Statutory Protection of Creditors in Reduction of Capital Stock

The sharp process of deflation which business has undergoneduring recent years has vested statutes relating to the reductionof corporate capital with an importance little appreciated whenmost of such statutes were enacted. Since 1929 an abrupt reversalof the previous tendency to increase corporate capitalizationshas taken place. Enormous sums of money and the interestsof many people have been subjected to the procedures forreduction of capital prescribed by the various corporation acts.With a few exceptions the protection which these acts afford tothe creditors of the corporation involved is entirely inadequate,a situation which may be ascribed largely to a failure to comprehendthe position of the creditor and the accounting problemsinvolved in the reduction situation