Advertisement

Increase Paid up capital Late

950 Views  ⚫  Asked 2 Years Ago
asked on Aug 28, 2015 at 09:23
by   Hopefull
Hi,

We are a bit late for completing the account for year 2014... in Year 2014, there are instances whereby the director has used own money as cash to make purchases... is it still possible to ask Company secretary to still do the increase in paid up capital a year later now?

Does the date needed to submit increase of paid up capital counted from 1)date of transaction or 2) date of Account audit? is it possible to still do so even if late?

Thank you and would appreciate if someone could advice on how to do this on a private company... thanks again...
0 had this question
Me Too
0 favorites
Favorite
[ share ]
8 Answers

answered on Aug 28, 2015 at 09:51
by   Hopefull
SOME Additional info for my situation...

I have been running a failed business over the past few years, running into losses every year, pumping in all my life savings, and have collected a big amount of credit cards debts due to this failed business. The main problem for causing the disaster is that my sdn bhd had signed a tenancy agreement few years back for a retail shop, big mistake... and when the business doesn't even contribute enough to pay rental, we asked the landlord to find new tenant or reduce the rental (which our sales were even lower than the rental amount), but the landlord doesn't care, and insists we stay and pay for the full 3years per the tenancy agreement. Towards the end of the contract, we have accumulated quite a big amount unable to pay, so the landlord sue us... our sdn bhd lost the case... I was ill advice by my lawyer casually that there is no problem, as my sdn bhd paid up capital is only RM2, so they can only get asset (nothing left as the shop were closed down already) and RM2 if they decided to proceed...

Today I was made aware by my friend that the Landlord who obtain the judgement can actually sue the shareholder the authorize capital RM100,000 minus RM2, and not RM2 that I understand previously. My question is....

1) There is a column with loans from director, is it possible to convert it into paid up capital? In reality, we have lost more than the authorize capital, but all the capital is pump in as a loan, and never convert into paid up. If the loan is able to convert, it can reach the full amount of authorize capital.

2) can we back date the paid up capital for the additional capital we pump in last year? The audited account for 2014 were late and not done yet as I have no money to pay accountant and auditor...

3) is there any way to overcome this... I have lost almost everything and accumulated a big debt from the business, but am now concern that the landlord will sue me personally, affecting our already hard livelihood and only place me and my family live.

If someone can give some good advice... really appreciated it. Thanks in advance.
0 found this helpful
Helpful

answered on Aug 29, 2015 at 15:27
by   jeff005
@ Hopefull

I was ill advice by my lawyer casually
The lawyer is correct based on what u hv posted, But other certain circumstances as CAN/COULD be stipulated in Tenancy Agreement can made shareholders personally liable (not only the SDN BHD). Any "personal quarantees" signed by the Directors? The situation is complicated if the the company directors are the sole shareholders too.

Today I was made aware by my friend
Is yr friend
1/ A kedai mamak lawyer?
2/ An Accountant?
3/ An Practising Auditor?

For financial loans, Issued Share Capital, Paidup Share Capital, Authorised Capital are ALL different.
It is ridiculous of ppl signing contracts with RM2 paidup share capital. Of course a contract worth RM 100 is of no issue at all.

1) There is a column with loans from director, is it possible to convert it into paid up capital?
By virtue of business tactic, this should have bee fully convert by yr CoSec FULLY or Partially in the first place. It is already too late and even if it can it has no advantage at all. Can  a marriage certificate be back dated?.

Just take note that if a your sdn bhd is made Judgement Debtor in a court of law, any accounts submited is useless after date of judgement as it can be disputed by the plantiff lawyer as being window dressing and "factoring" (never mind this term).

The critical issue is:-
What has been stated and signed on the Tenacy Agreement which can affect your personal assets.
0 found this helpful
Helpful

answered on Aug 30, 2015 at 17:36
by   Hopefull
Dear JeffOO5,

Thank for your reply and advice,

The lawyer is correct based on what u hv posted, But other certain circumstances as CAN/COULD be stipulated in Tenancy Agreement can made shareholders personally liable (not only the SDN BHD). Any "personal quarantees" signed by the Directors? The situation is complicated if the the company directors are the sole shareholders too.
We were optimistic previously as our lawyer say that there is nothing to worry as a director/shareholder since it is a RM2 company, and is not running business anymore, as we as director/shareholder luckily didn't sign any personal guarantee, only tenancy agreement. There are no terms in within that say anything that directors/shareholders shall be liable if the company is unable to pay the debt as well.

The problem is both the 2x director and 2x shareholder are exactly same. What is the complication in this case? I met up with a Lawyer friend today, and he say that since the directors and shareholders are same, the court will not look at it this way and the plaintiff side will eventually claim from the shareholders or make the shareholders bankrupt.

Just take note that if a your sdn bhd is made Judgement Debtor in a court of law, any accounts submited is useless after date of judgement as it can be disputed by the plantiff lawyer as being window dressing and "factoring" (never mind this term).
Thank you for your advice, but for outstanding audit account, in the case that the company need to eventually wind up, the accounts also need to be properly done and audited or no need as the liquidator will not accept it (seeing it as window dressing)?

