Maintenance of Capital

Maintenance of Capital in Europe

Financial assistance for purchase of its own shares (ss677–683)

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  • General prohibition on public companies giving financial assistance
  • Breach of the prohibition
  • Exceptions
  • The principal or larger purpose exception
  • Territorial effect

maintenance of capital in the English Law

Find out more about maintenance of capital in the English legal system in this entry of the UK Encyclopedia of Law: maintenance of capital (Commercial Law)

Reduction of Company’s Capital under s642

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  • To extinguish or reduce liability on partly paid shares
  • To cancel paid-up share capital which has been lost or is not represented by available assets
  • To pay off part of the paid-up share capital out of surplus assets
  • How to effect a reduction

Redemption and buy-back of shares

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  • Redemption of shares
  • How is redemption effected?
  • Consequences of redemption

Purchase by a company of its own shares (buy-back)

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  • Methods of purchase
  • Consequences of buy-back

Maintenance of Company’s Capital: The share premium account

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  • Maintenance of Company’s Capital: The distributable profits rule
  • Maintenance of Company’s Capital: Bonus (capitalisation) issues

Regulating the adequacy of the consideration obtained for shares on allotment

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  • Non-cash consideration

Paying for the shares out of capital

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  • Procedure to be followed for payment out of capital

Buy-back of shares

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  • Purchase by a company of its own shares (buy-back)

1 thought on “Maintenance of Capital”

  1. Capitalism, for Marx:

    As detailed workers (unskilled), they own neither tools nor machines of production–the capitalist supplies everything. The capitalist also organizes production, determines output, and sets prices.

    Detail workers sell their labor power. Labor power has the unique capacity to produce more value than its own value. Labor power is sold to the capitalist in return for a wage. Labor power is also a commodity, and its value is equal to the average amount of labor-time necessary to produce it. The value of labor-power = labor-time that on the average goes into producing the goods necessary to maintain a functioning worker at the prevailing standard of living. Producing labor-power means maintaining a functioning worker.

    If a worker’s production is equivalent to the worker’s wages (production = wage), there would be no profit (surplus value) for the capitalist.

    Necessary labor is the labor-time the worker works to produce a value = to his wage. The labor-time a worker sells beyond this point is surplus-labor, and the capitalist’s source of profit. So, profit equals the extraction of unpaid labor (surplus-labor) from the worker.

    This type of exploitation is the key to understanding the features of capitalist’s law.

    In capitalism, exploitation is hidden for view from both worker and capitalist. The compulsion of economic relations finalizes the capitalistic rule over the worker.

    The length of the normal working day becomes the object of negotiation from worker/seller and employer as buyer of labor-power.

    Economic basis of capitalist law: Capitalists and workers make wage agreements in a free-market. Labor must be free to move to another job for a higher wage. The employer must be free to hire/fire as the market demands.

    Exploitation remains structurally hidden in capitalism for capitalist exploitation to succeed, it is therefore essential to have workers who are legally free and equal to the capitalist.

    A person can offer his labor-power as a commodity only if he is the unimpeded owner of his labor-power.

    The owner of money and the worker meet in the market-place and deal with each other on the basis of equal rights. The only difference is that one is the buyer and the other is the seller–they are both equal in the eyes of the law. This hides the fact that there is no equality. Exploitation is hidden from both capitalists and workers.

    The worker transforms himself from a free man into a slave; from and owner of a commodity (i.e., labor-power) into a commodity.

    Individual equality is a necessary precondition for the operation of a capitalist mode of production based on the extraction of surplus labor through wage contracts.

    Individual freedom is essential for capitalist exploitation.

    Capitalism needs legal equality for the stabilization that left with feudalism. Now, the only bond between men is money. A heavy emphasis is placed on the legal conceptions of responsible actors.

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