eighth Conference of the European Historical Economics Society
(EHES), Geneva, September 3-6, 2009.
The literature on the French société anonyme (SA) in the first half of the
XIXth century has advanced the argument that this business form emerged
to increase entrepreneurs’ capacity to raise capital This paper argues that
it was not the case. Based on new archival evidence, we demonstrate that
this traditional approach hardly allows understanding the observed
strategies of the players. Then we propose alternative interpretations of
entrepreneur’s choices in the particular sectors of mining and metallurgy.
In 1807, the new French Code de commerce was promulgated. It was mainly a
formal registration of established uses, but on a few precise points it was more innovative1.
Among them, the Société anonyme (SA) appeared for the first time in the law. This
business organization form has now become very common in the whole Western world and
This paper is the first draft of an on work project. Any comment will be welcome and can be sent to
[email protected]
Hilaire (1995).
figures as the basis of the market economy of every developed country. At least since
Chandler’s Visible Hand in 1977, big business has conventionally been seen as a major
sign of modernity and the corporate form as a necessary support for it2. According to this
approach, the degree of maturity of an economy can be estimated with the development of
the corporate economy3. In this regard, the early XIXth century French economy was
criticized with two types of argument.
A first argument for the French economy is the very few numbers of SA that were
created: less than 650 between 1807 and 18674. During this sixty-year period, any creation
of a SA had to be authorized by the government. As a result, the state was held responsible,
since the XIXth century, for the French economic backwardness5. This very restrictive
policy toward corporations has been explained in three different ways: it could first have
been a deliberate policy enforced by the government seeking to oust potential competitors
on the credit market in order to be able to place its own loans, policy leading to a crowding
out effect6. But, second, the economic considerations were far from being the most
important at this time. The principles which guided the corporate regulation were rather
political or aimed to contribute to maintain a social coherence. In these post-Revolution
years, the corporation has to be replaced in the wider problematic of the association. Since
d’Allarde and Le Chapelier’s laws passed in March and June 1791, any kind of association
was deeply discredited. It was then considered as one of the most important progresses
brought by the Revolution to have abolished associations designed to promote “particular
interests”, such as guilds and corporations7. It is explicitly formulated by Le Chapelier in
1791: “There are no more corporations in the State; there is nothing between the interest of
Chandler (1977).
As an indicator of the importance traditionally attributed to the corporate form in the development of the
capitalism, we can mention Birdzell and Rosenberg (1986). Explaining “how the West grew rich”, they devoted
one whole chapter on a total of nine to the Corporation.
It is difficult to give a precise number, because some societies were winded up and then recreated with
exactly the same associates but with a different corporate name. Others were created with the name of a
society that went bankrupt. Freedeman (1979) counted 642, Lefebre-Teillard (1985) 651 and Fohlen (1960)
579. See figure X.
The theme of French economy’s backwardness compared with England was very present since the XVIIIth
century. See for instance Crouzet (1985) and Hirsch and Minard (1998).
See for instance Lévy-Leboyer (1965) and Lefebvre-Teillard (1988).
Rosanvallon (1989) and (1990), Chatriot and Lemercier (2002) and Lemercier (2003).
each individual and the General interest. Nobody is allowed to inspire any intermediate
interest to other citizens, to separate them from the res publica by an esprit de corps”8. In
this regard, associations were in contradiction with the new democratic and egalitarian
ideals, because they divided the nation into particular interest groups instead of promoting
its unity. It is essential to understand that the early XIXth century French société anonyme
was to a large extent assimilated to the old Regime’s privileged companies. Rather than a
sign of modernity, it was then perceived as an out of place relic of the old feudal society.
Finally, the third explanation for the hostility of the state toward the corporate form is
related to a fear of seeing private organizations raising unlimited resources and becoming
uncontrollable rival powers9. This criterion based on the size of the firms could also appear
in liberal discourses, as this business form could lead to monopolies10. The dissolution of
the Compagnie des mines de la Loire was motivated by these two preoccupations11. This
first argument, in fact, consists in opposing entrepreneurs’ needs on the one hand, politic
and legal answers to them on the other. Businesses needed freedom and capital; the
government didn’t give any of them.
The second argument exceeds the specific issue of corporate regulation.
Contributing to the everlasting question of the determinants of economic growth,
historians, economists and legal scholars have discussed a lot about the characteristics of
an efficient legal regime to support it. In the past few years, a huge literature has been
devoted to comparative studies on Western countries’ economic performances according to
the “legal family or tradition” they belong to12. Basically, LSSV distinguish two broad
legal families: the Civil law and the Common law countries. The second one, represented
by the U.S., England, Australia and others, is fundamentally better than the first one,
represented by France but also Germany, Scandinavia and others, as it is supposed to be
All translations from the French are from the author.
Lefebvre-Teillard (1981) and Hautcoeur (2007). Laffitte, for instance, saw two big projects thwarted in 1821
and 1825 because they were too big. See Gille (1959a) and Fohlen (1960).
Lefebvre-Teillard (1981)
Guillaume (1966).
