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8 Macquarie J. Bus. L. 1 (2011)

handle is hein.journals/macqjbul8 and id is 1 raw text is: MqJBL (2011) Vol8 FINANCIAL ASSISTANCE FOR THE PURCHASE OF COMPANY SHARES- THE SEARCH CONTINUES FOR AN IDEAL STATUTORY SOLUTION ANTHONY 0 NWAFOR Capital is an invaluable asset of the company. It is the capital that guarantees the company's commercial security. Creditors look up to the capital as security for advances made by them to the company. Shareholders see the capital as the only distributable fund available to them in the event of the winding up of the company. Capital also ensures that returns in form of dividends are provided to the shareholders while the company is a going concern. This importance of capital engendered the evolution by the courts in the second half of the nineteenth century of the concept of maintenance of company's capital. Since the evolution of this concept, the Parliament in various jurisdictions have embarked on a voyage in search of ideal statutory provisions that would protect the company's capital by ensuring that those in control of the affairs of the company do not, among others, wantonly dissipate the company's capital by giving financial assistance to themselves and others for the purchase of company 's shares. The paper examines the statutory provisions in three jurisdictions; the United Kingdom, South Africa and Lesotho, with the aim of discovering the extent to which those ideal provisions have been discovered. I INTRODUCTION The company as a creation of law has by law its capital as security for its creditors. Members of the company also look up to the capital as the only distributable asset in the event of the winding up of the company. Every member contributes to the company's capital to a limited extent as defined by his shareholding. This could be done in the course of the company's business or in the process of winding up of the company. The law requires that the capital so contributed by members must not be returned and no relief shall be granted to a member by the company for any liability arising from the purchase of the company's shares. The only distribution of fund authorised by law is the payment of dividend when duly declared. Lord Russell of LLB Hons (Unijos), LLM(UNN), PhD(Unjos), BL, Senior Lecturer, National University of Lesotho. Email: aonwafor@nul.1s. 1

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