All You Need to Know about Paid-up Capital in Singapore
All You Need to Know about Paid-up Capital in Singapore
A Singapore company registration can be done with a minimum paid-up capital of SGD 1 or its equivalent in any internationally acceptable legal currency. The classes of shares can be in the form of ordinary shares, preference shares, redeemable preference shares or other classes of shares.
To an entrepreneur looking for company formation in Singapore, the paid-up capital is important as it can be utilized towards the company’s business expenses without reserve and borrowing. A higher paid-up capital adds credibility to the business.
Additional Paid-Up Capital
Share capital consists of all funds raised by a company in exchange for either common or preferential shares and may remain unpaid. Therefore the share capital of a company can be divided into paid-up capital and unpaid share capital.
In some cases, the share capital of small businesses remains unpaid. As per company law in Singapore, all companies need to maintain registered capital throughout the life of the company. Investors looking for a business set up in Singapore must be aware that most of the companies in Singapore are incorporated with a paid-up capital.
Use of Paid-Up Capital
The fund raised as paid-up capital can be utilized for running the company’s business subject to any restrictions imposed by the company’s constitution. There may not be any need for corporate reserve and paid-up capital can be used as an alternate monetary source.
However, as the money injected through paid-up capital belongs to the company and not the owner, it can only be used for valid business purposes and not for personal use. Lawsuits can be filed if paid-up capital is misused for personal benefits.
In case of insolvency, the company’s unused paid-up capital along with other company assets will be used for repaying the existing creditors.
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Benefits of Higher Paid-Up Capital
- As higher paid-up capital means increased liquidity and cash flows, it directly benefits the newly incorporated companies which haven’t generated considerable revenues during the early days of business operations, in paying the suppliers, employees and service providers
- Companies with higher paid-up capital are more financially sound and can negotiate better with financial institutions for lower interest rates should they opt for debt financing. These companies can even get loans without much collateral
- All Singapore companies with paid-up capital exceeding SGD 500,000 are automatically awarded membership of the Singapore Business Federation (SBF) gaining greater access to networking opportunities, business workshops and wide-ranging events on business topics. The SBF membership can provide competitive advantages to such companies and help enhance products and service branding
Procedure for Changing Paid-Up Capital in the Company Profile
- Hold a board meeting and pass a board resolution
- Determine ways to raise the paid-up share capital in a board meeting
- Send a letter to the company secretary
- Send notices for a general meeting
- File documents with ACRA
- Logging on to www.bizfile.gov.sg. Under “File eServices”, click on Local Company > Update Share Information> Notice to Update EROM and Paid Up Share Capital
No, the authorized capital requirement has long been abolished for Singapore companies in January 2006 and used to be referred to as the maximum amount of share capital including paid-up capital that a company was authorised to allot to the shareholders.
Yes, paid-up capital must always be in cash as it needs to be deposited in the corporate bank account of the company.
Yes, Companies can issue shares for non-cash purposes too. When an asset is taken over by a company, the price of the asset can be paid by issuing company shares to the owner of the asset.
In Singapore, a company can be registered with a minimum of SGD 1 paid-up capital and it is applicable for foreigners too. (Note :- Removal of the paid-up capital requirement: New EntrePass applicants will no longer be required to have a paid-up capital of at least S$50,000 in their startup businesses here. With evolving economic trends, contributions by global startup talent will not be limited to only monetary contributions) For Employment Pass holders, there is no official minimum paid-up capital requirement.
Companies in regulated industries need higher minimum paid-up capital. While Insurance companies need SGD 300,000 paid-up capital, some service-based industries including Telecom and Travel agencies need SGD 100,000. Public accounting firms need SGD 50,000.
Singapore companies can increase their paid-up capital after registration. Additional new shares can be floated for new shareholders and/or existing shareholders can be offered more shares.
The procedure for issuance of new shares varies from company to company and depends on the respective company constitution.
For startups, share capital, especially the paid-up amount, holds huge importance as it helps the business entity survive for the initial days of operation. It adds financial strength and easy liquidity with money not borrowed on interest.
Share capital that is not paid up in full will be owed by the shareholder to the company. The company as per its constitution can deprive such shareholders of their voting rights until the money for the shares is paid in full. Usually, in such cases, the company through its constitution stipulates rules for the method and time of payment of such unpaid amount.
If a share is not fully paid up and the shareholder subsequently pays up the full amount, the company needs to notify ACRA by filing the “Notice to Update EROM and Paid Up Share Capital” transaction via BizFile+.
Yes, a company’s paid-up capital can be checked through the company’s business profile. You may get the business profile from ACRA by logging onto the online BizFile+ portal. The paid-up capital will be shown in the equity balance sheet along with the additional paid-up capital, if any.
No, shareholders are not allowed to withdraw their shares or any money from the paid-up capital. The paid-up capital belongs to the business and must be used for business purposes.
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