Paid-up capital refers to the amount paid on shares issued by a company. These may be ordinary, preference shares or shares of some other class.
Issued share capital is the total amount of consideration (i.e. money and other assets) that shareholders have contributed to the company in exchange for their shares.
Different from paid-up capital, these shares may or may not be fully paid up, although issuing shares without full payment is currently uncommon.
Neither paid-up capital nor issued share capital is a measure of a company's financial condition or value.
"Authorised capital" - a concept that existed earlier but was abolished on January 30, 2006.
This refers to the maximum amount of share capital (including paid-up capital) that a company can commit. This amount was fixed during the company's registration and specified in the company's constitution.
At that time, the share capital size could only be changed in accordance with the procedures set out in the Companies Act (which have since been abolished).
Yes. The paid-up capital must be deposited in the company's corporate bank account and, therefore, made in cash.
If the shares are issued for non-cash consideration (for example, in exchange for experience and services), the equivalent dollar value must be transferred to the company's bank account.
Capital not fully paid up will remain in the form of amounts due to the company's shareholders. The company's constitution may prohibit a shareholder from voting until the shareholder has paid in full.
The company may also, per its constitution, provide for the amount, manner and time by which the unpaid portion must be repaid.
The paid-up capital may be used for the company's business purposes, subject to any restrictions provided by the company's constitution. This is because the money invested in the company can be used immediately, and there is no need to keep the funds in the corporate account for any specific period.
If the company becomes insolvent, the company's paid-up capital (together with all of the company's remaining assets) will be used to repay debts owed to creditors.
If the paid-up capital is not used in accordance with the company's constitution or is otherwise misused, the company may sue the wrongdoer.
The company's business profile will show the amount of paid-up capital. In addition, you can obtain a business profile from the Accounting and Corporate Regulatory Authority (ACRA) through the BizFile+ portal.
Generally, the minimum paid-up capital to register a company is SGD 1.00. This requirement also applies to foreign nationals who register a company in Singapore.
Higher minimum paid-up capital requirements for certain types of companies
Certain types of companies that are in regulated industries may be subject to higher minimum paid-up capital requirements. Here are some examples:
• Travel Agencies - SGD 100,000 or SGD 50,000 if the agency operates tours within Singapore only and does not arrange accommodation.
• Government Accounting Firm - SGD 50,000.
• Insurance Intermediary Firms - SGD 300,000.
Even though the total minimum amount of paid-up capital is only SGD 1, having a higher paid-up capital can have practical benefits.
Ensures that sufficient funds are available to participate in the ordinary activities of the company
Since funds are typically required for the ordinary activities of a company, it is recommended that the amount of paid-up capital be sufficient to enable the company to carry on its normal activities with adequate cash flow.
Standard business functions may include payments to vendors, employees, and service providers.
The supplier may require payment upfront, but if the new business has not yet recorded any revenue, it will need buffer funds to pay that supplier. For this purpose, payment may be made from paid-up capital.
An alternative to financing a business with equity (i.e., raising money by selling shares) is raising funds through debt (loans or issuing debt instruments such as bonds).
A company with a higher amount of paid-up capital can get better leverage terms, such as lower interest rates, and avoid being charged on its assets.
This is because lenders can be more confident in recovering their investment from a company's paid-up capital in the event of its insolvency compared to a company with only SGD 1 paid-up capital.
All companies registered in Singapore with a paid-up capital of SGD 500,000 or more automatically became members of the Singapore Business Federation (SBF). SBF members can network with the business community and participate in events such as policy briefings and workshops.
As mentioned above, paid-up capital is not an indicator of a company's net worth.
As the company continues in business over time, any net income (above capital paid up initially) is recorded in the company's books as retained earnings. It can also be used to cover ongoing business expenses and liabilities.
However, if there is not enough money overall to meet obligations (for example, if things are going poorly or the company wants to expand more aggressively), the company may need to raise money by issuing new shares, obtaining bank loans, or issuing debt instruments.
It will first need to issue new shares to increase the company's paid-up capital.
There are many legal requirements to keep in mind when issuing shares. These include requirements regarding notice, shareholder approval, and directors' responsibilities. Violating some of these rules may result in civil and criminal liability.
Decreasing a company's paid-up capital (and returning it to shareholders) is more complex than increasing its paid-up capital. This is due to concerns that lenders could be disadvantaged if shareholders are free to return their investments.
Among other risks, lenders risk that their loans will be misused.
For example, if the loan amount is used to pay dividends to shareholders and not for an agreed purpose such as business development. This, in turn, creates the risk that the company may need more cash to pay off its debts as they fall due.
Some of the rules regarding capital reduction are also highly technical and may sometimes require court approval.
For example, share buybacks (when a company buys back its shares from existing shareholders and pays with its capital, thereby reducing its capital) are generally prohibited unless it falls under a few narrowly defined exceptions in the Company Law.
If the company closes, a liquidator will be appointed to complete the affairs of the company. In the process, the liquidator sells all of the company's assets (including paid-up capital) for distribution to creditors and, if funds remain, to shareholders, as mentioned above.
The initial amount of the company's paid-up capital is determined at its incorporation.
If you need help setting up a company with the desired amount of paid-up capital, you can use the services of Eltoma specialists.
As mentioned above, the process of increasing or decreasing share capital is also subject to various legal requirements, and some processes may be technical.
We will also be able to assist you with these administrative procedures while ensuring compliance with Singapore law. You can contact us through any communication channels indicated on the website. We are waiting for your requests!
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