Life Without Legal Capital: Lessons from American Law

56 Pages Posted: 27 Feb 2006

See all articles by Andreas Engert

Andreas Engert

Freie Universität Berlin, Department of Law; European Corporate Governance Institute (ECGI)

Date Written: January 2006


The Commission of the European Union contemplates abolishing the legal capital regime. Critics of legal capital have referred to American corporation law as an example of a more efficient approach. In this paper, I conduct a comparative analysis of the EU second company law directive and its functional equivalents under American law. There are two principal conclusions: First, the greater part of the second directive has little if anything to do with legal capital; at its heart, the legal capital concept is (only) about regulating distributions to shareholders. Second, the American approach to corporate distributions relies more on the law of fraudulent transfers than on corporation law. Therefore, simply replacing European legal capital with a U.S.-style "solvency test" would likely result in weaker creditor protection than under American law.

Keywords: Legal capital, fraudulent conveyance, fraudulent transfer, capital directive, European company law, comparative law, corporation law

JEL Classification: K22

Suggested Citation

Engert, Andreas, Life Without Legal Capital: Lessons from American Law (January 2006). Available at SSRN: or

Andreas Engert (Contact Author)

Freie Universität Berlin, Department of Law ( email )

Boltzmannstr. 3
Berlin, 14195

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

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