The City of Glasgow Bank failure in 1878, which led to large numbers of unlimited liability shareholders becoming insolvent, generated great public concern about their plight, and led directly to the 1879 Companies Act, which paved the way for the adoption of limited liability for all shareholders, including senior executives. In this article, we focus on the question of why the opportunity was not taken to assign greater liability to ‘insiders’, i.e. those with direct access to information and power over decisions, than to ‘outsiders’ lacking both. We analyse parliamentary and public debates ahead of the passage of the bill, and find that such issues were raised and discussed at the time, but arguments in support of equal shareholder treatment won out. By showing the weak foundations of those arguments, we suggest that an alternative, tiered-liability path could (and should) have been taken, with potentially significant implications for contemporary prudential policy.