Singapore Company Liquidation
Striking off or winding up of a Singapore company
The two main ways that a Singapore company thar can be “closed down” are either by Striking Off or Liquidation. Striking off and Liquidation (also know as winding up) both result in a company ceasing to exist. However, very different processes are involved in deriving at either and they should not be confused with one another.
There are differences not just in the law but also the administrative/logistical procedures between a Singapore company that is being closed down voluntarily by its owners, and one that is being closed down by an Order of the Court if it becomes insolvent.
The basic definition of an insolvent company is a company that cannot pay its debts as they fall due, or one that has liabilities due in excess of its assets. A creditor may thus commence legal action against the company by making an application to court, backed by proof of debt, for a judgment against the company in relation to that creditor’s debt. Following which, that creditor may apply to the Court to have the company wound up if the company is unwilling or unable to repay or settle the debt.
Other common reasons a company may be closed down are: it has ceased business activities either because it is dormant or is not profitable (therefore the costs of ongoing maintenance and compliance are proving to be unsustainable); there is a breach of laws and regulations by the officers of the company or offences by the company for non-compliance; there is a corporate restructuring either internally or as part of a group of entities; or there is a dispute(s) amongst shareholders that are irresolvable.
Striking off Singapore company
A private company that is not doing any business and meets certain other conditions may apply to the Company Registrar to be struck off the Register. In general, striking off is an easier, faster and less costly procedure, however it is only suitable for small or dormant companies that are able to meet the specific requirements and especially if it was incorporated under 18 months and if it is before the date that its AGM is due. A company may not be struck off if the company if there are outstanding liabilities especially to the authorities, for instance, if it has taxes owing to the Inland Revenue Authority of Singapore (IRAS). Also, it cannot be struck off if it is involved in insolvency proceedings or a compromise or arrangement with that company’s members and/or creditors (examples may include Schemes of Arrangement).
Liquidation of Company
Liquidation is a more formal procedure that involves the orderly winding up of the company affairs, the appointment of a liquidator to manage the process of realizing the company assets, ceasing of its operations or its sale, the payment of any of its debts and distribution of any surplus assets among its members.
Liquidation involves the lodging resolutions with ACRA and Official Receiver and placing an advertisement giving notice of the liquidation of the company and the appointment of liquidators. The main types of liquidation are Members’ Voluntary Liquidation (where the company must be solvent) or a Creditors’ Winding Up (where the company is insolvent.
More details about Striking Off and Winding Up methods of closing a Singapore company are provided below. Given the complex issues involved, it is best to engage a professional services firm to handle the matter of closing down a Singapore company.
Striking Off a Singapore Company
To have its name struck off the Register of businesses, a company will need to apply to ACRA. ACRA will only approve the application if the company can satisfy the criteria below for striking off:
- the company must not be involved in any court proceedings whether inside or outside Singapore and it has ceased all business
- the company must have no assets and liabilities by the time of application, and liabilities include any fines, outstanding penalties or offers of composition owing to any governmental or statutory body eg. tax liabilities with IRAS
- the officers (e.g. directors and company secretary) of the company must not have any outstanding ACRA matters (eg. summonses, civil charges) against any of them.
- the particulars of the directors must be the same as in the records of ACRA
- all the shareholders must consent to the striking off and the company must obtain a letter of consent from each individual shareholder
The procedure of Striking off in Singapore
The entire striking off process takes about 5-6 months because there are several steps that need to be fulfilled in pursuance of the striking off.
First, an application must be submitted to the Company Registrar. ACRA may take about 7 working days to process the application, based on the complexity of the case and whether the documentation submitted in support of the application are sufficiently furnished and/or comprehensive to meet the requirements.
Subsequently, if after assessing the documentation and doing its own investigations, ACRA is satisfied that the company fully meets the criteria for striking off, a “striking off notice” will be sent to the company at its registered office address, to the company’s officers (directors and company secretary) at their residential addresses, and to the Singapore governmental authorities. After 4 months from that gazette, a final notification that the company has been struck off the Register will be published, along with the date that the company is struck off. If there is anyone who objects to the striking-off, they can do so at this point.
Liquidating a Singapore Company
A winding up may be voluntary or compulsory:
Voluntary Winding Up
In a voluntary winding up, a Singapore company can be liquidated voluntarily by either its members or creditors. Firstly, a majority of directors of the company must produce a written Declaration of Solvency at a meeting of the Board, and filed with the Registrar. A notice must be sent to the members of an Extraordinary General Meeting (EGM) to be convened for the purpose of passing a Special Resolution to wind up the company. Additionally, an Ordinary Resolution appointing the liquidators (and approving their remuneration) must be passed. The EGM must be held within five weeks from the Directors’ Meeting executing the abovementioned Solvency Declaration.