The most discussed work on this topic is La Porta, Lopez-de-Silanes, Shleifer and Vishny (1998), henceforth
LLSV (1998). For the application of LLSV conceptual framework to the particular case of firms’ access to finance,
see Beck, Demirgüç-Kunt and Levine (2005).
more responsive to the rapid evolutions of the actors’ needs. In addition legislators and
governments in Civil law countries could use the law to solidify state power, with no
regard to the subsequent economic consequences13. French economic law, then, is
described as intrinsically inefficient.
Both these approaches emphasize the weakness of French environment for
business. The first one formulates a more superficial problem, resulting from punctual and
revocable decisions, while the second one is structural and dissociated from specific
actors’ decisions. But there is one question that is nearly never asked by scholars, because
the answer seems to be obvious: why did people choose to set up sociétés anonymes? In
regard with the literature, the SA had almost only drawbacks. The procedure to obtain the
authorization was very long - frequently more than one year, and expensive; this procedure
could not be followed once for all, as the authorization was given for a specified duration:
the SA had not even the advantage of immortality; the SA was subjected to a restrictive
transparency14; it was not flexible, as a new authorization was requested for any change in
the statutes; and finally minority shareholders had very little protections15. The literature
generally says that the Société anonyme is used to raise funds on the market16. But it has
been assumed that the French Code de commerce offered businesses an important
alternative: the société en commandite par actions (SCA)17. In this regard, it is very
difficult to understand why entrepreneurs or investors would prefer the SA. Only a very
few works challenge this traditional conception of the SA. Lamoreaux and Rosenthal
(2005) noted that “even in the U.S., few of the manufacturing corporations chartered
during the XIXth century raised funds by selling shares on the market”. Hannah (1976) and
(2007) made a similar assumption, showing that as late as the early XXth century
LLSV (1999).
Pillet-Will, a Parisian banker, declared that he would “refrain from being part of an administration whose
actions could be subjected to publicity”, cited in Gille (1959b).
According to LLSV, it is a constant characteristic of the code-based law countries. See La Porta, Lopez-DeSilanes, Shleifer and Vishny (1998).
This is the most common interpretation, nearly never demonstrated because it seems to be obvious. See for
examples Coquelin (1843); Frouart (1858); Lévy-Leboyer (1964), Bahls (1994) and Dam (2006).
See Freedeman (1979) and Guinnane, Harris, Lamoreaux and Rosenthal (2007) and (2008). The SCA is a
limited partnership with shares. The main differences with the SA is that 1° at least one of the associate bears
unlimited liability and 2° it can be constituted totally freely.
entrepreneurs sought to keep ownership and control and then had limited recourse to
external finance18. Hautcoeur (2007) observed that French SA were mostly self-financed or
financed with capital from related, and Deyon and Hirsch (1980) get to the conclusion that
“the accumulation of capital was only one function of the societies among others, and this
function could develop outside the scope of such an organization”. These arguments lead
us to believe that the traditional view on SA must be challenged, but they do not provide
any alternative answer to our starting question: why to choose this form?
The remainder of this paper is organized as follows. Section I briefly presents the
characteristics of the société anonyme and the history of this organization form (or its
equivalent) in other developed economies (Germany, Belgium, the U.S. and Great-Britain).
With the resort of new data and empirical evidence, section II shows that the traditional
interpretation of the role of the SA in the French XIXth century’s economy is inaccurate.
Section III provides three hypotheses for a new comprehension of the SA. We end with
Section I. Characteristics and International History of the Corporate form
What makes the SA special?
Any French commercial association had to be registered at the Tribunal de
commerce of its area. According to the Code de commerce, this registration could be made
under three different forms. The simplest one was the société en nom collectif, a simple
partnership. All the associates had the same rights and obligations. They all bore unlimited
liability and they could not issue shares. Unless this form seems a priori inadequate to
sustain a more and more capitalistic economy, it was used by a large majority of firm until
the mid-1920’s19. The second possibility was the société en commandite, a limited
partnership. This organization form is usually studied at the same time than the SA,
See also Lüpold and Schnyder (2006).
They represented 77% of the societies founded between 1840 and 1859, 83% between 1860 and 1879 and
still 65% between 1880 and 1913, Verley (2003). See also Guinnane, Harris, Lamoreaux and Rosenthal (2008).
because it could be a good substitute. The société en commandite could take two different
forms: simple or with shares. In both configurations, it was composed by two types of
partners: the managing partners (commandités) who were in charge of the administration of
the firm and bore unlimited liability, and the sleeping partners (commanditaires) who only
invested money but were not allowed to intervene in the management. If they respected
this disposition, their liability was limited to their initial contribution. If they did not, and
in case of litigation, they could be held entirely liable. The société anonyme grouped
together three characteristics in a unique way. First, it could issue bearer or nominative
shares. As mentioned above, this prerogative was shared with the Société en commandite
pas actions. Second, it had a legal personality. This is an important point because all the
others businesses were dependant on their partners’ life hazards, death in particular. On the
contrary, the SA could in theory be immortal. Effectively their statutes had to determine a
life duration, and it was often surprisingly short20. General limited liability was the third
characteristic. In the early XIXth century, this was perceived as something unnatural. What
guarantee was offered to the creditors of such association if nobody had any responsibility?
This precise point was frequently evoked to justify and legitimate the authorization system.
