What is Paid-Up Capital in Malaysia?

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What do you need to know about Paid-Up Capital?

As usual, most of the contents that we publish originates from real questions asked by real clients. So today, we will be explaining to you about Paid-Up Capital in the easiest way we know how.

Disclaimer: This content is only applicable when you set up a Company (Sdn Bhd).

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What is Paid-Up Capital?

Paid-Up capital means the actual amount of funds/capital injected into a company by the Shareholder(s), usually in exchange for shares in the Company. The said funds may then be utilised for the day to day operations of the Company to pay salary, debts and other expenses.

What is the minimum Paid-Up Capital to setup a Company in Malaysia?

There is no minimum paid-up capital requirement to setup a Company in Malaysia, but it is important to note that most government agencies, banks, or other entities may require that a Company meet a minimum amount before they would even consider any application for a loan, license, tender as well as any business dealings.

As an example – the immigration department of Malaysia would require a minimum capital of RM500,000.00 for a Company wholly owned by foreigner, to make a visa application.

Recommendation: We usually recommend an initial paid-up capital of RM1,000 for all new companies upon registration with SSM, but please consult your company secretary or alternatively consult your lawyer or business advisors on the best amount for your business. This is because for some Companies, it is very important to get it right at the point of incorporation due to any applications which may effect the operation of the business.

Can the Shareholders get back the Paid-Up Capital?

It will depend on the rights attached to the shares issued to the shareholders. Ask your lawyer or Company Secretary. However, as a General Rule, if you are an Ordinary Shareholder you are only entitled to get back the contribution/injection when the company is wound-up and after the proceeds of the wind-up is distributed amongst the shareholders. To keep it simple, whatever money that is injected into the Company as initial capital, you can “kiss it goodbye”.

Can the Company increase Paid-Up Capital without actually transferring money to the Company’s Bank Account?

Absolutely Not!!! –  any increase must be done with proof or evidence that the company has received the relevant amount of money from respective shareholders. Failure to remit the payment for the increase is a Major Offence punishable with RM5 Million FINE!!!

If anyone (including your lawyer, company secretary or accountant) tells you that you can increase paid-up capital without actually transferring any money or via some suspicious manner… DON’T DO IT… you will later discover that no auditor would want to sign off your audited accounts and you technically owe the Company for the unpaid amount, which the Company has all the rights in the world to pursue.

How is Paid-Up Capital related to Shareholding amongst Shareholder?

This is perhaps best answered with illustrations. Note: Focus on the price of the share and money injected to understand the illustrations

Illustration A:

If Shareholder A injects RM10,000 and Shareholder B injects RM50,000 to subscribe to Ordinary Shares priced at RM1.00 per Ordinary Share. In return, the Company will issue and allot:

Shareholder A – 10,000 units of ordinary shares

Shareholder B – 50,000 units if ordinary shares

The paid-up  of the Company is at RM60,000.00

Illustration B:

If Shareholder A injects RM10,000 and Shareholder B injects RM50,000 to subscribe to Ordinary Shares priced at RM5.00 per Ordinary Share. In return, the Company will issue and allot:

Shareholder A – 2,000 units of ordinary shares

Shareholder B – 10,000 units if ordinary shares

The paid-up of the Company is still at RM60,000.00

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4 thoughts on “What is Paid-Up Capital in Malaysia?

    • Hai Vinoth,

      Thank you for your question. The allotment/issuance price of Ordinary Shares is decided by the Board of Directors based on the mutual agreement between the Investor and Company. As long as parties are agreeable with the pricing then the OS price can be set at such agreed figure.

  • Hi…
    If the company is haveing 50% share holding with localite Malaysian, the foreign share holder has to pump in 500K RM to apply for DP 10 visa. Does this mean even the local share holder also needs to pump in 500k for the paid-up capital?

    • The short answer to your question is no, the local partner does not have to pump equal amount of capital. If you would like to know more – please drop your question via contact form to arrange an appointment with one of our lawyer to discuss further on this matter.

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