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Bubble Act facts for kids

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Long title An Act for better securing certain Powers and Privileges intended to be granted by His Majesty by Two Charters for Assurance of Ships and Merchandizes at Sea, and for lending Money on Bottomry; and for restraining several extravagant and unwarrantable Practices therein mentioned.
Citation 6 Geo. 1. c. 18
Territorial extent  Great Britain

Later extended to Colonies, including:

Quick facts for kids
Dates
Royal assent 11 June 1720
Repealed 5 July 1825
Other legislation
Amended by Bubble Companies, etc. Act 1825
Repealed by Royal Exchange Assurance Act 1901
Status: Repealed

The Bubble Act 1720 was an important law passed by the Parliament of Great Britain on June 11, 1720. This law officially created two companies: the Royal Exchange Assurance Corporation and the London Assurance Corporation. More importantly, it stopped other new companies from forming unless they had special approval from the King or Queen.

This law was later extended to British colonies, including places like Massachusetts. The Act also gave the South Sea Company a special right to control British trade with South America. This was until the "South Sea Bubble" burst, which was Britain's first big stock market crash.

Why Was This Law Made?

There are a few ideas about why the Bubble Act was created. One main reason was to prevent a big money problem called the South Sea Bubble. This happened when many people invested in the South Sea Company. They hoped to get rich quickly, but the company's stock price went up very high and then crashed. Many people lost their money.

Some historians believe the South Sea Company itself wanted this law. They wanted to stop other companies from competing with them for investors' money. This way, more people would invest in the South Sea Company. The law was actually passed in June 1720, before the biggest part of the South Sea Bubble crash happened.

The Bubble Act was partly removed in 1825 by another law called the Bubble Companies, etc. Act 1825. The rest of the Act was finally removed in 1901.

What Did the Act Say?

The Bubble Act said that any business that tried to raise money or offer shares like a big, official company was "illegal and void" if it didn't have a special approval, called a charter, from the royal government.

Under this law, only the Royal Exchange Assurance Corporation and the London Assurance Corporation were allowed to offer marine insurance. Marine insurance helps protect ships and their goods from damage or loss at sea. These two companies were the only ones with this special approval until 1824.

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