The raising and maintenance of capital

Abstract

The regulation of the raising and maintenance of capital is primarily intended to protect creditors from the possible abuse of the notion of limited liability by corporate debtors. Shareholders also stand to benefit from these rules in that they are protected from certain prejudicial decisions taken by the directors, which would otherwise be possible without their approval. Part I of the thesis focuses upon the rules that come into play whenever a company is incorporated or when there is a fresh issue of shares. These rules provide for the establishment of a capital fund and the manner in which investors may subscribe to or acquire shares in the company. Part II, on the other hand, analyses the regulation of the capital fund and the manner in which it may be applied in the interests of the company's creditors and shareholders. Part III wraps the discussion up with a criticism of the current local and European rules together with a number of proposals for reform. The provisions discussed m this thesis were intended to implement the Second Company Law Directive and consequently, reference is made to the abundant literature concerning it. Furthermore, extensive reference is also made to the British Statute Law and to the plethora of judgments delivered by the Courts in Britain and in a number of other Commonwealth jurisdictions. This was necessitated by the absence of any local Court judgments or literature on the topic being discussed. The law is stated as known to me on the 31st May, 2004.