Liquidation Options for Singapore Company
The following details give you information on how to liquidate a Singapore company. This guide sheds light on the process for “striking off” or “winding-up” your Singapore company.
How to Strike Off or Wind-Up a Company in Singapore
Winding Up and Striking Off are the 2 main ways for liquidating a Singapore company that has stopped conducting business. Either of these ways leads to the non-existence of the company. But it is important to know that different procedures are required for achieving either.
The differences exist in terms of the law and the administrative and logistical processes involved in a company that is shut down willingly by the owner, and the company that is closed down under Order of a Court in case it turns out to be insolvent.
An insolvent company in Singapore is defined as a company that is unable to pay off its debts when they become due or a company that bears more liabilities than its assets. In such a case, a creditor has the power to take legal action against the company by filing an application in court. The creditor will also have to provide evidence of debt to get a judgment against the Singapore Company with regard to his / her debt. Thence, the creditor may also request the Court to wind up the company if it is unable or not interested in repaying or settling the debt.
There could be other reasons as well for closing down a Singapore company. This includes the following:
- The company has stopped its business activities because of regular losses or because it has become dormant.
- There has been a breach of law/regulations by the company or its officers or offence(s) with regard to non-compliance.
- The company is undergoing corporate restructuring because of internal reasons or as part of the group.
- Irresolvable dispute(s) have arisen between its shareholders.
THE STRIKE OFF PROCESS
A Private Singapore company that doesn’t engage in any other business while meeting the minimum conditions can apply with the Company Registrar for getting “struck-off” the Register. Usually, it is a simpler, inexpensive and faster way to strike-off a company. It is ideal for the companies that meet the following conditions:
- If the company is small
- If the company has remained dormant
- If the company has been able to fulfill the minimal requirements
- If the company was incorporated not more than 18 months ago
- If the strike off date is before the due date of the AGM
However, a Singapore company cannot apply to be struck off if it has been involved in certain arrangement or compromise with the members or creditors of the company or in a court proceeding or insolvency proceeding. Again the company is ineligible to be struck-off if they have due liabilities against the government, such as unpaid taxes to the Inland Revenue Authority of Singapore (IRAS).
THE WIND-UP PROCESS
The process involves a more intense process of liquidation that involves the following:
- Methodical winding up of the affairs of the company
- Appointing liquidator for managing the procedure for realization of company assets
- Stopping all company operations or sale of the company
- Paying off any existing debts
- Distributing all surplus assets among the company members
Detailed information about Striking Off or Winding Up a Singapore company will be provided in the following paragraphs. Due to the complicated nature of these processes, it is best that you hire the services of a professional agency for handling the case of shutting down a Singapore company.
CONDITIONS TO STRIKE-OFF A SINGAPORE COMPANY
If a Singapore company wants to strike off its name off the Register, it will have to apply to the ACRA. The ACRA is going to approve this application only if the company is able to fulfill the following conditions:
- The company shouldn’t be involved in any court proceedings within or beyond the borders of Singapore and that it has stopped all business.
- The company shouldn’t have any liabilities and assets when making the application. The scope of liabilities include outstanding fines, penalties or any dues to the government such as tax liabilities to the IRAS.
- The company’s officers such as the director(s) or company secretary(s) shouldn’t have any outstanding issues with the ACRA such as any civil charges or summons.
- The director(s)’ particulars should be the same as mentioned in the records with the ACRA.
- The strike-off should receive the consent of every shareholder and this should be obtained in the form of a letter of consent.
PROCEDURE TO STRIKE OFF COMPANY
The process for striking off a company takes around 5 to 6 months. It involves many steps that should be fulfilled in pursuing the strike-off.
- An application needs to be made to the Company Registrar. The ACRA could take maximum 7 business days for processing the application. The duration will depend on how complex the case is and if the provided documentation supporting the application completely meets the requirements or not.
- The ACRA will evaluate all the documentation and carry out an investigation. Once the ACRA finds that the company meets the conditions for striking off, it will issue a “striking off notice” to the following:
- The company at its registered official address
- The officers of the company including the director(s) and company secretary at their residence address
- To relevant Singapore authorities
Four months after the issue of the notice, the ACRA sends out a final notice that the company is struck off its Register. This notice will then be published carrying the date of striking off. Any objection against the striking off can be raised at this time.
CONDITIONS TO WIND UP A SINGAPORE COMPANY
A company may face a wind-up situation from voluntary or obligatory requirements.
VOLUNTARY WIND UP
When a Singapore company undergoes voluntary wind-up, the process can be initiated either by its members or its creditors. The process is as following:
- A majority of the directors should produce a Declaration of Solvency at the Board meeting, and it should be filed in writing with the Registrar. A notification should be made to all the company members of the Extraordinary General Meeting (EGM) called for passing the Special Resolution for winding up the company. Liquidators should be appointed by passing an Ordinary Resolution. It must also approve their remuneration. This EGM should be called within 5 weeks of the Director’s Meeting agreeing to the Declaration of Solvency.
- The director(s) will appoint a liquidator who will be provisional until the EGM leads to the appointment of an approved liquidator. It will be required to publish a notice claiming the appointment of the interim liquidator along with the copy of the Statutory Declaration within 2 weeks of this appointment in each of an English, Chinese, Malay and Tamil language dailies.
- The EGM should pass a Special Resolution that approves the winding up of the company by a majority of 3/4th of the votes of all the members who hold the power to vote. Thence, the members must also appoint a liquidator and his/her remuneration. This liquidator should be a natural person(s), generally an accountant, who has/have already addressed their consent in writing.
- A 2nd Special Resolution is passed to give power to the appointed liquidator(s) for the division of all the assets and properties of the company among its members, such as shareholders.
