Revisiting Legal Capital

European Business Organization Law Review, Forthcoming

University of Cambridge Faculty of Law Research Paper 20/2019

26 Pages Posted: 6 Sep 2019

See all articles by Eilis Ferran

Eilis Ferran

University of Cambridge - Faculty of Law; European Corporate Governance Institute (ECGI)

Date Written: September 1, 2019


This paper argues for the UK to revisit the legal capital (maintenance of capital) doctrine. Leaving the EU could present an opportunity but to reform legal capital just because Brexit may make it possible to do so would have little merit. Three more substantial reasons for revisiting legal capital are developed: the evidence against legal capital being an effective bulwark against short termist corporate behaviour has continued to stack up; difficulties associated with applying legal rules on distributions in the context of modern financial reporting requirements have persisted; and we have a clearer sense of how creditors’ interests are affected by moving away from legal capital to solvency standards. The paper locates the need to revisit legal capital within the broader agenda for a system of effective corporate governance and regulation that supports economically worthwhile and sustainable business activity.

Keywords: Legal capital, Solvency standards, Short termism, Distributions, Financial reporting, Corporate governance

Suggested Citation

Ferran, Eilis, Revisiting Legal Capital (September 1, 2019). European Business Organization Law Review, Forthcoming, University of Cambridge Faculty of Law Research Paper 20/2019, Available at SSRN:

Eilis Ferran (Contact Author)

University of Cambridge - Faculty of Law ( email )

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European Corporate Governance Institute (ECGI)

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