Provisions Which Prevent Capital Going Out Of The Company:

In Trevor v Whitworth (1887) Lord Watson stated:

"Paid-up capital may be diminished or lost in the course of the company's trading; that is a result which no legislation can prevent, but persons that who deal through and give credit to a limited company, obviously rely upon the fact which the company is trading with a certain amount of capital before now paid, with upon the responsibility of its members for the capital remaining at a call; and they are entitled to assume that no part of the capital which has been paid into the coffers of the company has been next paid out, and except in the legitimate course of its business".

As Lord Watson acknowledged, no legislation can prevent a company's capital from being lost or diminished in the course of the company's business. However, various provisions of the Companies Act, and case law, are intended to ensure that no part of the company's paid-up capital is paid out by the company except in the legitimate course of its business.