Legal Capital Flashcards
- What is legal capital?
o The monetary value of contributions by associates.
- Why is legal capital protected?
o To safeguard creditors and ensure company stability
- What is subscribed capital?
o Total value associates agree to contribute at incorporation.
- What is paid-up capital?
o Portion of subscribed capital actually contributed.
- What are the EU requirements for paid-up capital?
o 25% paid at incorporation, with the rest due within two years
- What types of contributions exist?
o Money, kind, and work.
- What is the role of contributions in kind?
o Assets transferred to the company after valuation
- What is the significance of minimum capital requirements
o Protects creditors and ensures sufficient initial resources.
- How can legal capital be increased?
o Through new contributions, reserves, or retained earnings.
- What are the rules for capital distribution?
o Must not lower net assets below registered capital.
- What is the role of an independent expert in contributions?
o Validates the value of in-kind contributions.
- What are liquidated damages?
o Pre-agreed compensation for breaches related to contributions.
- What happens if a company’s capital is depleted?
o It must be replenished before profit-sharing.
- What is a revaluation reserve?
o Adjustment of asset values to reflect current market conditions
- What is a merger premium?
o Surplus value generated during a company merger.
- What are bearer shares?
o Surplus value generated during a company merger.
o Shares transferred by delivery without the need for formal registration.
- What is a convertible bond?
o A bond that can be converted into shares.
- What is the purpose of retained earnings?
o To fund future expansions or cushion against losses.
- What is an issue premium?
o Amount paid by shareholders over the nominal value of shares.
- How can capital be written down?
o By reducing share value, cancelling shares, or exempting contributions
