Is having a high Paid-Up Capital important?

Paid-up capital is the amount of money a company has received from shareholders in exchange for shares. In Singapore, companies can have as low a paid-up capital as SGD$1. In this instance, the company has received SGD$1 for perhaps 1 share of the company, assuming that the company is denominating one share at SGD$1. Let us then think of this example clearly and understand what this would mean to would-be investors or individuals or entities wanting to do business with this SGD$1 company. As the paid-up capital is extremely low, to the point of it being extremely insignificant, the perceived image of the company would not be good. Paid-up capital is money that the company will use for the day to day running of its operations. There is almost nothing that the company can do with SGD$1. This would mean that the company is not well capitalised and to many, this may seem as though the company is not serious to do business. In most instances, shell companies tend to have extremely low paid-up capital, especially to the tune of SGD$1.

On the flip side, a higher paid-up capital would mean that the company received a considerable sum for its shares. This is especially important to some individuals or entities wanting to do business with such a company. In Singapore, to obtain a license or be in a certain trade, the paid-up capital of a company needs to be of a certain amount. For example, a telecommunications services-based operator needs to have a minimum paid-up capital of SGD$100,000 when applying for and being issued a license. If a foreigner is applying for an EntrePass to start a company in Singapore, the paid-up capital of that particular company needs to be at least SGD$50,000.

Paid-up capital needs to be paid up by shareholders to the company in exchange for shares. The monies need to be deposited into the company accounts and these monies can only be used for company operations.

A higher paid-up capital adds credibility to a particular company. It also means more liquidity for the company.

When in doubt, seek legal advice or consult an experienced ACRA Filing Agent.

Yours Sincerely,
The editorial team at Singapore Secretary Services

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