A Quick Guide to Paid-Up Capital in Singapore

To be able to set up a company in Singapore, entrepreneurs must meet several mandatory requirements. One of them concerns the need for paid-up capital. This article will explain what paid-up capital is, how much paid-up capital is required to start a business, and how paid-up capital relates to working capital.

What is a paid-up capital, and why is it important?

Paid-up capital is the total amount of investment capital received by a company from its shareholders in exchange for shares. In other words, it refers to the amount of money the company gets from shareholders who have paid in full for the shares they purchased.

In general, paid-up capital is used in running the business in its early stages. Furthermore, shares issued for paid-up capital can be in the form of ordinary shares, preference shares, or other types of shares.

On the other hand, issued share capital is the actual amount of money (or other assets) contributed to a company by its shareholders. Unlike paid-up capital, these shares do not have to be fully paid up at the time of incorporation.

For startups, paid-up capital plays a vital role because it helps them survive in the first few months of their operations. In addition, paid-up capital also reflects the financial strength and liquidity of a company. For example, if a company fails, the company’s unused paid-up capital can be claimed by creditors. 

How much paid-up capital do I need?

In Singapore, you can register a company with a minimum paid-up capital of S$1. However, different work passes may require different paid-up capital amounts. For example, if you are applying for an Entrepreneur Pass (EntrePass), you should aim to have a minimum paid-up capital of S$50,000. 

Keep in mind that some types of companies engaged in certain industries may be subject to higher minimum paid-up capital requirements. For instance, if you are registering a travel agency company, you are required to have a minimum paid-up capital of S$50,000  for niche licenses and S$100,000 for general licenses. In addition, some other types of companies, such as public accounting firms, insurance intermediary firms, and recruitment firms, also have higher minimum paid-up capital requirements. 

How can I use my company’s paid-up capital?

You may use your company’s paid-up capital for its needs, such as paying for purchases or your employees’ salaries. It can also be used as working capital to keep the company operating in the first few months. Moreover, the amount can be kept in the company’s account for as long as needed and can be used when the company feels the need to do so.

However, you should not use the paid-up capital for non-business expenses. For example, if you withdraw the money for personal use, it will be considered a loan from the company.

How to increase paid-up capital

You can increase your company’s paid-up capital by issuing new shares. However, there are many legal requirements to be aware of when it comes to sharing issues. These include provisions relating to the giving notices, shareholders’ approvals, and directors’ duties. Violation of some of these rules can expose you to civil and even criminal liability.

The process for increasing paid-up capital is as follows:

• Incorporate a company with the required minimum share capital;
• Open a company bank account;
• Inject funds into the company’s bank account;
• Prepare the necessary documentation, and give notice for the increase in share capital; and
• Submit documents for the increase in share capital with the relevant authorities.

Benefits of having a higher paid-up capital

The following are some practical benefits of having a higher paid-up capital:

• A higher paid-up capital can help ensure sufficient funds to allow your company to conduct its daily operations;
• It adds credibility to your company, especially when dealing with stakeholders and investors; 
• It may be able to let you obtain more favorable debt capital fundraising terms such as lower interest rates and avoid having their assets charged; and 
• Your company could become a member of the Singapore Business Federation (SBF), which gives you access to various networking opportunities and other activities such as policy briefings and workshops.

What documents do I need to issue paid-up capital?

Once you have issued new shares to increase the company’s paid-up capital, your corporate secretarial service provider will ask you to provide the necessary documentation. Furthermore, your company’s directors will seek the approval of the existing shareholders to issue new shares, which will be done at a general meeting.

The documents and procedure required include:

• Ordinary resolutions (authority to issue shares);
• Directors’ resolutions (allotment of shares);
• Extraordinary General Meeting;
• Letter to the company’s secretary; and
• Application of shares.

Note:

Shareholders are also not allowed to withdraw their shares or any amount of the paid-up capital after the company receives the funds. This is because the paid-up capital already belongs to the company; thus, it should be used to manage the business needs.

In summary

By considering all the things we have covered in this article, you should be able to prepare and effectively manage your Singapore company’s paid-up capital requirements. However, since there are many details to consider, it is always best to engage professional help to simplify the process. Feel free to contact us at any time to discuss how we can help you. 

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