Capital Maintenance in the EU: Is the Second Company Law Directive Really That Restrictive?

Abstract

This contribution sets out to establish whether, and if so to what extent, the Second Company Law Directive allows the EU Member States to introduce different means of creditor protection, as suggested by recent academic studies on the function of legal capital and by various existing proposals for alternative regimes. The conclusion is that the Second Company Law Directive is a flexible instrument in so far as it allows Member States to impose capital requirements that are as severe as they want and it allows Member States to adopt solvency-based systems similar to those existing outside the EU. The recent amendments introduced by Directive 2006/68/EC have already simplified the requirement of an expert evaluation of contributions in kind, relaxed the share buy-back provisions and eliminated the ban on financial assistance. Moreover, Member States are not obliged to require companies to prepare individual IAS/IFRS-based accounts for dividend distribution purposes, and Member States that decide to do so may (but are not obliged to) introduce various mechanisms that limit the possibility of distributing unrealised profits according to the realisation principle entrenched in the Fourth Company Law Directive. As far as no par value shares are concerned, the Second Company Law Directive already allows the introduction of de facto no par value shares in the form of accountable par shares.