144 5 Equity and Shareholders’ Capital
If adopted, the provisions of the Uniform Fraudulent Transfer Act enable a
creditor to avoid a transfer or obligation for inadequate consideration under one of
the following conditions: (1) the debtor was left by the transfer or obligation with
unreasonably small assets for a transaction or the business in which he was en-
gaged; (2) the debtor intended to incur, or believed that he would incur, more
debts than he would be able to pay; or (3) the debtor was insolvent at the time or
as a result of the transfer or obligation.
The lack of a legal capital regime is complemented by the lack of legal rules
that vest decision-making powers in shareholders. The distribution of power be-
tween different corporate bodies is typically based on the company’s statutes. As a
rule, the board has plenty of discretion and shareholders have little formal power
to intervene in corporate decisions.^46 For example, shareholders typically do not
have any pre-emptive rights under company law rules “except to the extent articles
of incorporation so provide”,^47 and the board is free to make distributions to
shareholders “subject to restriction by the articles of incorporation and [the equity-
insolvency test]”.^48
One of the most important differences between the European legal capital re-
gime and the US equity-insolvency test regime thus relates to corporate govern-
ance. Under a legal capital regime, legal capital transactions must typically be
authorised by shareholders in general meeting ex ante. A legal capital regime is
one of the ways to separate decision management and decision control and is stag-
gered. Under an equity-insolvency test regime, transactions will typically be con-
strained by the test but not by any veto rights vested in the general meeting, unless
their consent is required on other grounds (for example, consent might be required
for large transactions such as takeovers on other grounds). An equity-insolvency
test regime is less staggered ex ante. It is typically complemented by rules on
shareholders’ and board members’ personal liability ex post.^49 Whereas the Euro-
pean capital regime leads to better monitoring of decisions under company laws ex
ante, the US equity-insolvency test means less monitoring under company laws ex
ante complemented by the threat of sanctions applied under insolvency laws ex
post.^50
A further difference is that a legal capital regime that focuses on distributions to
shareholders is less likely to restrict payments that are either not made to share-
(^46) See Bebchuk LA, The Case for Increasing Shareholder Power, Harv L R 118 (2005) pp
833–914.
(^47) MCBA § 6.30(a).
(^48) MCBA § 6.40(a).
(^49) See Lutter M, Das (feste Grund-)Kapital der Aktiengesellschaft in Europa, Zusammen-
fassung der Überlegungen des Arbeitskreises „Kapital in Europa“. In: Lutter M (ed),
Das Kapital der Aktiengesellschaft in Europa, ZGR, Sonderheft 17. De Gruyter Recht,
Berlin (2006) p 12; Veil R, Kapitalerhaltung. Das System der Kapitalrichtlinie versus
situative Ausschüttungssperren. In: Lutter M (ed), op cit, p 106; Engert A, Kapital-
gesellschaften ohne gesetzliches Kapital: Lehren aus dem US-amerikanischen Recht. In:
Lutter M (ed), op cit, pp 769–784.
(^50) Engert A, Kapitalgesellschaften ohne gesetzliches Kapital: Lehren aus dem US-
amerikanischen Recht. In: Lutter M (ed), op cit, p 746.