It is a fundamental principle of company law that the share capital of a company must be maintained. Discuss the legal consequences of this principle.

 The principle has the following consequences:
• A company cannot purchase its own shares.
• A company must not give financial assistance for the purchase of its own shares.
• Dividends must not be paid except out of distributable profits.
• Where a public company suffers a serious loss of capital a meeting of the company must be called to discuss the issue.
• Shares must not be issued at a discount.
• Reduction of capital must strictly comply with the provisions of the Companies Act.

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