The role of the government, they argued, was to certify that the capital stock was real (in
particular capital in-kind) and that it was estimated to its right value21.
Capital-based associations could then exist within the legal framework laid by the
Code de commerce. “The firm, from then on, will know its capital better than its
shareholders”22. However, it took a very long time until mentalities and uses became ready
to trust disembodied associations. Still in 1838, a redactor of L’Actionnaire, a French
financial Journal arguing for better information on investments, noted that “a single name
is sometimes enough for potential shareholders to make up their minds. And despite it is
The term of the authorization varied from a sector to another. Insurance companies were usually authorized
for 3, 6 or 9 years. In glass and iron industries, the norm was around 20 years. Companies that exploited a
concession were generally authorized for the duration of the concession, which, most of the time, was 99
years. See Lefebvre-Teillard (1985).
« (…) car un des principaux motifs que la loi a eus en vue en exigeant l’autorisation du Gouvernement, c’est
de s’assurer préalablement de la réalité d’un fonds capital mis dans la société. On ne peut être sûr qu’il existe,
si cette autorisation ne le certifie », Circulaire ministérielle relative aux sociétés anonymes, April 9, 1819. See
this Circulaire in Duvergier (1838).
Gille (1959b).
the most rapid way to take a decision, one must recognize that it is not necessarily the
worst”23. Many SA were in fact seen as the property of one incorporator, and his personal
credit and reputation were transmitted to it. For instance, the Conseil général de Mines
(CGM), concerning the Société anonyme pour la recherche des mines de houille du HautRhin, picked out in 1822 that “the whole project seems to hinge on the shareholders’ faith
in Mr Noetinger’s talents”24. Moreover, it was very common for an incorporator to be
referred to as “the owner” of a firm.
Some reference points on the international corporate legislation
Most continental Europe’s developed countries experienced situations very similar
to the French case (table I). In Germany and Belgium, a government authorization system
was implemented since the first decade of the XIXth century, and the liberalization
occurred between 1860 and the mid-1870’s (table I)25. Qualitative and quantitative
characteristics of the use of the SA are comparable as well. Very few authorizations were
granted and the distribution among the sectors was similar26: on 533 authorizations granted
in Belgium between 1919 and 1873, only about a hundred concerned heavy industry, and
about ten for textile industry. Most of the authorizations were granted for banking and
insurance, on the one hand, and transportation (canals, roads and railways) on the other.
Finally, the business organization forms’ menu in these three countries was quiet alike,
from the simple partnership to the private limited liability company (PLLC) and the
The content of this “menu” is one of the most important differences between the
continental model and the British and U.S. cases, where nearly nothing existed between the
In the same article, the author regretted that the director of the Mines argentifères de Pontgibaud did not
buy many shares in the company: “In a so serious an sincere business, it is an important additional guarantee
that would have been much appreciate”.
The Conseil général des mines (CGM) was an administrative organ in charge of reports on the firms
requesting the authorization. Bulky archive material from this administration is conserved at the Archives
nationals de France, F 17920 to 18056 and F 19038 to 19128, for the period-time 1811-1938.
1863-7 in France ; 1860-70 in Germany depending on the State; 1873 in Belgium. See Guinnane, Harris,
Lamoreaux and Rosenthal (2008).
Frère (1951) and Horn and Kocka (1979).
simple partnership and the corporation27. As a result, corporations developed earlier, and in
the second half of the XIXth century several hundreds were created in England every
year28. Since the Bubble Act of 1720, however, English corporations had to be chartered
by the government. This legislation falls down in three steps, first in 1825 (repeal of the
Bubble Act), then in 1844 (General Incorporation Act) and in 1855-6 (Limited Liability
Acts) to reach free general incorporation29. The expansion of the corporation occurred
gradually since the 1840’s, as the companies only had to register to exist legally, though
they had to wait until 1855-6 to bear general limited liability. As a matter of fact, the
British liberalization took place only a decade before in France, and this was not a
casuality as the French laws of 1863-7 were partly a response to the new British
It is more difficult to make a synthesis of business legislation in the U.S., as each
state provided its own rules. However it is possible to point out some general features.
Even if some firms tried to organize contractually as PLLC, one can not consider that this
was a real possibility because the courts often interpreted the statutes in a conservative way
that potentially exposed limited partners to unlimited liability31. In any case, the statutes
nearly never allowed issuing tradable shares. As a result, businesses in the U.S. only had
two possibilities: ordinary partnerships or corporations. In 1900, 96% of the American
firms used one of these two organization forms (respectively 67% and 29%). Since the
XIXth century, the corporation was much more used than in France, because it was the
only possibility to get external finance. Moreover, no authorization was requested. As a
result, the number of corporations grew earlier and faster than in France: 3200 creations
between 1800 and 1843 in New England and 3500 between 1844 and 186232. In
proportion, though, ordinary partnerships remained largely dominant at least until the
Entrepreneurs often tried to create silent or sleeping partnerships contractually, but they had no guarantee,
in case of litigation, that judges would take these clauses into account. See Guinnane, Harris, Lamoreaux and
Rosenthal (2007).
Guinnane, Harris, Lamoreaux and Rosenthal (2007).
See Harris (1997) and (2000).
