Capital maintenance principle in Joint Stock Companies Law

The principle of capital maintenance states that the company meets the minimum capital requirement for the establishment phase, to bring the share of capital promised by the shareholders at the establishment and capital increase to the company with full and fair value, distribution which can be made to the shareholders bind the rules based on the principle of keeping the sum of subscribed capital and legal reserves as equity, measures to be taken in case of partial or total loss of capital. Disguised distributions are prohibited under the principle of capital maintenance. Because, the principle mainly binds the distributions that may be made to the shareholders to the rules and disguised distributions are violation of these rules. Today, the principle of capital maintenance is considered to be under the pressure of securities markets. Because strict regulations foreseen within the scope of the principle reduce the efficiency that can be obtained from equity financing. Moreover, these regulations do not provide sufficient security to the creditors. In systems where legal capital regime is not adopted, different methods are used to protect creditors. In particular, a strong doctrine has emerged that the solvency tests applied in distributions provide more effective protection than the rules of capital maintenance. It is clear that the principle of capital maintenance is gradually losing importance. New approaches which are on the abolition of the principle will inevitably also affect to Turkey. Keywords: Capital maintenance, legal capital regime, subscribed capital, solvency test, protection of creditors