ABSTRACT
This chapter enables students to gain an understanding of the central importance of capital, and to acquire familiarity with various restrictions that surround it. As capital is of supreme importance, it features in both the memorandum and articles. The chapter discusses the classification of capital, maintenance of capital, reduction of capital, a company’s acquisition of its own shares, and share capital redemption. The maintenance of capital restrictions does not generally apply to unlimited companies as creditors are not exposed to the same degree of risk as they are with limited ones. A private company may use its capital to redeem or purchase its own shares once its distributable profits and reserves have been used up. A special resolution is needed but the directors must make a declaration of solvency supported by an auditor report and appropriate publicity.