This is the interpretation of Freedeman (1979). We were not able to find more information on this issue, but
Freedeman’s interpretation indicates that French and British laws were in competition.
Lamoreaux and Rosenthal (2005).
Kessler (1948).
second half of the XIXth century33. Despite this very different legislation, however, the
distribution of the chartered companies in the US did not appear to be different from
I conclude this first section with two brief remarks. Neither corporate law alone nor
the number of corporations created in a country are relevant proxies for the efficiency of an
economy. French law was restrictive during the July Monarchy and most of the Second
Empire, just like England before 1844 and Germany before the unification, the fact
remains that these periods knew important economic growth. The absolute number of
creations is not significant either, as one must consider business legislation as a system.
The very few sociétés anonymes in France compared to the U.S., for instance, does not
necessarily mean that there were less joint-stock enterprises, because French law provided
efficient alternatives that did not exist in the U.S.
The second remark prolongs the first one. As the domination of corporations in an
economy is presented as a victory for the free trade and consequently for business people,
the XIXth century is supposed to have been a wartime between business people fighting
for an easier access to the corporate form, on the one hand, and an intrusive government
trying to keep the economy under control. The reality seems to be a little different. Even in
the U.S., where the corporation was freer than elsewhere, ordinary partnerships kept very
dominant until the XXth century, just like in European countries even after the
liberalization laws. As a matter of fact, the SA appears to be an organization form on the
menu among others, with strong and weak points. But it is inaccurate trying to organize
business forms into a hierarchy in function of their efficiency or degree of modernity. The
best-fit solution for a firm at a precise moment depended on the characteristics of the credit
market, on the history of the firm (in particular for the capacity of self-financing), on how
the firm was inserted in the market and on many others variables. This drive us back to the
Atack and Bateman (1995) estimated that between 1850 and 1870, 90% of multiowner firms were not
Gervais (2006).
central issue of this paper, which is to understand why would people choose to organize as
a société anonyme.
Section II. The Sociétés Anonymes as a financing Tool: What do the Data say?
The background…
During the time of the authorization system, between 600 and 650 SA were granted
all sectors taken together. This paper deals with a sample constituted of 85 firms. These
firms are all the industrial companies granted between 1808 and 186735. As table II shows,
this is not the most important sector. Insurances are a traditional user of joint-stock forms,
in particular in maritime trade (99 of the 152 creations). There were generally created for a
very short time, to share the risks and profits of a particular operation. In the very first year
of the XIXth century, when a first draft of the Code de commerce planed to subject any
joint-stock enterprise to government authorization, the most virulent complaints came from
this sector.
Then came sectors that were closely dependant on public investment. These
companies, in fact, were rather public creations to raise money. Most often the government
conceded a monopoly on a particular exploitation (bridge, water, gas, canal …) and
sometimes guaranteed a fix interest rate besides the dividend. From the 1840’s, of course,
railway companies became dominant in both the number of creations and in capitalization.
Still at this time, however, the government was very present: in 1842, a law that aimed at
developing the network passed. It organized the collaboration between the government that
had to care about the infrastructure (grounds, buildings …) and private companies who
provided the trains and managed the exploitation. Heavy industry was the fourth sector,
followed by a few marginal ones. Banking was almost absent before 1848 (only 16
creations), because this sector was dominated by the Haute Banque, whose capital was the
possession of a few individuals. They didn’t need any judicial structure to associate other
The “industrial sector” consists of mining (coal, iron, lead, slate and salt), metallurgy (forge, smelting works
and foundry) and glass factories, but not of transportation and infrastructures (railways, canals, roads, bridges,
gas industry) and textile industry.
people to their business. Things changed slowly from the second half of the century, with
the creations of the first joint-stock banks36. “Others” is composed by a few textile
industries, sugar refineries, chemical firms and some others.
It is outstanding to notice the importance of public utilities. The SA is supposed to
be the archetypal tool of private capitalism, but as we see it was mainly used as a mean of
economic policy enforcement. Hannah (1976) emphasized the corporate economy and
governments’ embeddedness as late as the 1920’s37. In France, the economic policy cannot
be understood without references to the Old Regime’s privileged companies. The very
frequent combination of the authorization with a monopoly and the concession system
show the connection that existed between these two types of organizations. Rather than
interpreting the government’s intervention in a negative way, it could alternatively be
assumed that the authorization system aimed at encouraging initiatives that otherwise
would not have been undertaken for some reasons38. Even in the industrial sector that a
priori did not belong to the public sector, the SA was imagined as a kind of privilege. As a
result, the contribution to the general interest was an important condition to obtain the
… and the data
From the intuition that the early-nineteenth-century SA was something different
from what was traditionally said, we tried to find data to help us understand how and why
the SA was used at that time. Qualitative and quantitative data on the 85 industrial societies
authorized SA were gathered concerning the social capital of the companies, their shares
(number and par value), the shareholders (number, geographic origin, and number of
shares bought). This information was found either in the legal act that authorized the
company, or in the archives of the notaries who drafted the statutes. Most of the time, it
Notably through the impetus given by Saint-Simonians, and in particular the Pereire brothers and their Crédit
Mobilier (1852). See Bonin (1992).
