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Paid Up Capital Question

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ac3r3xpir3
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Paid Up Capital Question

Post by ac3r3xpir3 » Fri, 10 Mar 2017 9:40 am

Hi all!

Have a question on paid up capital in Singapore. What happens if one started a company with example $50,000 paid up capital on paper, but did not bank in the amount into corporate bank account, is there any issue when it comes to accounting etc?

Or is there any other way to work around it? Company have exist for a year.

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Strong Eagle
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Re: Paid Up Capital Question

Post by Strong Eagle » Fri, 10 Mar 2017 11:44 am

ac3r3xpir3 wrote:Hi all!

Have a question on paid up capital in Singapore. What happens if one started a company with example $50,000 paid up capital on paper, but did not bank in the amount into corporate bank account, is there any issue when it comes to accounting etc?

Or is there any other way to work around it? Company have exist for a year.
You are simply lying. If you registered the company with $50,000 in paid up capital, and issued shares for the same amount, but never collected the money, then you are violating multiple parts of the Companies Act.

You cannot even create a legitimate balance sheet without lying. If the capital was actually paid up you would have a balance sheet with $50,000 in the bank. You would have assets of $50,000 and liabilities and net worth of $50,000... hence the name, "balance sheet".

If you are reporting a balance sheet showing $50,000 cash received for shares issued, and you don't have the money in the bank, then you are guilty of fraud.

You are subject to civil and criminal prosecution. If you didn't have the money, you should have simply put in two dollars of paid up capital. If you did this to meet Entrepass requirements, you are truly screwed... MoM and Spring will want to see evidence of your deposits.

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Re: Paid Up Capital Question

Post by ac3r3xpir3 » Fri, 10 Mar 2017 11:52 am

The money was used to purchase assets over the year, such as computer and equipments etc hence didn't bank in the money. That's why. We have valid invoices and receipts

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Re: Paid Up Capital Question

Post by Strong Eagle » Fri, 10 Mar 2017 12:29 pm

ac3r3xpir3 wrote:The money was used to purchase assets over the year, such as computer and equipments etc hence didn't bank in the money. That's why. We have valid invoices and receipts
Your paid up capital can come in a number of legal forms, including equipment, from computers to industrial and manufacturing machines, to real estate and buildings.

In this case you would need to substantiate the declared value of the assets being put up as paid capital. For example, used machinery would be valued at either its depreciated cost or its open market value. The invoices and receipts you have would substantiate new equipment.

I stand corrected and I apologize. You can put up all sorts of assets as a measure of paid up value... the key is proper valuation... you wouldn't want to value a 10 year old Dell computer at $10,000. You can even put up intellectual property that has a value.. the key is setting the value... and shares must be issued in accordance with that value.

In this case, the asset side of your balance sheet reflects equipment assets, equal to the equity interest.

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Re: Paid Up Capital Question

Post by ac3r3xpir3 » Fri, 10 Mar 2017 12:43 pm

Thank you for your kind clarification and I greatly appreciate the advice you have given me so far. Am glad to know that I'm not violating any laws or regulations. Phew. Almost s**t my pants earlier. Thanks!

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Re: Paid Up Capital Question

Post by Strong Eagle » Fri, 10 Mar 2017 11:38 pm

Depending upon what you have already filed with IRAS and the ACRA, there really is no need to have $50,000 in paid up capital, unless you are in the Entrepass program, or you just want to impress clients with the money you have invested. Better to inject money into the company in the form of loans.

I am of the view that you don't inject assets into the company except where it makes sense. For example, if I am going to join your company and my contribution is to supply a manufacturing warehouse that I have owned for ten years, then yes, it makes sense to contribute an asset as paid up capital.

But, if you are going out and buying things with your own cash, then contributing them to the company as paid up capital, it makes more sense to contribute the cash to the company, then have the company buy the equipment. And instead of contributing the money as paid up capital, you record it as a loan to the company, to be paid back at some point in the future.

Of course, if you are using your own personal credit card to finance the purchase, that's another deal altogether.

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Re: Paid Up Capital Question

Post by Cherielim » Sun, 25 Aug 2019 12:55 am

Hi all. Would like to ride on this thread for a query of mine.

My company was incorporated in 2015 and last year, we increased our paid up capital by another 30k duly deposited into our corporate account. But the issue is that we have forgot about informing ACRA regarding the increase in the paid up capital until now. So my question is, is it still possible to do so at this point in time or is there a strict timeline for this?

Many thanks in advance.

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Re: Paid Up Capital Question

Post by Strong Eagle » Sun, 25 Aug 2019 5:35 am

Do you have sufficient declared shares in your articles of incorporation to be able to issue additional shares without calling an AGM/EGM? For example, if your articles authorized 100,000 shares and you've issued only 50,000 (assuming $1 value), then more stock can be issued without calling an AGM/EGM.

It probably won't matter at all as to when you notify ACRA of the increase in paid up capital, but I believe that, technically, you can't do it until it has been recorded with ACRA. Since you're the shareholders, owners, directors, it won't really matter when you get around to it.

If you want to keep the books pristine, then you would record the $30K you put into the company first as a director's loan, then when filed with ACRA, convert the loan to share equity.

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Re: Paid Up Capital Question

Post by Cherielim » Fri, 15 Nov 2019 12:18 pm

Strong Eagle wrote:
Sun, 25 Aug 2019 5:35 am
Do you have sufficient declared shares in your articles of incorporation to be able to issue additional shares without calling an AGM/EGM? For example, if your articles authorized 100,000 shares and you've issued only 50,000 (assuming $1 value), then more stock can be issued without calling an AGM/EGM.

It probably won't matter at all as to when you notify ACRA of the increase in paid up capital, but I believe that, technically, you can't do it until it has been recorded with ACRA. Since you're the shareholders, owners, directors, it won't really matter when you get around to it.

If you want to keep the books pristine, then you would record the $30K you put into the company first as a director's loan, then when filed with ACRA, convert the loan to share equity.
Hi Strong Eagle, our declared shares are only 20k and in this case, we will need to increase it to 50k.

In order for us to file allotment of new shares with ACRA, is it possible to just pass resolution for this? e.g. to record the 30k as loan and to convert it to share equity.

Many thanks in advance!

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