What principle must be applied to public company capital reduction?

The principle that must be applied to public company capital reduction is that the company must be solvent. This means that after the reduction of capital, the company must still be able to meet its debts as they fall due and have assets that exceed its liabilities. Ensuring solvency is crucial to protect creditors and maintain the company's financial integrity, as capital reductions can affect the resources available to satisfy outstanding obligations.

Maintaining solvency safeguards against scenarios where reducing capital could leave the company vulnerable to insolvency, which could lead to legal challenges and undermine stakeholder confidence. If a company were to undergo a capital reduction while not solvent, it would risk failing to satisfy its creditors, leading to potential legal disputes or financial instability.

The other options relate to various financial principles but do not directly address the foundational requirement tied to capital reductions in public companies. Ensuring that the shareholders are present or that assets remain unencumbered are not definitive conditions of a successful capital reduction process. Additionally, while raising capital through equity is a common practice, it does not specifically pertain to the conditions necessary for reducing existing capital. Therefore, the requirement for the company to be solvent is fundamental in this context.