Paid-Up Capital

Reason to increase paid-up capital?

Doing Business in Malaysia Note #1: Why should I increase my company’s paid-up capital?

Normally, there are FOUR (4) REASONS where the company may find itself in the situation whereby it may need to increase its paid-up capital:

1. Requested by Bank

2. Project Tender Requirement

3. Licence Requirement

4. Corporate Image

Doing Business in Malaysia Note #2: Reason 1 : Requested by Bank

As part of the terms and conditions in the Letter of Offer from the Bank for business loan applications submitted by the Company, the company is required to increase its paid-up capital as may be required by the Bank.

For example, a company is required to increase its paid-up capital from RM1,000 to RM200,000 as part of the requirement for the RM1,000,000 bank loan application from a bank.

Doing Business in Malaysia Note #3: Reason 2 : Project Tender Requirement

As one of the qualification requirements, the company is to have at least a certain amount of paid-up capital before it can submit any project tender document.

For example, a company may be required to have at least RM100,000 paid-up capital to be pre-qualified for certain projects.

Doing Business in Malaysia Note #4: Reason 3 : License application

A company operating in certain industries may be required to have certain licences before they can commence its business operations.   Or a company needs to have at least RM500,000 paid-up capital before they can apply for a working visa for its foreign staff with Immigration Department.

Doing Business in Malaysia Note #5: Reason 4 : Corporate Image

A 2-dollar company is not better than a company with paid-up capital of RM100,000!

In Malaysia, any increase in paid-up capital by a company will normally be required to produce some proof or evidence that the company has received the relevant amount of money from respective shareholders, that is why your company secretary will request “bank-in slip” from the director before preparation of the relevant documents.

Doing Business in Malaysia Note #6: Why does the increase of capital need a bank-in slip from you, as directors of the Company?

It is stated clearly in the Section 186 of the Companies Act, 1965 which has been extracted as follows:

• No allotment shall be made of any shares of a company unless the minimum subscription has been subscribed and the sum payable on application for the shares has been received by the Company.
• If a cheque for the sum has been received by the company, the sum shall be deemed not to have been received by the company until the cheque is paid by the bank.
• Every director of a company who knowingly contravenes or permits or authorises the contravention shall be guilty on an offence against this Act.
• Penalty: in the case of the company, to a fine not exceeding five million ringgit and in the case of the officer or promoter of a company or a proposed company, to imprisonment for a term not exceeding five years or to a fine not exceeding five million ringgit or to both.