Capital Maintenance Concepts

Summary

Capital maintenance in corporate law ensures that companies do not reduce funds available to creditors. Disguised gifts out of capital are prohibited to protect creditors, as seen in Re Halt Garage (1964) Ltd [1982] and Aveling Barford Ltd v Perion Ltd [1989]. Companies should not reduce share capital or redeem their own shares, as highlighted in Trevor v Whitworth (1887). However, purchasing another company with significant shareholding is an exception, as per Acatos and Hutcheson plc v Watson [1994].

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Acatos and Hutcheson plc v Watson [*]
Acatos and Hutcheson plc v Watson [*] addresses the exception to the rule against a company purchasing its own shares. Specifically, it states that while companies generally cannot reduce their funds to pay creditors by buying their own shares, they can purchase another company whose primary asset is significant shareholding.
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A company must not make disguised gifts out of capital
Sure, let's break down the concept of "disguised gifts out of capital":
- Disguised Gifts Out of Capital:
- Companies must not make gifts from their capital, as this reduces the funds available to pay creditors.
- Case References:
- *Re Halt Garage (*) Ltd [*]*
- *Aveling Barford Ltd v Perion Ltd [*]*
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