This document provides an overview of shares and capital structure from a historical perspective. It discusses how the modern corporate culture began in England and spread worldwide, requiring large amounts of capital raised through the public issuance of shares. A company's authorized capital forms the base of its strength and viability, while issued capital indicates its range of activity. Shares reflect shareholder ownership and rights regarding representation, profits, losses and winding up. Overall the document examines the role of shares and capital structure in corporate law and how they facilitate business formation and governance.

1. SHARES & CAPITAL STRUCTURE
OF A COMPANY
IN HISTORICAL PERSPECTIVE
BY
HAFIZ MUHAMMAD TALHA
(Advocate High Court)
January 2017
Proud to be an student of
SINDH MUSLIM GOVERNMENT LAW COLLEGE
UNIVERSITY OF KARACHI

2. ACKNOWLEDGEMENTS
I am gratefully acknowledged the best efforts of my great teacher Professor
Abrar Hasan, who given me inspiration for taking the Company Law as a
main subject of my law practice. My research work is dedicated to my
parents & my great teachers, the prayers of my parents and knowledge
given by my teachers made me able to reach this stage of education. I will
always be thankful and pray for all of them and will always try my best to
obtain highest level of Professionalism which reflect the kind efforts of my
seniors.
The copyright in this thesis is owned by Hafiz Muhammad Talha (Advocate
High Court). Any quotation from the thesis or use of any of the information
contained in it must acknowledge this thesis as the source of the quotation
or information.

3. ABSTRACT
“Shares and Capital Structure of A Company in Historical Perspective” is
very interesting topic; I have enjoyed studying it from various angles.
Basically Formation of a Corporate Entity is based on capital structure
while historical information about the concerned area of research is always
useful to ascertain the in depth potential of any topic as well as helpful to
determine the best future directions. No business or economic activity can
run without capital, so, the formation of a Company needs to build its
Capital Structure and that shall be attributed in the shape of shares of
whatsoever nature but reflects the entitlement of “Person’s Rights” in the
Company. The Rights given to such shareholders shall be depending upon
his / her shareholding and investment in the company.
Historically, the Modern Corporate Culture started from England and with
the passage of time extended to all over the world. The main feature in this
culture is to obtain large amounts of money to establish huge size of
businesses by administering bulk of production with transportation via fleet
of ships to far flung areas of the globe. Resultantly, determination of huge
losses or distribution of large amount of profits also proved as prime
responsibility of Company’s management which had been also governed
under that Corporation Law.
For fulfilling the need of huge amount of money, the corporate law also
allows to call money from general public, investors, business concerns and
financial institutions etc. In this regard, the law gives step by step
comprehensive procedure, ignorance of which results in heavy penalties.
Any misdeclaration or fraudulent demonstration in advertising document
(Prospectus or Statement in lieu of Prospectus) may result in forfeiture of
the whole money acquired from the public under the newly enacted
Securities Law, issued in mid of 2015. The authorised capital of a company
being the base of its strength and viability of its working always indicate
the range of its activity. While the issued capital or paid up capital shall be
the off shot of the Authorised Capital.

4. The just & crystal clear determination of Rights & Liabilities among
members & company’s management of such corporation is also a
cumbersome job. For the implementation of that principle of justice &
equity, the issuance of Shares is necessary with detailed narrations. It
requires the Certificate of Share(s) which not only reflects the ownership of
the shareholders but including their Rights of Representation or Rights in
Profits & Losses or even in case of winding up. That title of shareholding
may sellable or transferable and the value will be based on free markets.
To smoothly drive a Company, detailed and thorough study of
contemporary Principles of Corporate Laws are required from Historical
Facts to Legislations & Precedents. Whereas, the compliance of Corporate
Laws are mandatory but with the Memorandum & Articles of a Company
that shall be prepared at the very initial stage in consonance with the
concerned rulings and shall be registered before commencement of
business with the Government Authorized Companies Registration Office.
All the business of the company shall also accordingly be managed.
In general, a corporation and a shareholder are separate and distinct, and
the debts of the corporation are not the debts of the shareholders. However,
when on the happening of certain events, the corporate veil may also pierce
and then the corporation and the individual become one and the same. As
they are identical, the liabilities of the corporation may become the
liabilities of the people who behind the beneficial cover of the corporate
veil.

