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Business law > Legal Capital > Flashcards

Legal Capital Flashcards

1
Q
  1. What is legal capital?
A

o The monetary value of contributions by associates.

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2
Q
  1. Why is legal capital protected?
A

o To safeguard creditors and ensure company stability

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3
Q
  1. What is subscribed capital?
A

o Total value associates agree to contribute at incorporation.

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4
Q
  1. What is paid-up capital?
A

o Portion of subscribed capital actually contributed.

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5
Q
  1. What are the EU requirements for paid-up capital?
A

o 25% paid at incorporation, with the rest due within two years

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6
Q
  1. What types of contributions exist?
A

o Money, kind, and work.

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7
Q
  1. What is the role of contributions in kind?
A

o Assets transferred to the company after valuation

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8
Q
  1. What is the significance of minimum capital requirements
A

o Protects creditors and ensures sufficient initial resources.

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9
Q
  1. How can legal capital be increased?
A

o Through new contributions, reserves, or retained earnings.

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10
Q
  1. What are the rules for capital distribution?
A

o Must not lower net assets below registered capital.

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11
Q
  1. What is the role of an independent expert in contributions?
A

o Validates the value of in-kind contributions.

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12
Q
  1. What are liquidated damages?
A

o Pre-agreed compensation for breaches related to contributions.

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13
Q
  1. What happens if a company’s capital is depleted?
A

o It must be replenished before profit-sharing.

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14
Q
  1. What is a revaluation reserve?
A

o Adjustment of asset values to reflect current market conditions

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15
Q
  1. What is a merger premium?
A

o Surplus value generated during a company merger.

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16
Q
  1. What are bearer shares?
A

o Surplus value generated during a company merger.
o Shares transferred by delivery without the need for formal registration.

17
Q
  1. What is a convertible bond?
A

o A bond that can be converted into shares.

18
Q
  1. What is the purpose of retained earnings?
A

o To fund future expansions or cushion against losses.

19
Q
  1. What is an issue premium?
A

o Amount paid by shareholders over the nominal value of shares.

20
Q
  1. How can capital be written down?
A

o By reducing share value, cancelling shares, or exempting contributions

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