This chapter discusses the two principal types of capital that companies acquire: share capital (capital obtained by selling shares) and debt capital (capital borrowed from others). Having obtained share capital through the selling of shares, the law requires that the company ‘maintain’ that capital by not distributing it in unauthorized ways, notably by prohibiting companies from returning capital to the shareholders prior to liquidation.
Chapter
7. Capital and capital maintenance
Chapter
6. Shares
This chapter considers one way of becoming a shareholder of a company with a share capital: by taking shares from the company in exchange for a contribution of capital. The number and class of shares of the company that the member holds determines the extent of the member’s undertaking to contribute capital, and of entitlement to share in distributions and vote at meetings. Share allotment in exchange for a capital contribution is explained, and the need for public companies to have a minimum contributed capital is emphasised. The chapter also looks at possible remedies available to a person who has been induced to take an allotment of shares by a misrepresentation, including rescission of contract. Finally, it examines ways of altering a company’s share capital.
Chapter
6. Shares
This chapter considers one way of becoming a shareholder of a company with a share capital: by taking shares from the company in exchange for a contribution of capital. The number and class of shares of the company that the member holds determines the extent of the member’s undertaking to contribute capital, and of entitlement to share in distributions and vote at meetings. Share allotment in exchange for a capital contribution is explained, and the need for public companies to have a minimum contributed capital is emphasised. The chapter also looks at possible remedies available to a person who has been induced to take an allotment of shares by a misrepresentation, including rescission of contract. Finally, it examines ways of altering a company’s share capital.
Chapter
7. Capital and capital maintenance
Each Concentrate revision guide is packed with essential information, key cases, revision tips, exam Q&As, and more. Concentrates show you what to expect in a law exam, what examiners are looking for, and how to achieve extra marks. This chapter discusses the two principal types of capital that companies acquire: share capital (capital obtained by selling shares) and debt capital (capital borrowed from others). Having obtained share capital through the selling of shares, the law requires that the company ‘maintain’ that capital by not distributing it in unauthorized ways, notably by prohibiting companies from returning capital to the shareholders prior to liquidation.
