Before incorporating your company in Singapore, you must first decide on your company’s share capital. Details of your company’s share capital such as how it is issued and the different classes of shares must be written in its constitution. The law requires all companies in Singapore to maintain share capital throughout their lifespan.
Share capital consists of all the funds that your company raises in exchange for shares. It is the principal source of finance for private limited companies. As a result, shareholders of private limited companies in Singapore are not liable for their debts and losses beyond their amount of share capital.
Share capital is only generated by the initial sale of shares by your company to investors (i.e. the primary market). It does not include shares that are sold in the secondary market – such as on the stock exchange – where investors buy and sell shares that they already own.
Share capital typically comprises issued, paid up and unpaid share capital.
What is Paid-up Capital?
As its name suggests, paid-up capital is the total amount of capital that has been paid in full by shareholders or owners in a company. In other words, it refers to the amount of money that a company receives from shareholders who have completely paid for their purchased shares.
For instance, if your company has two shareholders and they each have a 50% share of a company with SGD 20,000 paid-up capital, they must each pay SGD 10,000.
Why is Paid-up Capital Important?
For start-ups, share capital – especially paid-up capital – plays a crucial role. Paid-up capital is needed especially to survive in the first few months of operations. This will ensure that your company can endure through those initial months. Besides an initial source of funds, paid-up capital also reflects the financial strength and liquidity of a company.
In the unfortunate event that a company fails, creditors may lay claim to any unused paid-up capital. As such, paid-up capital is important as it represents money that is not borrowed.
How Much Paid-up Capital Do I Need?
In Singapore, companies can be registered with just a minimum paid-up capital of SGD 1. Singapore allows any legal currency to be used as paid-up capital.
However, different relocation work passes may require different paid-up capital amounts. If you are applying for an Entrepreneur Pass (EntrePass) in Singapore, your company must have a minimum paid-up capital of SGD 50,000. If you are applying for an Employment Pass (EP), there is no official minimum paid-up capital requirement though it is a good idea to state an appropriate amount in order to support your EP application.
If your company is in a regulated industry, there may be different minimum paid-up capital requirements. For instance, a travel agency or a telecommunications Services-Based Operator (SBO) must each have a minimum paid-up capital of SGD 100,000 at the time of licensing.
Should I Decide on a Higher or Lower Paid-up Capital?
A higher paid-up capital generally adds credibility to your company, especially when dealing with stakeholders and investors. It also means more liquidity for the business. On the flip side, a small paid-up capital may be of concern to investors and stakeholders.
Is there a Maximum Amount of Paid-up Capital?
The concept of authorised capital has been abolished in Singapore.
Where Do I Deposit my Company’s Paid-up Capital?
The amount of paid-up capital listed must be deposited into your company’s bank account immediately upon incorporation. There is no need to keep your company’s paid-up capital locked in the bank account for any specific periods.
What Can I Use the Paid-up Capital On?
You may use the paid-up capital for your company’s business needs accordingly, such as paying for purchases or paying your employees. However, you cannot withdraw it for non-company expenses. If you withdraw that money for personal use, it will be treated as a loan from the company.
Can I Increase my Company’s Paid-up Capital?
You may increase the paid-up capital of your company any time after registration. This usually takes the form of new shares. You may accept new shareholders or get existing shareholders to buy more shares.
However, please note that the procedure to issue new shares may differ between companies as company constitutions may vary. If you are uncertain, please refer to your company’s constitution.
How Can I Change the Paid-up Capital Amount in my Company Profile?
Upon receiving proof of capital injection (i.e. bank statement), your corporate services provider will ask you to produce the necessary documentation. This is because company directors will need to seek approval from existing shareholders in order to issue new shares and this should be done at a general meeting.
The documents and procedures required include:
- Extraordinary General Meeting (EGM)
- Ordinary Resolutions (Authority to Issue Shares)
- Directors’ Resolutions (Allotment of Shares)
- Letter to the Company Secretary
- Application of Shares
These documents will be filed with the Accounting and Corporate Regulatory Authority (ACRA). ACRA will update your company profile showing the revised paid-up capital for your Singapore company accordingly.
Can a Shareholder Withdraw His Share of Paid-up Capital?
Shareholders are not allowed to withdraw their share or any amount from the paid-up capital. Once the funds go to a business, the paid-up capital belongs to the company and must be used for its business needs.
Get Expert Guidance from Corporate Services Singapore
Starting a business in Singapore can be easy and seamless when you engage Corporate Services Singapore. At Corporate Services Singapore, we help foreign and local entrepreneurs and business owners navigate Singapore’s company incorporation policies while advising you on paid-up capital requirements in Singapore.
Corporate Services Singapore offers a complete suite of corporate services and solutions, from company registration and company secretarial services to outsourced accounting, audit and tax. To set up an entity and do business in Singapore, give us a call at 6602 8286 or email us at email@example.com to get started today.