Winding Up A Company: Voluntary Winding Up
Aside from applying for striking off Singapore’s official registry of businesses, a company slated for closing can also undergo a process called winding up. Also known as liquidation, this process will involve the sale of company assets for cash – a task undertaken by an appointed liquidator. All the funds pooled from the asset sale will be used to pay off the company’s creditors. All funds that remain after all payments will then be distributed to the members.
A company can undergo any of two types of winding up: voluntary and compulsory.
Voluntary winding up involves two processes: members’ voluntary winding up, and creditors’ voluntary winding up. The winding up process starts with the passing of a resolution by the members during a general meeting.
The members’ voluntary winding up is ideal for still-solvent companies. A general meeting would be held after the company stops all operations, given the assurance that all its debts will be successfully paid off within 12 months. This will be followed by a special resolution, which needs to earn three-fourths of the approval of all the members entitled to vote. A company then appoints a liquidator to wind up the company, at which time directors will also be stripped of their authority in running the company.
The creditors’ voluntary winding up, on the other hand, would involve a company that is already insolvent-meaning, the company’s creditors would move to wind it up because they believe it could not anymore pay off its debts and operate at the same time.
The company will have to undergo the same process as in the members’ voluntary winding up, only that a meeting with creditors must follow the general meeting of members, where they would come up with a resolution to undergo voluntary winding up. With the presence of the creditors, company directors are tasked to report on company affairs, and then move to wind it up. This is then subject to majority vote, after which a special resolution will follow and a liquidator appointed.