This article argues that in analysing the efficiency of the German legal capital rules, it is helpful to distinguish carefully between three different aspects: the question of whether the law should impose a minimum legal capital requirement, the relevance of provisions in the articles of incorporation pertaining to the legal capital of the company as a collective offer to the company's creditors, and the role of legal capital rules in limiting distributions prior to the company's insolvency. The existence of a minimum legal capital requirement, while it may not be particularly burdensome to serious-minded entrepreneurs, does not do much to help creditors. The second aspect, namely, the role of provisions in the articles of incorporation pertaining to the legal capital of the company as a collective offer to the company's creditors, is far more important. It explains why the traditional system of capital protection constitutes an efficient contractual instrument facilitating the entrepreneurial activities of companies. Most importantly, however, legal capital rules are the most efficient way of limiting distributions prior to the company's insolvency, providing less room for manipulation than the ad hoc solvency tests used in Anglo-American legal systems.