- The 2nd Special Resolution involves fielding with the ACRA within 7 business days after it has been passed. Within 10 days of passing it, a notification needs to be published in at least 1 Singapore newspaper. Thenceforth, all company documentation issued by its officers will have to mention the term “in liquidation” after the company name. Additionally, all company documents, books and records must be submitted to the appointed liquidator.
- The liquidator will work on settling all the affairs of the company while filing the mandatory notifications as per the Companies Act. The liquidator will be filing the notification and advertisements along with the settlement of any creditor claims. Then, the liquidator will file the accounts, the income tax clearance, and calculate any returns to the shareholders after clearing all the liabilities and debts.
- Once all the matters are wound up, it is the duty of the liquidator to draw up all the accounts and demonstrate the conducting of the wind-up process. This includes showing how the company’s property was disposed of. The liquidator will then call up a general meeting, where he/she will present and explain the accounts to the attendees. Within 7 business days of this meeting, the liquidator will have to inform the ACRA and Official Receiver about the meeting and attach a copy of the company accounts.
- 3 months after filing the application with the Registrar, the Singapore company will come to dissolution. The court, however, retains the power to void the dissolution up to a period of 24 months after this date of dissolution. This application could be made from the side the liquidator or any interested party.
Against a voluntary wind up, a creditor’s voluntary wind up can be initiated if the director(s) of the Singapore company think that its operations cannot continue due to liabilities. In such a case, the company will have to appoint a liquidator for winding up its affairs and filling the mandatory notifications as per the Singapore Companies Act. This will be followed in the same way as mentioned above.
Once a Singapore company ends the phase of voluntary winding up, it will have to cease all business operations except what is essentially required for the process of winding up. The powers of directors will stop to exist with the exception where the shareholders and the liquidator(s) consent that the director(s) will continue with their powers in a few matters. Any transfer of shares is disallowed and will be void unless the liquidator(s) sanctions it. It will not be allowed to bring any changes to the status of the company members after the shares transfer (if any).
COMPULSORY WIND UP
A mandatory wind up of a Singapore company may be initiated if there is a Court Order under certain situations:
- The company fails to pay its due debts
- The Court finds that it is reasonable to wind up the company
The wind-up proceedings can be initiated by any of the following:
- The company
- Company creditors
- Company shareholders
- Board appointed liquidator(s)
- Judicial manager
Then, the Court will appoint a liquidator or an Official Receiver (if the liquidator is not appointed) to manage the winding up of the Singapore company.
The liquidator will review the company assets and claims of creditors for producing a Statement of Affairs about the assets and liabilities of the company. This also involves carrying out an investigation for the conduct of the director(s) and other parties involved for realization of the company’s assets in the best interests of both the company and the creditors. The liquidator is authorized to continue running the business if he finds it to be the ideal option. The company officers will be required to support and cooperate even if they don’t have the power to run the operations or in matters they are not allowed by the Court.
The liquidator will arbitrate all the claimed made against the company and will be liable to accept or reject them, after having evaluated all the assets of the company. once the liquidation expenses are settled from the assets of the company, all the surplus after having paid the creditors and employees (if there are any pending wages) will be handed over to the shareholders.
WHERE DOES THE COMPANY STAND AFTER WINDING UP
Once the winding up order is given or the provisional liquidator is appointed, a leave of court is required for taking any action against the company. This requires filing an application with the court for getting a stay on the proceedings against the company by presenting a wind-up petition. This is done before the court makes a winding up order.
Transfer of any shares is not allowed and stands void during this period unless it has been approved by the liquidator. After the transfer (if allowed), the status of the company members cannot be changed. No disposition of the company property is allowed after the court puts the process of winding up a business in motion unless it has been sanctioned by the court itself.
The wind-up order of a Singapore company doesn’t affect the right of a secured creditor to realize his/her security in the company assets. But a creditor cannot have any attachment or continue to have any proceedings against the company once the petition for wind up has commenced.
A responsible party can be made liable to pay the company debts at a personal level if the liquidator or the Official Receiver comes across the following findings during the course of investigations. If the liquidator or Official Receiver notices that for a specific period before the winding up was initiated, the company was occupied in some “voidable transaction”. This includes any business, disposal, diversion or divestment of company assets that involved certain kind of financial advantage such as the following:
- Inequitable preferences with regard to paying company creditors
- Underrated disposals
- High-value credit transactions
Any of these activities has been done with the intention of deceiving the creditors or for any deceitful purpose. The liquidator/Official Receiver or creditor(s) or company contributory in such a case can request the Court to make such a person/party liable for the company debts.
Any dealings involving mutual credits/debts between the Singapore company and its creditor can be started against each other and a party can claim the balance (if any) against the other party. But it is not possible to make a claim for a setoff if the credit agreement has been made at a time when the wind-up petition was already initiated against the company. It is not possible to get out of these setting off regulations and they are enforced strictly by law.
ADDITIONAL LEGAL CRITERIA AROUND COMPANY LIQUIDATION
The company will have to inform the following organizations that its business has ceased, and thus all outstanding issues with them stand settled:
- Inland Revenue Authority of Singapore
- Accounting & Corporate Regulatory Authority
- Central Provident Fund Board
Even licensing authorities and other government agencies relevant to the business should be informed. This can include the Customs & Immigration Authorities, Monetary Authority of Singapore, Ministry of Manpower and others.
NEED FOR PROFESSIONAL SUPPORT FOR CLOSING YOUR SINGAPORE COMPANY
Once you have determined to shut off your Singapore company, it will be best to get the professional support of an experienced service like Richmond. We can evaluate your company’s situation, suggest the best strategies, and provide help with the entire procedure. It is essential to have such a professional service helping you because the closure of a Singapore company is a complicated and time-consuming process. You will have to comply with a wide range of statutory legal requirements that you cannot do on your own.