Paid-Up Capital in Singapore: A Complete Guide (Is $1 Enough?)
What is Paid-Up Capital
Paid-up capital refers to the amount that has been paid-up on shares that have been issued by the company. These shares may be ordinary shares, preference shares or some other class of shares.
How is paid-up capital different from share capital?
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.
Unlike paid-up capital, these shares may or may have not been fully paid-up yet, though it is nowadays uncommon for shares to be issued without being fully paid-up.
Neither paid-up capital nor issued share capital are measures of the company’s current wealth or value.
How is paid-up capital different from authorised capital?
“Authorised capital” is a concept that used to exist, but abolished on 30th January 2006.
It referred to the maximum amount of share capital (inclusive of paid-up capital) that a company was authorised to allot. This amount was fixed when the company was first incorporated, and indicated in the company’s constitution.
At that time, the amount of authorised capital could only be changed in accordance with the procedures set out in the Companies Act (CA) (which have since been removed).
Must Paid-Up Capital be Paid in Cash?
Yes. Paid-up capital has to be deposited into the company’s corporate bank account, and hence has to be in cash.
Where shares are issued for non-cash consideration (e.g. in exchange for expertise and service), an equivalent dollar-value must still be paid into the company’s bank account.
What if the capital is not fully paid-up?
Capital that is not fully paid-up will remain as sums owed by the shareholder to the company. The company’s constitution may disallow a shareholder from voting until he fully pays for the shares.
The company may also, subject to its constitution, make provisions for the amount, manner and time by when the unpaid portion must be repaid.
What is Paid-Up Capital Used For?
Paid-up capital can be freely utilised for the company’s business purposes, subject to any restrictions in the company’s constitution. This is because money injected into the company can be utilised immediately, and there is no requirement for the funds to be kept in the corporate account for any specific period of time.
If the company becomes insolvent, the company’s paid-up capital (along with all the remaining assets of the company) will be used to repay creditors.
What happens if paid-up capital is used for non-business purposes?
Where paid-up capital is not used in accordance with the company’s constitution, or otherwise improperly used, the company may sue the wrongdoer.
How Can I Check How Much Paid-Up Capital a Company has?
The company’s business profile will state the amount of paid-up capital the company has. You can acquire the business profile from the Accounting and Corporate Regulatory Authority (ACRA) through the BizFile+ portal.
Minimum Paid-Up Capital Requirements
Generally, the minimum paid-up capital to incorporate a company is S$1.00. This applies to foreigners wishing to register a company in Singapore as well.
Higher minimum paid-up capital requirements for certain types of companies
Some types of companies which are in regulated industries may be subject to higher minimum paid-up capital requirements. Some examples include:
- Travel agencies – S$100,000 or S$50,000 if the agency only conducts tours within Singapore and do not arrange for accommodation
- Public accounting firm – S$50,000
- Insurance intermediary firms –S$300,000.
Benefits of Having a Higher Paid-Up Capital
Despite the general minimum paid-up capital amount of just S$1, there might be practical benefits to having a higher paid-up capital.
Ensure sufficient funds to engage in the company’s ordinary business
As funds are usually needed in a company’s usual operations, it is recommended that the amount of paid-up capital be sufficient to allow the company to conduct its ordinary business with adequate cash flow.
To illustrate, standard business functions may include paying suppliers, employees, and service providers.
A supplier may demand to be paid upfront but where a new business has not booked any revenue yet, it will need to have buffer funds to pay that supplier. To this end, payment could come out of the paid-up capital.
May allow for more favourable debt capital fundraising terms
An alternative to funding a business via equity capital (i.e. raising money by selling shares) is to raise funds via debt (loans, or issuing debt instruments like bonds).
A company that has a higher amount of paid-up capital may be able to obtain more favourable debt capital fundraising terms such as lower interest rates and avoid having its assets charged.
This is because creditors may feel more reassured of being able to recoup their investment from the company’s paid-up capital in the event of the company’s insolvency, as compared to a company with a paid-up capital of only S$1.
