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Current enthusiasm for the ‘enterprise culture’ results in strong support for easy access to limited liability forms of business organisation. This has manifested itself in the creation of new limited liability vehicles such as the LLC and the LLP. The UK Company Law Review is examining ways of enhancing the attractiveness of the limited liability company to small business owners. This article examines the claims made for the ‘efficiency’ of limited liability and the applicability of these claims to small firms. It raises the importance of taking into account public policy issues beyond economic efficiency when considering the degree of risk taking and shifting to be encouraged. The article concludes that, although it is difficult to find rational methods of restricting access to limited liability, it does not follow that limited liability should be positively encouraged for all small firms. It is important to signal the limitations of limited liability.

There is a strong intuitive case for the creation of a new legal form through which small businesses in the United Kingdom could operate. The view is widely held that our companies legislation, fashioned with the public, quoted company in mind, is of a length and complexity which is wholly inappropriate to the small, private company.1 The development of the theory of the company as a nexus of contracts2 has strengthened the analysis of the limited liability company as a device for raising capital and reducing agency and monitoring costs. This is a corporate model which forces its supporters to distinguish the unquoted ownermanaged company from the public listed corporation and depict them as altogether different creatures.3 The dichotomy revealed by this analysis has come to dominate our understanding of company law. The weight placed by economists and politicians on the small business as a vehicle for entrepreneurship, economic growth and job creation in recent years4 has also drawn attention to the apparent inadequacy of the legal packages available to small firm owners.5 The fashion for deregulation6 emphasises the facilitative role of company law, which leads to proposals for simplification and removal of burdens from small firms. At the same time, legislation and other forms of binding

Sealy wrote in 1984 of 'a widespread concern among law teachers that company law has become unteachable'.' If that concern is justified, it may follow that it has become impossible to write a satisfactory company law textbook, and that it would therefore be unreasonable to criticise Farrar and his colleagues for not achieving the impossible. They have produced a book which the majority of students declare to be readable2 and which seems to fill the gap created in the market for degree course level company law text books by the decision to update Gower's classic text through supplements rather than a new edition.3 It is not, however, unreasonable to question whether Farrar has made a contribution beyond filling a gap in the student market on a temporary basis. When the long awaited new edition of Gower is published, will it resume its pre-eminent position, or will it have been replaced? Arguably, the authors of Farrar set themselves the wrong task. The constant developments in the law which affects companies and the consequent rumblings of change in company law teaching mean that what was needed was a completely fresh approach to the study of the law governing business entities rather than another traditional company law text book. What we have is a traditional textbook with some contextual material, at the expense, in places, of thorough case analysis. Farrar's Company law is not (and does not claim to be) a blueprint for curriculum reform in the way that Gower's Principles of Modem Company Law was when first published in 1954. However, the authors' stated objectives are not unambitious; the back cover of the book claims that 'Its character is unique, combining as it does some elements of a traditional approach with a clear theoretical structure, contextual treatment and practical new perspectives.' This is a good example of the type of work which legal publishers now appear to be encouraging, especially in fields where they feel there 'should' be a wide (and profitable) market; a kind of 'pick and mix' approach to legal writing, offering a wide menu from which the reader can make a personal selection. Yet ultimately, in its attempt to please all, this book fails to take a new direction and present a thesis of its own about its subject. It is essentially derivative and, like all works which aim to please everyone, risks satisfying