Is it true that even without signing any personal guarantor letter, and without any terms in the 50 pages tenancy agreement stating that in the eventuality that the company cannot pay, the directors/shareholders shall be liable... the plaintiff can and will still go ahead and claim from the shareholder or make them bankrupt, since the directors and shareholders are the exact same and the court will grant it...
0 found this helpful
Helpful

answered on Aug 31, 2015 at 14:11
by   vkpc
We were optimistic previously as our lawyer say that there is nothing to worry as a director/shareholder since it is a RM2 company, and is not running business anymore, as we as director/shareholder luckily didn't sign any personal guarantee, only tenancy agreement. There are no terms in within that say anything that directors/shareholders shall be liable if the company is unable to pay the debt as well.
Your lawyer was wrong and your friend was right.
Creditors can still sue shareholders for RM 100k - RM 2. ( shortfall of paid up capital )
The good news is, most likely they will not throw more good money after bad money.

Is it true that even without signing any personal guarantor letter, and without any terms in the 50 pages tenancy agreement stating that in the eventuality that the company cannot pay, the directors/shareholders shall be liable... the plaintiff can and will still go ahead and claim from the shareholder or make them bankrupt, since the directors and shareholders are the exact same and the court will grant it.

This has nothing to do with whether directors and shareholders are same persons.
Shareholders can be sued for the paid up capital shortfall as mentioned above but unlikely.

1) There is a column with loans from director, is it possible to convert it into paid up capital? In reality, we have lost more than the authorize capital, but all the capital is pump in as a loan, and never convert into paid up. If the loan is able to convert, it can reach the full amount of authorize capital.
2) can we back date the paid up capital for the additional capital we pump in last year? The audited account for 2014 were late and not done yet as I have no money to pay accountant and auditor...


If you have no more money to pay the auditors and the secretary, how are they going to verify the loan account and then convert to paid up capital for you?  Usually, for paid up capital increase, you need to pass the capital cheque to the secretary.  It is difficult to convert from loan accounts because secretaries are afraid company funds many be used to increase the capital. ( illegal to do this )
0 found this helpful
Helpful

answered on Sep 1, 2015 at 05:43
by   Hopefull
Dear vkpc,

Thank you very much for your response and advice, I understand the points made by JeffOO5 and vkpc that it is impossible/not feasible to backdate the increase of paid up capital.. very much appreciated thanks.

I have some questions in regards to your comments:

"Creditors can still sue shareholders for RM 100k - RM 2. ( shortfall of paid up capital )"
I have asked my lawyer friend yesterday can the creditor claim the shortfall of authorized capital minus paid up capital with sdn bhd winding up, his answer is there is nothing related with the authorized and paid up... the only way that the judgement creditor can/will attempt is by "lifting/piercing Veil of Incorporation", so I am a bit lost, hope you can bare with me. Can you please advice which is your source of information regarding this clause, so that at least we would know which law angle this danger is coming from? for example which law the creditor is able to claim the shortfall of paid up capital? or does it by any chance related to the law "lifting/piercing Veil of Incorporation"?

I have tried to do some digging online, and here is the closest that I manage to find in regards to winding up and paid up capital:

Source #1
\https://www.ssm.com.my/acts/fscommand/act125s0214.htm
Section 214. Liability as contributories of present and past members.
(d) in the case of a company limited by shares, no contribution shall be required from any member exceeding the amount, if any, unpaid on the shares in respect of which he is liable as a present or past member;


Source #2
http://www.insolvensi.gov.my/faqs/liquidation
12. What is the effect of winding up towards contributory of the company ?
The contributory is not personally liable towards the company's debts. However, the liquidator has power to direct the contributory to pay any unpaid shares.


I have noticed the word "unpaid shares" in both sources, that the Judgement Creditor are able to recover unpaid shares from the contributory, from my understanding and research today... "unpaid shares" means shares that were allocated for that particular shareholder, supposingly paid to increase the paid up capital, but somehow was not paid into the company account yet, is that right, or there is other law that will enable the judgement creditor to claim authorized capital minus (-) paid up capital difference.

Hope bro vkpc can kindly shed some lights...

On the other hand, if anyone has an 1st hand experience on claiming/being claimed on the shortfall of paid up capital, in the case of winding up, it will be much appreciated to hear details as well.

Thanks very much once again.
0 found this helpful
Helpful

answered on Sep 1, 2015 at 17:07
by   jeff005
his answer is there is nothing related with the authorized and paid up..
Somewhere there is a missing link.
Authorized Capital, Issued Share Capital (various types) Paidup Share Capital (Fully/Partially Paidup, Shares on Call) have different connoctations on the "Financial Health" of a Sdn Bhd. You can google and find it, read it.

the only way that the judgement creditor can/will attempt is by "lifting/piercing Veil of Incorporation"
Very accurate indeed. But is the Landlord willing to spend massive legal costs in a futile attempt to sue? It depends a lot on financial health of all the shareholders cum Directors.