“(…) by 1928 two-thirds of the capital required for large-scale undertakings in the economy as a whole had
been raised with state assistance of various kind”, see Hannah (1976), p. 62.
Lamoreaux (1996) and Gervais (2006) made an identical analyse for the early XIXth century U.S. chartered
concerns the companies at the time of their constitution/authorization, and it will be a next
step of this research to try to follow the evolution of the shareholding over time.
What do the data say?
The arguments used by politicians and economists put the size of the companies in
the very centre of the issue: the SA as a juridical form was designed to support very big
businesses39. This representation had repercussions on the reality because it was a criterion
used by the experts in charge of reports on the requesting companies: if they were too
small, they were answered that they could operate under another organization form.
Figure I compares the amount of the capital of all mining companies requesting the
authorization with the capital of authorized mining companies only.
It appears clearly that the administration’s activity tend to increase the size of the
companies. But this criterion comports a limit: a company seen as too big would not either
be granted, because they frightened the administration and were blamed for their
monopolistic situation40. As a matter of fact, however, the SA were not necessarily bigger
than the other types of business organizations. For the period 1808-1867, the average
capital of the authorized SA was around 2,15mio of francs; the average capitalization of
the Parisian sociétés en commandite par actions in 1837 was 2.2mio41. In addition, the
average for the SA was increased by a few very big companies: 80% of the SA had a
capital below 2mio (Figure II). Most of the biggest mining companies were not SA,
although they were very capitalistic undertakings42. Of course the SA were among the
biggest firms, but the size was not a sufficient criterion to explain the choice of a SA.
Because of the availability of the SCA, entrepreneurs didn’t need to embark on long
procedures, even when they needed money. The need for finance, then, cannot be
considered as a determinant motivation.
See for instance Jourdain and Malepeyre (1833, )Vincens (1837) and Berès (1838).
The Compagnie des mines de la Loire was dissolved in 1854 for this reason. See Guillaume (1966).
Freedeman (1979).
Until the end of the 1840s, only three companies from the two biggest coal basins were SA. Very big
companies were often SCA, such as the giant Compagnie des mines de la Loire.
It could be argued, however, that though the amount of the capital was not higher in
SA than in SCA, people would choose the second form when they can gather enough
money easily, whether they would choose the SA only if they needed a more sophisticated
vehicle to raise money outside the circle of their personal connections. In other words, the
SA should be really “anonymous”, because it is made for investors with no personal
connections. The shares, moreover, should be optimized for a market-oriented issue. The
data, however, do not confirm this hypothesis. First, very few companies’ shares were
listed on the stock exchange43. It is more difficult to follow the transactions at the coulisse,
the unofficial stock exchange, but it was probably mainly fueled with shares of
commandites pas actions, and only from the late 1830s44. The shares, second, did not seem
to be designed for being traded. Most of the time, the companies issued only a very small
number of shares (figure III and IV). Until the late 1830s, the norm was to issue only a few
hundred shares (373 in average between 1808 and 1839). This average increased rapidly
since the 1840s to a bit less than 4’000 for 1840-1849 and more than 6’800 for 1850186745. The influence of railways companies is patent from the 1840s, but the industrial
sector always kept far, for instance, from the 250’000 shares issued in 1845 by the
Compagnie des chemins de fer du Nord. The instruction ministérielle of December 12,
1807, stipulated that to be authorized, at least 25% of the shares of a society had to be paid
off. Nevertheless, more than 88% of the shares of my corpus were bought at the time of the
procedure. Manifestly, the main function of the shares was not to raise capital on the
In fact, the crop of money took place, to a large extent, before the authorization
procedure46. Founding partners, then, had to find investors without the tools of a modern
Until the end of the 1830s, no company of our sample appeared on the official list. From the end of this
decade, a few railway companies were quoted, and exceptionally a mining company. But as late as the midnineteenth century, the stock exchange main function was to place government loans.
Marseilhan (1930), Gille (1959b) and Hautcoeur (2007) ;
These numbers do not take into account the four companies born in 1854 from the forced dissolution of the
Compagnie des mines de la Loire (SCA). Their capital was composed by 80’000 shares each. We chose not to
include them in our data, because this was a very particular and “aberrant” case.
Bédarride (1856) wrote that “the government does not give the authorization to inventors or speculators
seeking shareholders. He only give it to real companies (…) that already have enough serious shareholders”
(t.2, p. 396).
corporate economy47. The structure of the shareholdings appeared to be a direct
consequence of this “out-of-market” fundraising process. The shareholders of a SA
generally had the same geographic origin (figure V). In average, 71% of the shareholders
came from the same administrative subdivision (Départment). Figure V shows a relative
decline of the dominant geographic origin over time, but this group still represented 62%
of the shareholders in the 1850s-60s. Moreover, the two dominant geographic origins taken
together always represented between 82% and 90% of the total. Another characteristic of
the SA was the important concentration of the capital. In 80% of the observations, the
shareholders were less than fifty (figure VI). Even from the 1840s, when the number of
shares issued increased rapidly, the size of the shareholdings kept limited: less than 64 in
average. In addition, the shares were concentrated in the hands of some big shareholders.
In average, the biggest shareholder possessed more than 26% of the shares and the three
biggest shareholders possessed more than 50% (figure VII and VIII).
