Slitherine

I know that you can't be flanked when you are in square formation but I thought there was a decrease in your defensive capability. I couldn't find anything in the manual about the impact on melee. Thanks.

The unit can't be flanked but it loses its movement, attack and zone of control but I don't think the melee and impact capabilities are affected.

That is correct.

The design reason for this is that otherwise troops in square would be too easy to beat, which historically they weren't. (e.g. The Seleucid pikes at Magnesia which the Romans were not willing to engage until they broke up after the elephants panicked.)