Charter capital

Charter capital
See also

Charter capital is the nominal capital, which is the company's capital base. In addition, it sets limits of liability and determines the participation of its participants in relation to creditors or their participation in the company. As mentioned above[1]:

  • the company's share capital determines the minimum amount of the company's real estate, which is the nominal value of the company's shares.
  • The share capital cannot exceed the actual value of the company's assets.

In this case, art. 99 clause 4 kc obliges the company to reduce the share capital or increase its actual value. If a company cannot increase its actual value or reduce its nominal capital due to minimum capital requirements, it is liquidated. This is monitored through the company's annual reports to the tax authorities when the value of the company's assets and share capital is compared. The amount of share capital is determined by the company's founders and is divided into equal nominal shares.

The minimum capital requirements for charter

The federal law on joint-stock companies specifies the minimum amount of share capital. The minimum capital requirements for charter are different for public and non-public limited companies. The initial capital is created from the contributions of the company's founders, which can be transferred in the form of cash or type contributions. All proposed changes in the amount of share capital are subject to the decision of the general meeting. The amount of share capital should also serve as a minimum guarantee for creditors. However, due to the relatively low minimum requirements for charter capital, a situation arises in which the claims of creditors cannot be sufficiently satisfied using charter capital. Thus, as a rule, the minimum charter capital requirements only serve as a barrier to unnecessary company setting ambitions, while this sum is not a basis for satisfying creditors' claims[2].

Reduction of the company's share capital is allowed after notifying all creditors in accordance with the procedure specified in the statute of joint-stock companies. In this case, the company's creditors have the right to demand early termination or fulfillment of appropriate obligations and compensation for damages. The reduction of the share capital of a joint-stock company through the purchase and redemption of part of the shares is permissible if such a possibility is provided for in the company's statute[3]. Charter capital may be expressed as an equivalent in any currency that is lawful at the time shareholders make initial contributions[4].

References

Footnotes

  1. Heindler F., 2018
  2. Heindler F., 2018
  3. Maggs P. B.
  4. Kosovo Business Law Handbook: Strategic Information and Laws, 2013

Author: Weronika Nowak