Legal Definitions - impaired capital

Impaired capital refers to corporate funds that are less than the sum of a corporation's legal capital and its liabilities. Legal capital is an amount equal to the aggregate "par" or stated value of all outstanding shares of a corporation. In other words, impaired capital means that a company's assets are not enough to cover its debts and obligations.

For example, if a company has $100,000 in legal capital and $150,000 in liabilities, but only $120,000 in assets, then it has $30,000 in impaired capital. This means that the company is in a financially unstable position and may have difficulty meeting its financial obligations.

Impaired capital can be a warning sign for investors and creditors, as it indicates that a company may be at risk of bankruptcy or insolvency. It is important for companies to maintain a healthy balance sheet and ensure that their assets are sufficient to cover their liabilities.