5. INTRODUCTION
VALUES OF SHARES AND CAPITAL STRUCTURE
Corporate Law is mandatory to be followed by every company
incorporated as a corporation. Establishment of Capital Structure of a
Company and issuance of shares is also required to be in consonance with
the Corporate Law. This research work has been made to explore the
historical values of corporation and corporate laws in relation to the
Rights of Shareholders under the Shares and Capital Structure of A
Company. Basically, the word ‘company’ may be used by any business,
but as far as company limited by shares is concerned, which mostly based
on limited liability, it is required to be incorporated with the concerned
Authority under the ‘Corporate Law’. In other words, the incorporation is
just like an enrolment and this enrolment or registration is required, for the
establishment of relationship or acceptance of supervision of the
Competent Statutory Regulatory Authority which is normally called the
Securities & Exchange Commission in most Countries of the Globe.
Basically, only an incorporated company is qualified for the issuance of
legal shares with limited liability and creation of capital structure for the
establishment of a business whether for profitable or non profitable purpose
in the name of a registered company limited by shares.

6. One of the main characteristic of Corporate Law is to endeavor the capacity
of a Legal Person to any business, whether formed by either an Individual
as a Single Member Company or by 2 or more persons. That Legal Person
is admitted by the Courts of Law as distinguished legal entity out of its
promoters or beneficiaries whether in the form of a person, group of
persons or several persons or large number of individuals. Whether any
individual, company, or any other entity which has legal rights and is
subject to obligations may call as Legal Person but as far as financial
credibility is concerned before the Financial Institutions, a Corporation has
maximum goodwill to obtain loan as compare to other business entities.
The reason of that celebrated goodwill in favor of Corporations is due to
huge capital structure and perpetuity, while the fair business structure
which is mandatory to be maintained by incorporated companies under the
Companies Law administered by Statutory Regulatory Body, like
mandatory Record Retention and keeping of proper accounts under
applicable reporting requirements as per the Globally Accepted Accounting
Principles (GAAP) and International Accounting Standards (IAS) including
International Financial Reporting Standards (IFRS).
The rules for Corporate Governance are also applicable on a corporation
which reflects the sound and prudent management undertaken by Board of
Directors of a company under the Regulatory framework issued the
Government. Other values of business incorporation under the corporate
law are Plenty of Rights available to shareholders like, attendance in
Meetings, important decisions making by voting among shareholders,
election of Directors by shareholders, Right to call Meetings by
shareholders and including Right to call for Investigation into the affairs of
the Company or in other words Right to lodge complaint against the
management of the company or certain Directors.

7. In circumstances of winding up of the company, the creditors including
Financial Institutions by whom loans had been taken as well as pending the
staff or employees of the company and shareholders, all are guaranteed to
be compensated to the extent of Company’s Assets and other holdings etc.
as valuated by Liquidator. Governments of mostly under developed
countries are also allowed by legislation or policy guidelines to Written off
the debts while Corporate Rehabilitation Laws are also practical in most of
the countries. Banks have certain provisions to write off the debts of large
businesses including companies, for the sake of their large number of
employees and penetration of funds in various segments of the entire
economical system.
So, in order to save the economical cycle of major areas of business and
public employment, it is legally allowed to write off certain parts of debt,
rescheduling or conversion of loans into ordinary shares of the company.
These benefits are mostly allowed to incorporated companies as convenient
to compare with other forms of businesses. Corporate Rehabilitation Laws
for revival of sick industrial units are also part of corporate laws in various
countries, the remedial measures adopted under that law is also mostly
convenient with incorporated companies due to their shares based capital
structure. Sale of certain part of share capital to another business concern,
reduction of share capital, issuance of further shares to raise more money
from public or to paying off the debts of the company. While acquisition by
the parent company or by the other company dealing in the same business,
or merger with the other institution in order to save the large losses are also
part of the Principles of Corporate Rehabilitation.

8. Every transaction based on capital structure of a company, based on the
exact valuation that shall be determined to clarify the factual position of the
company. The acquirer or Merging Company shall also be dealt under the
capital structure, the shares of the company shall be converted into the
name of the acquiring company, and the new share may be more valuable
or less valuable than the value of the outgoing concern. Hence, the shares
are starting or opening parameter of every company incorporated under the
corporate law, as well as the last or ending point of the company till the
liquidation. While without shares there is no existence of a company and
without capital structure, nothing can be ascertained as transferable or
sellable to any extent.
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