Written by attorneys · grounded in primary & secondary sources — see below
2 senses
The total amount of long-term financing used by a business, including stocks, bonds, retained earnings, and other funds.
The total par value of the authorized or outstanding stock of a corporation.
Each sense below has its own examples, sources, and questions.
The total amount of long-term financing used by a business, including stocks, bonds, retained earnings, and other funds.
Caleb Chang formed Continental Bank with only one thousand dollars in initial capital. He commingled client deposits with personal funds and used the entity to shield assets from personal trading guarantees. When the bank collapsed leaving creditors unpaid, a court weighed the inadequate capitalization along with other factors under the totality test and disregarded the corporate form to impose personal liability on Chang.
The total par value of the authorized or outstanding stock of a corporation.
Cobalt Energy transferred land to the city for redevelopment promising new jobs and tax revenue. The project benefited a private pharmaceutical firm through increased economic activity. In assessing whether the taking satisfied the public use requirement, the court considered the total long-term financing committed by the developer as part of the overall purpose evaluation.
Christine Castro and her partner formed a joint business venture whose capitalization reflected equal ownership interests through stock and retained earnings. State law previously limited recognition of their marriage. The ruling extending marriage rights clarified that the couple's equity financing in the venture would receive full legal protection equivalent to other married couples.
Connor Clark, a minority shareholder in Cardinal Insurance, challenged the board's decision to retain earnings rather than declare additional dividends. The company had already paid sixty percent on its two-million-dollar capitalization. The court examined whether the reinvestment policy improperly limited distributions from the total long-term financing at the expense of shareholder returns.
Chloe Chen's blood sample was analyzed and the report listed the testing laboratory's total long-term financing in the header. The report was offered to prove her blood alcohol level. The court evaluated whether the financing information in the document satisfied confrontation requirements for forensic evidence.
Christian Coleman sought to raise long-term financing for a firearms training business but faced a district handgun ban. He argued the restriction prevented effective use of his equity financing in training facilities. The court assessed whether the ban infringed the right to keep and bear arms in the context of commercial financing of related services.
Courts apply a totality of the circumstances test. Relevant factors include inadequate capitalization, failure to observe corporate formalities, insolvency, siphoning of funds by the dominant shareholder, and whether the entity was a mere facade.
The number of authorized shares is a mandatory provision that establishes the corporation's equity capitalization on the public record. Without it the articles are incomplete and any purported issuances rest on a defective authorization.
No. Undercapitalization by itself is insufficient absent evidence that the entity was used to defraud creditors or functioned as an alter ego. A plaintiff must satisfy both prongs of the two-part test showing unity of interest and injustice.
Capitalization of interest computes interest on interest and is increasingly used to ease payment burdens. No case law supports the claim that it violates the clogging doctrine, and such provisions are viewed as socially useful rather than penalizing redemption.
…to exercise “neither force nor will but merely judgment.” The Federalist No. 78, p. 465 (C. Rossiter ed. 1961) (A. Hamilton) (capitalization altered). Although the policy arguments for extending marriage to same-sex couples may be compelling, the legal arguments for requiring such an extension are not. The fundamental right to…