Company Incorporation | 5 mins read | Last updated 30 Jun 2019
Definitions:
1.) Issued Share Capital is the total of a company’s shares that are held by shareholders.
2.) Paid-up Share Capital is the amount of money a company has received from shareholders in exchange for shares.
3.) Shares represent ownership in a company.
If the issued share capital is equal to the paid-up share capital amount, shareholders of the Company have fully paid for the shares.
If the issued share capital is higher than the paid-up share capital, the shareholders of the Company have not fully paid for the shares. The Company can request the shareholders to make full payment for the shares they own as and when it needs this fund for its operation.
The minimum issued capital must be at least S$1. However, there is no minimum paid up capital required.
There can be situations where the company will need to have a prescribed minimum paid-up capital, for example the business of the company is in an industry where licenses are required, EPPU Supplier for government must have paid-up capital of at least S$5,000, or tender for business contracts etc.
For start-ups, paid-up capital plays an important role. Other than being the initial source of funds, it’s a reflection of the financial strength and liquidity status of the company. For information, Singapore Companies with paid-up capital of S$0.5 million and above will be automatically became members of the Singapore Business Federation, where members have valuable opportunities for networking and able to attract interest from different stakeholders.
If we do not have any consideration, we may decide the issued capital to be S$1. If the Company needs more money, it can increase its share capital by issuing and allotting additional shares to the shareholders or to the new investors.
Generally, a company issues two main types of shares: Ordinary Shares & Preference Shares
Ordinary shares: Carry voting rights and entitle shareholders to variable rates of dividends (i.e. payments to shareholders from profits of the company)
Preference shares: Has preferential rights over ordinary shares, usually in respect of dividend distributions. The specific rights and benefits of preferential shares are commercial decisions decided by each company. They are contained in the Constitution or resolutions passed during meetings.
Others: A private limited company may wish to issue shares of different classes to vary the dividends payable to the different shareholders, to create non-voting shares for family members, or redeemable preference shares for employees.
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