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Paid-up Capital

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asked on Apr 17, 2004 at 23:52
by   Learner
I want to start a Private Limited Company, what is paid-up capital? How does it work?
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answered on Apr 19, 2004 at 20:28
by   Unni
Paid up capital is the actual amount of capital in money you or your other directors have contributed towards the company as opposed to the authorised capital of the company.

Authorised capital is the limit to the amount of capital the company is allowed to raise and thats usually decided at the formation of the company .Or if extra capital is needed beyond that which the company is authorised to raise (its authorised caiptal), upon application to a court or to the registrar of companies, the authority grants the company the right to raising extra capital (increase in auhorised capital).

So if for instance you form a Pte Ltd Company with an authorised capital of $1,000,000 it means you are allowed to raise (through issue of shares or acquiring assets) up to $1,000,000. Thats your authorised capital.

However upon formation of company, it is usual for directors and founding members to subscribe to $2 worth of shares each. The company would issue only 2 x $1.00 shares to each director subscriber . It would thus have issued 4 shares at 2 shares per director for $2 each director ($1.00 per share) issued and paid up by the 2 directors making it $4 paid up capital company. The balance remaining shares remain in the authorised category. When you need to raise more money and bring in newer directors you issue from the remainder unissued capital of the company.

I hope the explanation is not too complicated.
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answered on Jun 10, 2004 at 17:10
by   JustJO
Good explanation by Unni. However, based on experience from the cosec practice, if done in Malaysia, a Pte Ltd company or Sdn Bhd need not apply to the Court for authorisation to increase authorised capital.  Just fill in the prescribed forms to the Registrar of Companies will do. However, this is only done upon approval from the shareholders of the Company.

On the formation of company, it must have a minimum of 2 subcribers or first members as the minimum paid-up capital is RM2.00.  You don't actually need 4 members per se, just get the two first directors cum shareholders to put in RM1/- each.
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answered on Jun 10, 2004 at 19:58
by   Unni
You will find that my response addresses the matters you have raised and revisited.
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answered on Jun 21, 2004 at 21:33
by   Student
Just wondering if we can reduce the paid-up capital.

Say we started a company with Authorised Capital of RM1,000,000.00 and the Paid up Capital is RM100,000.00. Say 5 years down the road, the directors decided to decrease the Paid ip Capital to RM50,000.00. If yes, how to go about doing it?
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answered on Jun 23, 2004 at 01:04
by   Unni
Reducing paid up capital is qui9te common these days and in actual fact has been used often to reduce a company's shareholder base and caital structure by using the mechanism of share buy backs or cancelling issued shares or consolidating shares into smaller numbers in larger denominations. There are numerous other variables.

You have to obtain shareholder approval and or court approval depending on whether you are a public or private company and the structure of your company as well. Capital restructuring can be quite complex and involves a number of legal issues. I wound suggest you get an accountan to assist.
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answered on Jun 23, 2004 at 01:28
by   Unni
I apologise for the poor spelling, the missing letters in words and the somewhat suspect grammar. It is because I do things on the run and have a horrible keyboard.
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answered on Jun 16, 2008 at 21:27
by   anyone
hi
i still have no clue about paid up capital
so if i want to start a company
and the law says, need a paid up capital of 100k
so me and my partner need to have that 100k?
in the bank?or pay to someone?
thank you
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answered on Oct 8, 2008 at 15:41
by   sher
if paid-up capital is modal sumbangan in malay,

what is the term for authorized capital in malay then?
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answered on Oct 16, 2008 at 17:38
by   Taiko
to sher,

authorised capital is translated as " modal yang dibenarkan" in Malay.
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answered on Oct 17, 2008 at 17:04
by   Wong
Need help urgently :-

1) The Paid-up Capital is that the amount of money that going to be contributed to setup a new company?

examples :-

- Cost of setting up a company is RM600k
- Share holder 1 contribute RM500k, Share holder 2 contribute RM100k

Is that mean the Paid Up Capital should be 6shares (share holder 1 holding 5share and Share holder 2 holding 2 share?)

2) Is the Paid up capital amount ie. RM600k must be reflected in bank account RM600k? Paid up capital = amount in bank?

3) If the share holder could not contribute the full amount as per the cost of setting up for example RM400K (cash contribute from shareholders) and RM200k (Loan from bank), what is the Paid Up Capital to be registered?

Thanks in advance.
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