Abstract:
The Companies (Amendment) Act 2005 has reformed the law on capital maintenance substantially. It has, inter alia, enabled a company that satisfies the requisite solvency tests to reduce capital, engage in financial assistance and share buyback. This article analyses the salient features of these reforms and their doctrinal implications, in particular the doctrine of capital maintenance and solvency tests. It argues that whilst the reforms have reduced compliance costs, the failure to bring the solvency-based reforms to their logical conclusion has made Singapore law’s on capital maintenance incoherent. It recommends that Singapore should follow New Zealand and abolish the capital maintenance doctrine.