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It is a fundamental principle of company law, that share capital be maintained. Company law has evolved principles and provisions to ensure that companies raise and maintain their capital for example:
- A public company may not commence business before the minimum subscription is raised.
- Consideration for shares must be in money or money?s worth.
- A public company may not allot shares for non-cash consideration.
- Issuing of shares at a discount is in principal prohibited. Section 59 of the Act
If shares are issued at a premium, a share premium account must be created. Section 58 of the Act.
- Reduction of capital by a company must strictly comply with the provisions of the Companies Act.
- Preference shares should only be redeemed by reserves or proceeds of a special issue for that purpose.
- Dividend must not be paid out of capital. Article 16 of Table A.
-The par value of shares must be maintained.
- A company must not purchase its shares.
- A company must not finance the purchase or acquisition of its shares. Trevor V.Whitworth. This rule is embodied in Section 56 (1) of the Companies Act.
marto answered the question on February 5, 2019 at 11:45