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The South Sea Company was a British joint-stock company founded in January 1711, created as a public-private partnership to consolidate and reduce the cost of the national debt.

To generate income, in 1713 the company was granted a monopoly (the Asiento de Negros) to supply enslaved Africans to the islands in the "South Seas" and South America. When the company was created, Britain was involved in the War of the Spanish Succession and Spain and Portugal controlled most of South America. The notorious economic bubble thus created, which ruined thousands of investors, became known as the South Sea Bubble. 18), which forbade the creation of joint-stock companies without royal charter, was promoted by the South Sea Company itself before its collapse. At the time of these events, the Bank of England was also a private company dealing in national debt, and the crash of its rival confirmed its position as banker to the British government.

All holders of the debt (creditors) would be required to surrender it to a new company formed for the purpose, the South Sea Company, which in return would issue them shares in itself to the same nominal value.

Directors of the Bank of England and of the East India Company were barred from being directors of the South Sea Company.

The South Sea company presented the offer to the public in July 1719.

On 21 January the plan was presented to the board of the South Sea Company, and on 22 January Chancellor of the Exchequer John Aislabie presented it to Parliament.

The South Sea Company was by no means the only company seeking to raise money from investors in 1720.

The collapse coincided with the fall of the Mississippi Company of John Law in France and the price of South Sea shares began to decline.

The money went to the victims and the stock of the South Sea Company was divided between the Bank of England and the East India Company.

The South Sea Company was created in 1711 to reduce the size of public debts, but was granted the commercial privilege of exclusive rights of trade to the Spanish Indies, based on the treaty of commerce signed by Britain and the Archduke Charles, candidate to the Spanish throne during the War of the Spanish Succession. The King of Spain did not receive any payments due to him, and this was one of the sources of contention between the Spanish Crown and the South Sea Company. The relationship between the South Sea Company and the Government of Spain was always bad, and worsened with time. Walpole was able to negotiate a treaty with the King of Spain at the Convention of Pardo in January 1739 that stipulated that Spain would pay British merchants £95,000 in compensation for captures and seized goods, while the South Sea Company would pay the Spanish Crown £68,000 in due proceeds from the Asiento. The South Sea Company refused to pay those proceeds and the King of Spain retained payment of the compensation until payment from the South Sea Company could be secured.

The South Sea Company never paid the amount due for the first annual ship to the Spanish Crown, nor did it pay any amount for any of the other six trips.

The South Sea Company directors appealed to the British government for further support.

The South Sea Company had a governor (generally an honorary position), a subgovernor, a deputy governor and 30 directors – reduced by the South Sea Company Act 1753 (26 Geo.

Shea, Gary S. (2007), "Understanding financial derivatives during the South Sea Bubble: The case of the South Sea subscription shares" (PDF), Oxford Economic Papers, 59 (Supplement 1): i73–i104, doi:10.1093/oep/gpm031

Novel set in the South Sea Company bubble.

Quick Facts

• The South Sea Company refused to pay those proceeds and the King of Spain retained payment of the compensation until payment from the South Sea Company could be secured.
• The South Sea Company had a governor (generally an honorary position), a subgovernor, a deputy governor and 30 directors – reduced by the South Sea Company Act 1753 (26 Geo.
• To generate income, in 1713 the company was granted a monopoly (the Asiento de Negros) to supply enslaved Africans to the islands in the "South Seas" and South America.
• Directors of the Bank of England and of the East India Company were barred from being directors of the South Sea Company.
• 18), which forbade the creation of joint-stock companies without royal charter, was promoted by the South Sea Company itself before its collapse.

Source material: Wikipedia - "South Sea Company". Adapted and summarized for DiscoverScroll. Original contributors are credited through the linked Wikipedia article. Read original on Wikipedia. CC BY-SA 4.0. Changes were made from the original.