Capital Doctrine Samples for Students †MyAssignmenthelp.com

Question: Discuss about the Company Law and Capital Doctrine. Answer: Capital Doctrine The doctrine of capital is maintained by companies to receive appropriate consideration of shares so as to issue and receive such capital it might not repay to members excluding certain conditions. It is an essential principle of company law, as the doctrine highlights the duties of the company to aside the capital for the security of the creditors (Griggs, 2016). Thus, taking the permission to court to oversee to ensure capital is dissolute legally or not. Capital doctrine is maintained because of the following aspects; Dividend payment to shareholders Decreasing of the companys share capital Redemption of companys share History Of Capital Doctrine Capital doctrine is to be maintained so as to protect creditors interest and to assure the legal dissipation of the assets of the company. Courts are always worried to aside the capital of company intact so that the creditors can give credit to that capital by considering their credibility. Same has been described in the case of Trevor v Whitworth (Islam, 2015). Under Aveling Bar ford Ltd. V. Person Ltd, 13 it is found that during winding up of company, shareholders can recover their capital only if payments to all creditors are made to provide security to outside obligations of business. Benefits Of Doctrine The advantage of maintaining capital doctrine is that it contains a proper collection of rules which ensures, that capital is obtained by a company which was supposed to rise, and the capital is maintained to require the subject of the business for the security of creditors and for the benefit of the company. For example 257B states that buy back must be supported by all viable requirements stated in the section by providing proper definition of the same (Cassidy, 2006). The main purpose of the doctrine of capital maintenance is to avoid deception and fraudulence and to assure creditors by deducting share capital and ensuring liabilities of shareholders. For this 260A provides financial assistance before and after acquisition Exceptions Of The Doctrine Some expectations of this principle according to section 256B and 259A is as follows The company can reduce its share capital with the permission of the court. Shares can be redeemed buy company only if act allows. The company can purchase its own shares under a process set by thelaw (Islam, 2015). During winding up, if the debts of the company are paid, capital can be returned to the members References Cassidy, J., 2006. Concise Corporations Law. Federation Press. Griggs, L., 2016. The doctrinal coherence of the Torrens system of land registration in Australia: evolution or revolution?. Islam, M.S., 2015. The Doctrine of Capital Maintenance and its Statutory Developments: An Analysis. Northern University Journal of Law, 4, pp.47-55.