Stated Capital Rules in French Security Offerings
27 Pages Posted: 9 Nov 2006
Date Written: November 2006
The corporate finance provisions of the French Commercial Code are grounded on the assumption that stated capital is an essential measure of corporate solvency. To ensure the integrity of stated capital as a reliable gauge for creditors, French corporate law narrowly restricts contributions of capital to French corporations, the issuance of new equity rights, and distributions by corporations to their shareholders. French corporate law also applies stricter capital maintenance rules than those mandated by European legislation. This article explores the stated capital rules of the French Commercial Code and the problems they pose for practitioners structuring corporate finance transactions. It critically appraises the theoretical basis for this corporate doctrine and suggests repealing certain rules to improve the efficiency of French capital markets.
Keywords: stated capital, par value, corporate finance, issuance, shares, capital maintenance
JEL Classification: k10, k22, k33
Suggested Citation: Suggested Citation