Explain the Statutory and Common Law Rules that govern raising and maintenance of share capital of a company.

Explain the Statutory and Common Law Rules that govern raising and maintenance of share capital of a company.

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.

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marto answered the question on February 5, 2019 at 11:45

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