Singapore Business Federation membership with S$500,000 paid-up capital
All Singapore-registered companies paid-up capital of S$500,000 or more are automatically made members of the Singapore Business Federation (SBF). SBF members get access to various networking opportunities and other activities such as policy briefings and workshops.
What Happens If There is Insufficient Paid-Up Capital?
As mentioned above, the paid-up capital alone is not indicative of the net worth of the company.
As a company carries on business over time, any net gains (above the original paid-up capital) are booked in the company books as retained earnings. These can also be used to satisfy ongoing business expenses and liabilities.
However if there is, on the whole, insufficient money to satisfy liabilities (e.g. if the business is not doing well, or a company wishes to expand more aggressively), the company may need to raise money by issuing new shares, taking up bank loans or issuing debt instruments.
Increasing and Reducing Company’s Paid-Up Capital
Increasing paid-up capital
To increase paid-up capital, the company will first need to issue new shares.
There are numerous legal requirements to be mindful of when it comes to share issues. These includes requirements pertaining to the giving of notice, shareholder approvals and directors’ duties. Breach of some of these rules may expose you to civil and even criminal liability.
For more information, please see our article on how to issue shares in a company.
Reducing paid-up capital
Reducing a company’s paid-up capital (and returning such capital to the shareholders) is more difficult than increasing its paid-up capital. This is so because of the concern that creditors may be disadvantaged if shareholders could freely recover their investments.
Amongst other risks, creditors run the risk of having their loans used for improper purposes.
For example, if the loan amount is used to pay dividends to shareholders, instead of for agreed purposes like growing the business. This in turn creates the risk that the company may not have enough money to pay their debts as they fall due.
Some of the rules pertaining to capital reduction are also highly technical in nature, and may at times require the court’s sanction.
For instance, share buybacks (whereby a company buys back its own shares from existing shareholders, and makes payment with its capital, hence reducing the company’s capital) are generally disallowed unless they fall within a few narrowly-defined exceptions in the CA.
For more information, please refer to our article on how to reduce the share capital of a company.
What Happens to Paid-Up Capital If a Company Closes Down?
If a company closes down, a liquidator will be appointed to wind up the affairs of the company. In the process, the liquidator will realise all of the company’s assets (including the paid-up capital) for distribution amongst creditors and, if there are funds remaining, to the shareholders, as mentioned above.
The initial amount of a company’s paid-up capital is determined when the company is first incorporated.
If you need assistance with setting up a company with your preferred amount of paid-up capital, you may wish to engage the services of a corporate secretarial firm.
The process of increasing or decreasing share capital, as mentioned above, is also subject to various legal requirements, and some processes may be highly technical in nature.
A corporate secretarial firm will also be able to assist you with these administrative procedures while ensuring compliance with the CA.
- What are Annual General Meetings (AGMs) in Singapore?
- Anti-Money Laundering Regulations and Your Business: What You Need to Know
- Price-Fixing, Bid-Rigging and Other Anti-Competitive Practices to Avoid
- Dividend Payments Guide for Singapore Business Owners
- Company Audits in Singapore: Requirements and Exemptions
- Guide to Transferring Shares in a Singapore Private Company
- How to Hold Extraordinary General Meetings (EGMs) in Singapore
- How to Issue Shares in a Singapore Private Company
- How to Reduce the Share Capital of Your Singapore Company
- Legally Conducting Lucky Draws for Singapore Businesses
- Dormant Companies and Their Filing Obligations in Singapore
- How to Hold a Board Meeting in Singapore
- Paid-Up Capital in Singapore: A Complete Guide (Is $1 Enough?)
- Restaurant Inspection and Food Safety Rules in Singapore
- Essential Regulatory Compliance Guide for Singapore Companies
- Finding a Suitable Corporate Secretarial Firm in Singapore
- Oppression of Minority Shareholders
- Process Agents in Singapore
- Shadow Directors: Who are They and What Duties Do They Owe to the Company?
