INCREASE AUTHORISED AND PAID-UP CAPITAL SYARIKAT SDN. BHD.

QUESTION

Dear Radzi,

May you explain to me on how i can increase my paid-up capital for new company. For example, after opening a bank account, then i deposit let say RM 50 k. Therefore my company paid up capital now increase & become RM 50 k.

Please advise whether my understanding is right.

Regards,

Mohd Isa

ANSWER

Salam.

In Syarikat Sdn. Bhd., paid-up capital will only recognised when it has been lodged at SSM through issuing Form 24 (Increase Authorised and Paid-up Capital).

Refer to your case, when you put deposit in bank amount of RM 50k, it will be only be recognised as :

a. If you as Director: Amount Due to Directors (Liability)

b. If you not a Director: Others Payables and Accruals (Liability)

If u want to be as part of capital (Paid-up Capital), you need to register with SSM as I mentioned above. Person who holds the shares (Paid-up Capital) will be called as Shareholders.

Increase Paid-up Capital:

As I mentioned before, we need to lodged to SSM through Form 24 regarding issuing or increasing Authorised or Paid-up Capital. Without this, what ever amount we put into the Company will be consider as Liability (as above).

There are 2 ways of increasing the Paid-up Capital.

1. By Cash: we need put cash money when acquired the shares

2. Other Than Cash: Assets, Converting Liability to Equity (i.e. Amount Due To Directors or Others Payables).

Current issues:

Most of Companies Secretary will increase paid-up capital without realising that issuing shares must be proved by Cash and Other Than Cash (as above). Even though its wrong by Companies Act 1969 but the Company Auditors will adjust the status by the end of the Financial Year Ended (Audit Report) based on condition. This case mostly happens for new incoporated Companies.

Thank you.