company law - Assignment PDF

Running head: QUESTION 0
COMPANY LAW
STUDENT DETAILS:

QUESTION 1
The company may not operate properly with limited capital therefore mandating the
need of capital from means deemed lawful as specified in Act. Creditors, in addition to
capital raised from stakeholders or investors, assist to the finance the business operation of
the corporations. Creditors and other stakeholders require guarantee that that the funds in the
companies are protected from the changes of business procedures. The reservations of
creditors and the prospects and limits of stakeholders are consequently stated by the doctrine
of capital maintenance under The Companies Act 2006. In the following parts, new laws
regarding doctrine of capital maintenance, requirement of changes and what does changes
mean to creditors, are discussed and critically examined.
The capital serves the protection for the creditors, for the debt owed to them. It led to
changes to provide more protection to creditors. The changes in the law has an impact that
the capital of company can be paid without reducing the capital if approved by the
Companies Act. It was worn that as per the rule of capital maintenance, dividend could not
made out of the capital, the corporation cannot purchase the own shares, and stakes at par
value could not be issued at the discount excluding severe situations (Law, 2016).
Additionally, the shareholders will choose that they are paid from the corporate coffer
regardless of what gets when creditor is cautious for the protection of the personal
investment. Though, doctrine of capital maintenance restricts corporations from inveterate to
the funds of stakeholders that were primarily contributed for the stakes. In the case of Trevor
v Whitworth (1887) 12 App Cas 409, the corporation purchased again practically the quarter
of the personal share so during the liquidation of the corporation, it is requested by a
stakeholder that balance that stayed be moved to him in respect of due amount. The exercise
is banned for the corporations trying to make attempt to decrease the capital by buy back the
share (Hannigan, 2018).