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REFUNDS FROM CAPITAL RE-DUCTION MUST BE IN CASH
Article 156 Paragraph 5 of the Company Law provides that shareholders other than promoters may contribute capital to a company only in the form of cash, except in cases where the Law provides otherwise. Article 272 (first part) of the Company Law further provides that when a company publicly issues new shares, payment for such shares shall in principle be made in cash. In view of these provisions, in a legal interpreta-tion dated 13 January 1995 the Ministry of Jus-tice (MOJ) stated that a company's capital com-prises the total capital contributed by sharehold-ers, and that accordingly when a company makes a reduction in its capital, the amount of the re-duction to be refunded to each shareholder pro rata to their shareholdings, should be paid out only in cash. If assets other than cash were to be substituted, it is highly likely that because of the difficulty in correctly estimating such assets' value, the interests of the company and of its obligees would be harmed. This would go against the principle, embodied in the Company Law, of maintaining a company's capital.
Based on the above opinion of the MOJ, the MOEA stated in an interpretation dated 20 Au-gust 2001 that when a company reduces its capital, the amount of a capital reduction re-funded pro rata to shareholders may not be paid out as shares or other non-cash assets.