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Evolution of the share capital function, as a tool for overcoming economic turmoil

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Lai L.

Central European Review of Economics & Finance

2017

issue Vol. 18, No 2

19-29

The paper aims at showing that a lower share capital in limited liability companies can be a successful tool for overcoming the consequences of an economic crisis. In a period of economic turmoil insolvency is more than a simple risk. For such a reason the limited liability company shareholders, thanks to the complete financial autonomy given by the share capital, have a shield from the legitimate expectations of the creditors. The share capital protects the entrepreneur and at the same time allows faster fresh starts; nevertheless, in order for that to happen, the share capital cannot be an additional burden, instead has to be a simple formal element. The article demonstrates that in the last 50 years is visible a shift in the concept and function of the share capital. During the 50's of the past century, the share capital was considered as a guarantee for the company's creditors. Nowadays the European legislators across Europe are heading to consider the share capital as a mere formal element disconnected by any due quantity. (original abstract)

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1 Central European Review of Economics & Finance

1 Lai L.

1 2017

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Evolution of the share capital function, as a tool for overcoming economic turmoil