A high gearing ratio can create problems for: If the shareholders have introduced only a nominal amount of paid-up share capital, then the company has lower financial reserves with which to meet its obligations.
In general, most common law countries tend not to employ thin capitalisation rules in relation to raising and maintenance of capital.
However, in almost all jurisdictions there are certain types of regulated entity which require a certain amount, or a certain proportion, of paid-up share capital to be licensed to trade.
However, some countries simply disallow interest deductions above a certain level from all sources when the company is considered to be too highly geared under applicable tax regulations.
Some tax authorities limit the applicability of thin capitalisation rules to corporate groups with foreign entities to avoid “base erosion and profit shifting" to other jurisdictions.