- Guide to Directors' Remuneration in Singapore
- 3 Types of Insurance Every Singapore Business Needs
- How to Change the Name of Your Singapore Company
- How to Remove a Director from a Company in Singapore
- Appointing Company Directors in Singapore: Eligibility, Process etc.
- Company Loans to Directors/Shareholders (& Vice Versa) in Singapore
- Share Transmission: What Happens If a Shareholder Dies in Singapore?
- Business Will: How to Pass on Your Business to Your Successors in Singapore
- Shareholder Rights in Singapore Private Companies
- Removal and Resignation of Company Auditor in Singapore
- Shareholder Roles and Obligations in Singapore Companies
- Creating and Registering Charges in Singapore: Guide for Companies
- How to Commence a Derivative Action on Behalf of a Company in Singapore
- Managing Director vs CEO in Singapore: Roles and Obligations
- Appointing an Authorised Representative for a Singapore Business
- Business Partnership Disputes in Singapore: How to Resolve
- Appointing a Company Secretary: Roles and Responsibilities
- Directors' Duties in Singapore
- Company Constitutions in Singapore and How to Draft One
- Company Memorandum and Articles of Association
- Minutes of Company Meeting in Singapore: How to Record
- Guide to Filing Financial Statements for Singapore Business Owners
- Filing Annual Returns For Your Business
- Memorandum of Understanding (MOU): Does Your Business Need One?
- Company Resolutions: What are They?
- Board Resolutions in Singapore
- How to Set Up a Register of Controllers
- How to Set Up a Register of Nominee Directors
- Your Guide to Resolutions Passed at a First Directors’ Meeting
- Your Guide to Resolutions to Appoint a Company Secretary
- Your Guide to Resolutions for Authority to Act on a Share Purchase and Subscription Agreement
- Your Guide to Shareholders’ Resolutions for Share Allotments
- Your Guide to Resolution for Authorisation of Investment in the Shares of Another Company
- Your Guide to Share Certificates in Singapore: Usage and How to Prepare
- Your Guide to Resolution for Transfer of Shares
- Your Guide to Resolution for Change of Registered Address
- Your Guide to Board Resolution for Approval/Allotment of Shares
- Your Guide to Resolutions to Increase a Company's Share Capital
- What is Withholding Tax and When to Pay It in Singapore
- Singapore Influencers: Here's How to Calculate Your Income Tax
- Corporate Tax in Singapore: How to Pay, Tax Rate, Exemptions
- When to Register for GST, How and Responsibilities after Registration
- Start-Up Tax Exemption Guide for New Singapore Companies
- Tax Investigation of Tax-Evading Business Owners in Singapore
- Small Business Accounting Services in Singapore
- Essential PDPA Compliance Guide for Singapore Businesses
- Cloud Storage of Personal Data: Your Business’ Data Protection Obligations
- How Can Companies Dispose of Documents Containing Personal Data?
- Here's a 7-Step Plan for Companies to Prevent Unauthorised Disclosure When Processing and Sending Personal Data
- Appointing a Data Protection Officer For Your Business: All You Need to Know
- Summary: Your Organisation's 9 Main PDPA Obligations
- Check the Do-Not-Call Registry Before Marketing to Singapore Phone Numbers
- GDPR Compliance in Singapore: Is it Required and How to Comply
- Is It Legal for Businesses to Ask for Your NRIC in Singapore?
- PDPA Consent Requirements: How Can Your Business Comply?
- Legal Options If Employees Breach Confidentiality in Singapore
- Insolvency: Claw-back of Assets from Unfair Preference and Undervalue Transactions
- Striking Off a Company
- What Should a Creditor Do When a Company Becomes Insolvent?
- Dissolution of partnerships in Singapore
- Validation of Payments Made by Companies Being Wound Up
- Can a Company that Struck Itself Off the Register Later Apply to Restore Itself?
- Closing Your Singapore Business: What You Need to Settle
- How to File a Proof of Debt against a Company in Liquidation
- Winding Up a Company