All this information drives us to conclude that SAs were far from being impersonal
institutions. They were composed by a few partners coming from the same geographic
areas. The question remains if this situation was imposed to entrepreneurs by external
factors, such as the narrowness of the financial market, or if it resulted from a deliberate
strategy. It appeared that, most of the time, incorporators were unwilling to see people they
did not know taking part in their business. In this regard, issuing shares was potentially
dangerous, as it could result in a loss of control. This could explain the very little number
of shares generally issued. Incorporators wanted to keep each share certificate under
control. Until the late 1840s, the vast majority of the shares issued were nominatives48.
That meant that any transfer had to be announced to the board that would issue a new
certificate with the name of the new shareholder. From the 1840s, more and more
Notaries may have played an important role in this fundraising process, but this assumption would
necessitate a detailed study. Hoffman, Postel-Vinay and Rosenthal (2000) pointed out the central role of
notaries on the Parisian credit market since the seventeenth century, but they noticed a fall of these
intermediaries from the mid-eighteenth century. My opinion based on an overview of some archive material is
that notaries kept very important players at least until the first half of the nineteenth century, mainly to diffuse
companies’ shares among their clients.
Between 1812 and 1848, on 53 requesting companies whose statutes were discussed by the Conseil general
des Mines, 45 intended to issue nominative shares, only 5 preferred to issue bearer shares, and the last 3 let
the choice to the shareholders.
companies allowed shareholders to choose between bearer or nominative shares. Still at
that time, however, the statutes very often put restrictions to the tradability of shares: “any
share’s transaction will not be effective, and then give the quality of shareholder to the
buyer, until the board of directors would have approved the transaction by a vote (…)”49.
Clauses like this could be found in the statutes of almost all companies. The
administration, though, tried to do away with this practice since the early 1820s, in vain.
The Conseil general des mines, for instance, argued that these clauses would make the
circulation of the shares more difficult, and that it could be harmful for the shareholders
themselves50. Despite this official position, this mean of control was used at least until the
second half of the century.
The shares, then, were not designed to reach large populations. Additional evidence
of this strategy comes from the shares’ par value. The average par value was around
12’000 francs in the 1820s-30s, and began to fall only in the 1840s to 3’700 francs and to
600 francs from the 1850s (figure IX)51. The market for industrial shares was for a long
time reserved for economic elite, and it kept far from the preoccupations of the
incorporators trying to tap the middle class savings. Entrepreneurs were probably not alone
responsible for this “archaic” model, as they had to deal with a “on work” financial and
economic environment. But as far as we can see, they didn’t use their room for manoeuvre
in order to “modernize” the corporate economy. This does not mean that choosing the way
of incorporation, considering the cost of the authorization procedure, was irrational. As we
shall see in Section III, the use of the corporate form could result from a wide range of
strategies. Gathering money was only one of them, and thus could not alone explain all the
players’ comportments.
Statutes of the Compagnie des fonderies et forges de la Loire et de l’Isère, granted on November 13, 1822.
This argument was formulated several times. See for instance the report on the Société des mines de plomb
de la Haute-Loire [Archives Nationales de France, F 17935, session of December 3, 1823].
Like for the number of shares issued and the number of shareholders, the railways companies had a great
influence on the industrial sector from the 1840s, and to have imposed their standards to the rest of the
economy. This appeared very clearly concerning the par value of the shares. The industrial sector largely
adopted the 500 francs’ standard of the railway companies. As said above, the average par value in the
industrial sector fall to around 600 francs, with a standard deviation also falling from 10’800 francs to a bit
more than 3’000 francs. In this paper, we do not put the accent on the evolutions, because they cannot be
understood without a global look on the whole economy, and because it is not central for our argument.
Section III. Some hypothesis for a new Comprehension of the Uses of the SA
It is not the ambition of this paper to provide a full theory of the corporate form’s
purposes in France. In section II, we argued that the arguments traditionally advanced in
the literature to explain the emergence of the SA do not allow understanding the uses that
were effectively made of it. But the quantitative data used for this argumentation are not
sufficient to provide alternative comprehensions of the uses of the SA. Now I provide three
hypotheses to try to explain why SA were created in the XIXth century. At this point, these
hypotheses are only supported by isolated examples. A more systematic argumentation will
necessitate further works.
Hypothesis 1: the public SA
How people acted in the XIXth century not only depends on quantifiable economic
parameters. One also has to take into account the intellectual environment of entrepreneurs
and the representations of the reality with which they used to act. The SA appeared in the
French law only in 1808, but similar business forms have an older history. The invention
of the uses of the SA, thus, is not baseless, and lawyers, economists, politicians and
entrepreneurs have common references to the pre-revolutionary period. In France, big
joint-stock companies appeared in the mid-XVIIth century to support oversea trade, but
they were public of semi-public undertakings. Private joint-stock companies with limited
liability, however, appeared in the last third of the XVIIIth century52. Though it was not
well-defined before the Code de commerce, it was reserved for important businesses that
aimed at promoting general interests. The government, then, played an important role with
the attribution of monopolies. The promotion of private undertakings through privileges
was an important aspect of the public economic intervention.
Lévy-Bruhl (1938).
