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Paid Up Capital Question

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ac3r3xpir3
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Paid Up Capital Question

Postby 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

Postby 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

Postby 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

Postby 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

Postby 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

Postby 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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