Capital Maintenance in the EU: Is the 2nd Company Law Directive Really so Restrictive?
Posted: 4 Jan 2009
Date Written: September 30, 2008
This contribution sets out to identify whether, and if so to what extent, the Second Company Law Directive allows the EU Member States to introduce different means of creditor protection as suggested by the recent academic studies on the function of the legal capital and by the various existing proposals of alternative regimes. The conclusion is that the Second Company Law Directive is a flexible instrument insofar as it allows Member States to impose capital requirements as severe as they choose and that it already allows the Member States to adopt solvency-based systems similar to those which exist outside the EU. The recent amendments introduced through Directive 2006/68/EC have already simplified the requirement of an expert evaluation of contributions in kind, relaxed the share buy-backs provisions and eliminated the financial assistance forbiddance. Moreover, Member States are not compelled to require companies to prepare individual IAS/IFRS-based accounts for dividend distributions purposes, and Member States that decide to do so may (but are not obliged to) introduce various mechanisms that limit the possibility to distribute unrealized profits according to the realization principle entrenched in the Fourth Company Law Directive. As far as no-par-value shares are concerned, the Second Company Law Directive already allows the introduction of de facto no par value shares in the form of accountable par shares.
Keywords: Second Company Law Directive, legal capital, solvency test, balance sheet test, corporate law, creditor protection, capital maintenance
JEL Classification: K22
Suggested Citation: Suggested Citation