Assessing the adequacy and effectiveness of the doctrine of capital maintenance in company law following amendments to the second company law directive

Abstract

This thesis deals specifically with the aspects which form the doctrine of capital maintenance as witnessed in the Second Council Directive 77/91/EEC of 13 December 1976 and its subsequent amendment by virtue of Directive 2006/68/EC, with specific emphasis on the interests they seek to protect and their adequacy and sustainability in protecting these interests. The rationale for the enactment of these rules, in a nutshell, boils down to the protection of company creditors; an aim which for years, both European and national legislation, has striven to achieve. Whether this rationale has been upheld in light of the amendments witnessed to the Second Company Law Directive and in contrast with the ever increasing desire for companies to maintain their competitive and efficient edge, will be assessed. More specifically, the first and second parts of this thesis evaluate the main changes introduced by means of the amending Directive 2006/68/EC and how these have been implemented into Maltese law. These amendments mainly provide for the simplification of financial assistance rules to a certain extent, the exemption from independent expert evaluation of financial instruments and assets in certain defined circumstances, the relaxation of rules in relation to share buy-backs as regards the minimum thresholds and authorization periods and other rules pertaining to the onus of proof being shifted onto creditors following a reduction in capital. The second part also provides a comparative review in relation to the implementation of these amendments into various EU Member States namely the United Kingdom, Luxembourg, Italy and Cyprus. Finally, the author goes on to discuss various theories which have been put forward in relation to the feasibility of retaining the capital maintenance regime or otherwise; an argument which leads conclusions to be drawn as to whether the contemplated regime, by means of the tools provided to it, manages to bridge the gap between the protection of creditors and the maintenance of an efficient and competitive solution for European companies.