1)
Explain what legal capital is & discuss the European Provisions relating
to its formation and maintainance
2)
Legal capital is the amount necessary to provide minimal resources to start up the
company's activity.
According to EU Company law the subscribed capital may be formed only of
assets "capable of economic assessment"and an undertaking to perform work or
supply services may not form part of those assets.
The mandatory minimun capital is set by the Directive as 25.000 euros, but
Member States may at their discretion raise this threshold (ex: In Italy is 50.000
euros).
The corporate statutes or the instrument of incorporation shall include information
on the amount of the subscribed capital paid up at the time the company is
incorporated or is authorized to commence business.
Once the shareholders’ contributions are made, the concern of the system changes
and is then oriented towards their preservation; European provisions lay down the
conditions needed to ensure that the capital of the company is maintained in the
interest of creditors.
A company achieves capital maintenance when the amount of its capital at the end
of a period is unchanged from that at the beginning of the period; any excess
amount above this represents the company's profit.
This part of the regime is mainly composed of rules governing the distribution of
dividends, purchases and redemptions of own shares, reductions and loss of
capital.
In the case of a serious loss of the subscribed capital, a general meeting of
shareholders must be called within the period laid down by the laws of the
Member States, to consider whether the company should be wound up or any other
measures taken.
1)
Explain and discuss what financial assistence is and how it is regulated
whithin the European provisions relating to companies capital
mantainance obligations
2)
Financial assistance is when a company helps a person with the purchase of its
own shares or the shares of its holding companies. Art. 64 of the Directive
2017/1132 provides the rules concerning financial assistance by a company for
acquisition of its shares by a third party.
The article applies to those Member States that permit a company to, either
directly or indirectly, advance funds or make loans or provide security, with a view
to the acquisition of its shares by a third party.
According to the Article the aggregate financial assistance granted to third parties
shall at no time result in the reduction of the net assets below the amount specified
in Art 56 of the Directive.
The transactions shall take place under the responsibility of the administrative or
management body at fair market conditions, then the corporate bodies shall
submitt the transactions to the general meeting for prior approval.
The administrative or management body shall present a written report to the
general meeting, indicating: the reasons for the transaction; the interest of the
company in entering into such a transaction; the conditions on which the
transaction is entered into; the risks involved in the transaction for the liquidity
and solvency of the company; and the price at which the third party is to acquire
the shares. Then the report shall be submitted to the register for publication.