Capital Maintenance
/ˈkæpɪtl meɪnˈteɪnəns/
Definitions
- (n.) Legal principle requiring a company to preserve its capital to protect creditors, restricting distributions to shareholders.
The company must comply with capital maintenance rules before declaring dividends.
- (n.) Accounting rule mandating the retention of certain reserve funds to safeguard the financial stability of a corporation.
Capital maintenance ensures the company’s equity is not eroded through profits distribution.
Forms
- capital maintenance
Related terms
See also
Commentary
Capital maintenance rules balance shareholder returns with creditor protection; precise drafting is essential to clarify permitted distributions and reserve requirements.
This glossary is for general informational and educational purposes only. Definitions are jurisdiction-agnostic but reflect terminology and concepts primarily drawn from English and American legal traditions. Nothing herein constitutes legal advice or creates a lawyer-client relationship. Users should consult qualified counsel for advice on specific matters or jurisdictions.