After the Revolution, this kind of intervention lost its legitimacy for two reasons:
first, because privileges were seen as incompatible with the egalitarian ideal carried by the
Revolution53; second because free-market theories became widely spread among
economists, and thus state interventionism had to be reduced to the minimum54. This loss
of legitimacy, however, had its main impact on people’s representations. But many
economic institutions passed over the Revolution or were recreated in the very first years
of the XIXth century55. In other words, the way people named things changed drastically,
while the way to make them kept much more stable. The SA can be seen as one of these
institutions that were presented as a brand new ones, though they were only old ones in
new shapes. Still in the XIXth century, the SA was used as a tool of economic policy. The
reason for the creation of a SA, in such cases, must be found on the government side rather
than in the strategies of founding members. The SA allowed the government to encourage
initiatives in key sectors, with the attribution of a certain privilege. This privilege could
take several forms. It could be a sort of caution. As the statutes of the requesting
companies were examined, an authorization was interpreted as a proof of seriousness and
good health56. When combined with a concession, the privilege could take the form of a
It is not surprising that this situation was the rule in transportation and
infrastructure sectors57. It could also be observed in the industrial sector. The report of the
Conseil general des mines on the request of the Société pour la recherche de mines de
houille dans le département du Haut-Rhin (1822), exposed that the initiative came from
“the prefet, who anticipated the benefits of promoting coal industry in the region (…), and
The Revolution crystallized this criticism, but it was formulated before. In addition, this criticism was to a
large extent the result of an incorrect interpretation of privileges before the Revolution. See Sieyès (1788),
Bossenga (1991), Durand (1992) and Margairaz (2006)
In fact the relations between the government and the economy were never that simple. The government had
to provide a complex mixed policy made of rules and freedom, though in theory free-market was the aim. See
for instance Daumard (1976), Bouvier (1986), Hirsch (1991) and Hirsch and Minard (1998).
Rosanvallon (1989) and (1990), Thépot (1998), Chatriot and Lemercier (2002) and Lemercier (2003).
Vincens (1837), for instance, mentioned companies that made people believe that they were SA, and thus
“benefited from the credit attached to the authorization”.
For an example of a detailed case analyze, see Williot (1999).
thus sought to associate manufacturers of the region to his project”58. As late as 1861, the
city of Caen organized a SA for public bath and laundry. The city owed 38% of the capital
and guaranteed a fix annual interest rate of 5% on the shares. Public authority, at various
levels (city, département, region, state), could use the SA to provide public services. This
conception of the SA as a public-oriented institution is dominant all over the period. The
justification of the SA, then, was made in the same terms than the justification of old
regime privileges. Wolowski exposed very clearly that “(...) the SA is designed for big
businesses dealing with public interest”59. In fact, this juridical form offered a possibility
of alliance between a public authority, that did not have the resources nor the legitimacy to
act alone, and the private sector. Shareholders invested in such enterprises like they would
have bought government stocks.
Hypothesis 2: the SA as a complementary institution to kinship
A look at the composition of shareholdings in the XIXth century reveals the
importance of family-held companies. In such cases, the hypothesis of a SA as a vehicle
for finance does not make any sense. In 1831, the Compagnie des ardoisières de Rimogne
et de Saint-Louis-sur-Meuse was granted with a capital of 1,08mio of francs. This capital
was divided in 54 nominative shares of 20'000 francs each. 42 of them were held by seven
members of the Rousseau family. The other 12 were held by “two allies of the family”60.
This, of course, was an extreme case. But many families were dominant holder in many
SA. 47% of the shareholders of the Société anonyme des fonderies de Bordeaux (granted in
1824) belonged to two related families, and 100% of the capital was held by négociants
from the city of Bordeaux. Two thirds of the capital of the Compagnie des manufactures de
glaces et de verres de Saint-Quirin, Cirey et Monthermé (granted in 1841) were also held
by seven members of two families. Two families, third example, held 45% of the 2100
Report on the Société pour la recherche de mines de houille dans le département du Haut-Rhin [Archives
Nationales de France, F 17933, session of December 11, 1822]. This company never received the
Wolowski (1838). Such statements could be found in all commentators’ books or articles. See for instance
Vincens (1821) and (1837), Jourdain and Malpeyre (1833) and Bédarride (1856).
Report of the CGM on the Compagnie des ardoisières de Rimogne et de Saint-Louis-sur-Meuse [Archives
Nationales de France, F 17945, session of November 29, 1830].
shares issued by l'Expansion, société pour la construction de machines et de mécaniques
(granted in 1848). Many others examples of family firms using the corporate form could be
In this type of uses, business strategies were probably secondary. Historians have
very often emphasized how kinship relations could be mobilized to support business61.
Less attention has been paid to the supports that business institutions could provide to
families. Hirsch noticed the “incapacity of a family institution to function by itself”, and
then saw commercial associations as a potential complement. Very often, for instance,
commercial associations were used to pass patrimony down, avoiding egalitarian-based
inheritance rules62. Alternatively, a SA could be designed to avoid a dispersion of a family
patrimony or to strengthen links created by a marriage. Here again, every case has to be
studied individually, and standardized data alone, such as companies acts, are not sufficient
to understand the strategies of the families. Nevertheless, this analyze in term of
institutional complementarity appear to be very useful for our issue.
