Introduction

Capital maintenance and the wider concept of legal capital, of which capital maintenance is part, have been among the most controversial topics in European company law in recent years. From its epicentre in the United Kingdom, the policy debate developed simultaneously on two fronts. While the UK Company Law Review raised questions about a number of technical points in the existing law, a series of academic contributions doubted the relevance of legal capital rules for the protection of creditors at a fundamental level. The White Paper from the DTI on ‘Company Law Reform’ stated with confidence: ‘Capital maintenance is largely irrelevant to the vast majority of private companies and their creditors.’ Following the recommendations by the Company Law Review, the Companies Act 2006 introduced a significant relaxation for private companies as regards the reduction of its share capital (below, B.3) and virtually abolished the prohibition on granting financial assistance for the acquisition of a private company's own shares, a field of regulation adjacent to capital maintenance. However, a more radical departure from the existing law was thwarted by the wish to preserve coherence within the Companies Act, because the law for public companies remains wedded to the concept of legal capital by virtue of the Second Company Law Directive.

Against this backdrop it was natural that the UK – along with a few other Member States – would push for fundamental change at EU level.