Principle of Capital Maintenance for Flitcrofts- MyAssignmenthelp

Question: Discuss about thePrinciple of Capital Maintenancefor Flitcrofts. Answer: Introduction: The meaning of the Maintenance Capital Doctrine is that the company should access the proper application for the shares which concerns and received such capital as it should not compensate it to the members subject to some of the circumstances. As there is limited liability of the shareholders the safeguard of the beneficiary has always been the concern (Arnold, 2016). So, to meet its end, the maintenance of the principle of the Maintenance capital is the assortment of the rules which are created to ensure that the company access the funds which it has pretended to raise and the other is that the funds are maintained except some of the contingency of the business for the protection and the benefits of the creditors of the company. History of the Doctrine: The doctrine has developed through the series of the judicial interpretation in the cases of the company law held in England. In Flitcrofts case, the two aspects of the doctrine of the capital maintenance have been described. The first is that the creditor has the right to check whether the capital is not dissipated unlawfully and the second is member should not have the capital returned to them surreptitiously (Boucekkine, Martinez and Saglam, 2010). Benefits of the Doctrine: The doctrine has many benefits as we can say that the company could not effectively with the limited capitals as the requirement of the capital from the sources is important. The creditors and the stakeholders require the assurances the investment which they made in the company is secure (Islam, 2015). The reservations of the capital and the limitations of the share holders should be addressed by the doctrine of the capital maintenance. So in simple words, we can say that the major benefit of the principle of the capital maintenance is to safeguard the rights of the creditors and the share holders. Exceptions to the Principle of the Capital Maintenance: The rule of the maintenance of the capital exists in order to safeguard the company from reducing its capital by returning it to the members of the company. But this general rule has some of the exceptions which can be discussed as the Reduction of the capital. The reduction of the capital as defined in the section 256B of the Corporations Act,2001 whereby it has mentioned that the company can reduce the capital at any time on the partly paid shares and return the capital in excess of the need of the company (skinner, 2009). References Arnold, A. (2016). Capital reduction case law decisions and the development of the capital maintenance doctrine in late-nineteenth-century England.Accounting and Business Research, 47(2), pp.172-190. Boucekkine, R., Martinez, B. And Saglam, C. (2010). Capital maintenance as a key development tool.Scottish Journal of Political Economy, 57(5), pp.547-567. Islam, M. (2015). The Doctrine of Capital Maintenance and its Statutory Developments: An Analysis.Northern University Journal of Law, 4, p.47. Skinner, r. (2009). The maintenance of rates of return on capital.Bulletin of the Oxford University Institute of Economics Statistics, 28(4), pp.231-240.