Practice question · Multiple choice
An S.A.'s minimum capital of 60,000€ is often described as protecting creditors. Why is that protection weaker than it sounds?
Hints
- Ask where the 60,000€ actually is, six months after incorporation.
- Is capital an asset or an entry on the other side of the balance sheet?
Show the answer
C. Capital is a figure in the accounts, not a reserved fund
Why
Capital sits on the liabilities side as a claim figure while the money itself becomes machines and salaries, it is a barrier to entry rather than a guarantee fund. The real creditor protections are the rules on distributions and the duty to act on losses, not the number itself.
Practise Joint-Stock Companies (S.A.)
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More questions on Joint-Stock Companies (S.A.)
- An S.A. issues 10,000 shares of 10€ nominal value at a price of 14€ each. Set the slider to the total share…
- A venture must choose its legal form. Sort each situation by the better fit.
- Match each S.A. term to its meaning.
- Why does the law demand 60,000€ minimum capital for an S.A. but only 3,000€ for an S.L.?
- Which rights does an ordinary S.A. share confer on its holder?
- The law lets an S.A. be founded with capital subscribed but only partly paid up. What is that distinction…