Frenz, u do not appear to be a victim of RM2 company. U are too knowledgeable in Company Laws. But anyhow this forum welcomes constructive discussions. Thank you for all of your feedback.
0 found this helpful
Helpful

answered on Sep 2, 2015 at 05:06
by   Hopefull
Dear JeffOO5,

Thanks very much for your feedback.

"Somewhere there is a missing link.
Authorized Capital, Issued Share Capital (various types) Paidup Share Capital (Fully/Partially Paidup, Shares on Call) have different connoctations on the "Financial Health" of a Sdn Bhd. You can google and find it, read it."


I have read it the different types of capitals in Google per your suggestion, thanks... it seems that my company structure is rather simple, authorized 100k, paid up RM2, no allocated shares that are unpaid/partially paid at all. So, it seems like from my interpretation if purely from this angle, the Judgement creditor will not be able to claim/demand from the shareholder, on a winding up petition instance, unless they are trying to do it by lifting the veil of incorporation.

"Very accurate indeed. But is the Landlord willing to spend massive legal costs in a futile attempt to sue? It depends a lot on financial health of all the shareholders cum Directors.

Frenz, u do not appear to be a victim of RM2 company. U are too knowledgeable in Company Laws. But anyhow this forum welcomes constructive discussions. Thank you for all of your feedback."

Do you mean the Judgement creditor will consider this option by reviewing the financial health of all the Judgement Debtor shareholders cum directors right (that is reviewing our financial health)?

bro Jeff05, when doing business, I know a bit about the general details about Company Laws, but when bad things happened, it is obvious that I don't know enough to run a proper business and/or safeguard ourselves, for the event of a honestly done failed business with our life savings, recently I am scared on what will happened to the livelihood of my family next and lost many nights of sleep. With so many useful advice from lawyerment.com.my, I started to dig more details about it and deeper when possible, and try to maintain a constructive thread with clearer details whenever possible, so hopefully anyone who would like/need to know more, would be able to also learn from the threads that I created, doing a small part only, as compared to bro Jeff05, vkpc and so many great contributor who contributed so many useful details on this Forum, helping so many people.
0 found this helpful
Helpful

answered on Sep 10, 2015 at 06:39
by   Hopefull
Dear vkpc,

AuthorisedCapital - PaidUpCapital = Unpaid Capital. ( get it into your head ).
Capital Shortfall due from you = RM 50k - RM 1 = RM 49,999.00 ( your share after divide by 2 shareholders )


Thanks for your reply. Is it possible to share from which angle/laws that is explaining about the Unpaid shares being Authorised Capital - Paid up Capital? and not Unpaid = Allocated Shares - Paid up Shares? To be frank, I am concern about this angle, but somehow from the little research, it seems like unpaid shares is not common in many company, and unpaid is unpaid only at the point when the shares are issued/allocated, and not authorized...

From my understanding, Authorized shares has no legal obligation, for bigger company can be increase gradually, so for example if one company increase from 100k to 500k, then from my understanding, it doesnt means that the shareholder will be oblige to pay up the 400k, from my understanding, it only means that the company can issue/allot up to 500k.

Source #1
\https://www.ssm.com.my/acts/fscommand/act125s0214.htm
Section 214. Liability as contributories of present and past members.
(d) in the case of a company limited by shares, no contribution shall be required from any member exceeding the amount, if any, unpaid on the shares in respect of which he is liable as a present or past member;

Source #2
http://www.insolvensi.gov.my/faqs/liquidation
12. What is the effect of winding up towards contributory of the company ?
The contributory is not personally liable towards the company's debts. However, the liquidator has power to direct the contributory to pay any unpaid shares.

Source #3
http://www.informdirect.co.uk/shares/what-are-unpaid-shares/
Why would a company issue unpaid shares?

Although unpaid and partly paid shares are far less common than fully paid shares, there are a number of reasons why a company might choose to issue them:

    It might form part of a pre-planned schedule of payments, whereby the shareholder commits to the full price but needs time to access funds
    Convenience when first setting up a company – perhaps because the circumstances do not warrant setting up a bank account into which to pay the nominal value of the shares issued
    In line with a strategy to implement an acquisition or merger of companies.
    To retain the option to forfeit the shares at a later date.

In many cases, however, unpaid shares exist without the directors ever having really made a conscious decision to opt for them instead of fully paid shares. Sometimes this happens inadvertently when the company is formed – where an incorporation agent only offers formation with unpaid shares or the wrong box is accidentally ticked and the wrong details confirmed to Companies House.

2. How much will the estimated lawyer costs for a slightly reputable (not prestigious) lawyer firm, to handle the winding up petition in high court? is it feasible for them to do it on a 100k debt?
It might cost them RM50k, so as I mentioned earlier, they will not take things further.
Why keep worrying over nothing? It is not helping your cause.


I understand that there are lots of work to do for winding up, but wow the fees seems really high. Thanks for your advice vkpc, much appreciated it.
0 found this helpful
Helpful

Your Answer





By posting your answer, you agree to the privacy policy, cookie policy and terms of service.