Hypothesis 3: the SA as a result to industrial strategies
In the particular sector of heavy industry, geographic and geologic hazard had a
great importance on the structure of the firms. In England, for instance, coal and iron were
found in the same basins, and then integrated firms appeared to be the natural form of
business. In France, in the opposite, coal and iron were extracted in distinct areas63.
Ironworks manufacturer, then, had to buy the combustible they needed. But French coal
was expensive and of low quality64. Transportation, moreover, were expansive and the
network was not coherent65. Combustible supply, as a result, was a constant preoccupation,
to the point that manufacturer could decide to mine themselves. The Compagnie des mines
de houille de Norroy, for instance, requested the authorization in 1831. The report of the
Conseil general des mines said that the founding members were “mainly ironmasters from
See, for instance, Sabean (1998).
Hirsch (1991).
Lévy-Leboyer (1964).
More precisely, it was uneasy to make good coke out of the coal. See Gille (1959b) and Sougy (2008).
Things changed slowly from the 1840s with the railways. See Caron (1997).
the region”66. The main advantage of the SA, in this situation, was the limited liability it
offered to the associates. Coal mining, at this time, was still a risky industry, in particular
because it was very difficult to estimate the richness of a coal seam. The report of the
CGM explained that the associate “did not want to compromise their commercial credit in
undertakings as uncertain as mining industry”. It is important to keep in mind that
commercial credit represented much more than just finance. Credit was attached to a name.
For a business man, it was indispensable that his name inspired confidence67. Any types of
association except SA were referred to by the names of the associates. The choice of a SA,
in the end, was a mean to resolve an issue in the production process without implicating
the main and principal activity of the associates. This kind of strategy makes
understandable that the shares were not designed to be traded, as they were not supposed to
be the vehicle of any speculation. In addition, the associates did not want to lose the
control of their business, thus they did not intend to sell the shares.
The literature traditionally argued that the société anonyme was the instrument of
modern capitalism. In a more and more capitalistic economy, it was perceived as the
necessary support for big businesses. This paper demonstrates that French SA in the early
XIXth century was not a univocal institution. Raising finance, in particular, was only one
of its functions, and maybe not the most important. Further research will be necessary to
come to a better comprehension of the different uses of the SA. But it is already possible to
assume that the strategies of firms or people that chose this juridical form were various. At
least two general categories can be drawn. The SA first was very often used by the
government as a vehicle for its economic policy. Second, the SA was also used in the
private sector, but not necessarily as the modern institution it was supposed to be. Despite
Report of the CGM on the Compagnie des mines de houille de Norroy [Archives Nationales de France,
F 17946, session of May 23, 1831].
For an overview of the notion of “credit” in the XIXth century, see Baubeau (2007).
France is described as the temple of civil law in contemporary typologies, the users of the
SA had a great breathing space to make this institution evolve, by means of jurisprudence.
The Code de commerce, as it was a very general text, gave enough flexibility to be used for
different purposes. French corporate law, thus, provided a useful support for a large range
of different business strategies. Some of them were the exact opposite of a classical
capitalist model.
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Tables and Figures
Table I: The Menu of Organizational Choices
Type of Form
Ordinary Partneship
Limited Partneship
Limited Partneship with
tradable shares
Definition of Form
Two or more partners, all
unlimitedly liable
One or more general
partners with unlimited
liability, and one or more
special partners who cannot
participate in management
but who have limited liability
Same as limited partnership,
except special partners'
shares can be bought and
sold on the market
Yes in all four countries
All members have limited
liability and their shares are
Required special permission
France: 1867
Germany: 1860s-1870,
varied by state
UK: 1844 without limited
liability and 1855-6 with
limited liability
US: mostly middle third of
nineteenth century, varied
by state
Source: Guinnane, Harris, Lamoreaux and Rosenthal (2007).
France: yes
Germany: yes
UK: only after 1907
US: yes, but in an
unattractive form
France: yes
Germany: yes
UK: no
US: no
Table II: Repartition SA by sector,
Public infrastructure
Mining and metallurgy
Real estate
Source: Lefebvre-Teillard (1985), pp. 67 and 69.
Figure I: Comparison of the capital of all requesting companies with
authorized companies, 1812-1848
(Moving averages)
Millions of Francs
Authorized companies only
All requesting companies
Number of shares issued
Millions of Francs
Figure II: Capital of the SA, 1808-1867
Number of observations, in % of the total
Figure III: Number of Shares issued, 1808-1867
(Moving average)
Source: Author's database
Figure IV: Number of shares issued, 1808-1867
Number of observations, in % of the total
Figure V:: % of shareholders's of a SA from the dominant geographic
origins (administrative departments)
Figure VI: Number of Shareholders, 1808-1867
(Moving average)
Source: Author's database
Figure VII: Proportion of Capital held by the 1, 2, 5, 10, 20 and 50
biggest shareholders
Source: Author's database
Figure VIII: % of Shareholders possessing 33%, 50% and
66% of the Capital
Source: Author's database
Figure IX: Shares' par value
Source: Author's database
Figure X: Annual SA Creations in France,
Source: Author's computation from Freedeman (1979)