Constitution of capital and prohibition of repayment to shareholders thereof in joint stock companies

The vital role which is undertaken by joint stock companies within the economic system is mainly based on their legal characteristics which are granted them by the Law. The most determining one among those characteristics is that joint stock companies are liable for their debts limited to their total assets. Thanks to the limited liability principle, being a shareholder to joint stock companies as opposite to personal partnerships, has the nature of an investment and the investors are solely undertaking a risk limited to the amount of the investment that they have made. By increasing the interest of the investors to joint stock companies, this fact enables the collection of capital in huge amounts.However, the principle of limited liability which has such a defining and distinguishing nature over the joint stock companies and in a wider scope, over all capital stock companies, causes some risks for stakeholders outside of the company. The mentioned risks arise from the fact that the creditors of the company shall have no source other than the assets of the company in the event that their claims are remained unpaid. Hence the law maker brought some measures in order to maintain the balance of interest between the shareholders and the creditors of the company. The most important of those measures is the legal requirement that orders the company to posses assets (capital) at an amount equal to the legal capital determined in its articles of association in accordance with the minimum legal capital amount as stated by the Law, at the moment of constitution and to maintain the mentioned amount of assets against any distribution to the shareholders in the course of its activities. The mentioned requirement which may be stated as constitution of capital and prohibition of repayment to shareholders thereof, under the framework of capital maintenance, fundamentally aims to provide the company a solid financial structure that guarantees its solvency.Realization of the said aim primarily requires the inclusion of the capital which was undertaken by shareholders both in cash and in kind to the property of the joint stock company as required by the Law, secondarily the prevention of the repayment of such capital openly or implicitly to the shareholders. The analyze of legal provisions under the mentioned system constitutes the main subject of our study.