The next step after the meeting is that the directors are to appoint an approved liquidator to be the provisional liquidator between the period leading up to the holding of the EGM. The notice of the appointment of the provisional liquidator with a copy of a Statutory Declaration must be advertised within 14 days of the appointment of the provisional liquidator published in each of the English, Malay, Chinese and Tamil languages newspapers respectively.
A Special Resolution passed at the EGM, on approving the winding up by a majority of not less than 75% of the votes of the members entitled to vote needs to be passed, then a liquidator must be appointed (being one or more natural persons who have given their prior written consent, in practice usually an accountant).
A second Special Resolution is then to be passed, empowering the liquidator(s) to divide any and all of the properties and assets of the company among the members (eg. the shareholders).
This Special Resolution is then to be filed with ACRA within 7 days after its passing, and within 10 days, notice of that Resolution has to be published in one or more newspapers in Singapore. Further, from this point on the company must ensure that all documents that it or its officers issues (containing the company’s name) must be followed by the words “in liquidation” after its name, and all company books and records to be handed over to the liquidator.
The liquidator will then proceed to settle all the affairs of the company and file the necessary notifications required under the Companies Act. The liquidator will then file the relevant notice and advertisements including any settlement of creditors’ claims. Thereafter, the filing of the company’s accounts, the company’s income tax clearance, and the determining of returns (if any) to the company’s shareholders after paying off all the company’s liabilities and debts is attended to.
Finally, as soon as these matters are fully wound up, the liquidator must draw up accounts and show how the winding up has been conducted, including how the company property has been disposed of. A general meeting of the company will then be called by the liquidator, presenting and explaining these accounts to the attendees. The liquidator must, within 7 days after the meeting, lodge with ACRA and the Official Receiver, a return stating that the meeting has been held and attaching a copy of the account.
On the expiration of 3 months after the lodging of the form with the Registrar, the company will be dissolved. However, the court has the power to declare the dissolution of a company to be void at any time within 2 years after the date of dissolution. The application may be made by the liquidator or any other interested person.
Instead of a voluntary winding up, it is also possible to opt for a creditors’ voluntary winding up if the directors of the company believe that the company cannot continue business because of its liabilities. The company will then appoint a liquidator to wind up its affairs and file the necessary notifications required under the Companies Act, in the same manner as outlined above.
Upon a voluntary winding up, the company must cease all business except for whatever is required for the winding up (with effect from the passing of the special resolution). Additionally, the directors’ powers cease to exist, except where the shareholders, with the consent of the liquidator, have resolved that the directors should continue to have such powers and even then only in certain matters. Finally, any shares transfer is prohibited and void unless sanctioned by the liquidator, and it is not permissible to change the status of the members thereafter.
Compulsory Winding Up
If an Order of the Court is made under certain circumstances e.g. when the company is unable to pay its debts when they fall due, or when the court is of the opinion that it is just and equitable to do so, a company may be liquidated in that mandatory manner. Such an order may be obtained after proceedings initiated by either the company itself, its creditors, shareholders, the liquidator or judicial manager; thereafter, the Court appoints a liquidator (or the Official Receiver if none is appointed) to attend to the winding up of the company.
The liquidator, in order to produce a Statement of Affairs on the company’s assets and liabilities for the company’s submission, first reviews the company’s assets and the claims by creditors, as well as launches an investigation into the conduct of its directors and other persons to realise the company’s assets in a manner that is in the best interest of the company and its creditors. The liquidator is also allowed to authorise the carrying on of the business if he considers it the most beneficial option, and the officers of the company have the duty to assist and co-operate with him even though they are otherwise deprived of their power to run the company or in other matters not sanctioned by the Court.
Finally, the liquidator will adjudicate all the claims lodged against the company and admit or reject them accordingly, after all assets of the company have been assessed and dealt with accordingly. After the costs of liquidation have been settled from the company’s assets thereafter, any surplus after paying the creditors (often including employee wages) will be returned to the shareholders.
What Liquidation means for the company
After a winding-up order has been made or a provisional liquidator has been appointed, leave of court (the official permission of the Court) is needed to commence or proceed with an action against the company. Therefore, an application has to be made to the court to stay or restrain pending proceedings against the company after the presentation of a winding up petition and before a winding-up order is made by the court.
Any shares transfer during this period is prohibited and void unless sanctioned by the liquidator, and it is not permissible to change the status of the members thereafter; similarly, any disposition of the property of the company made after the commencement of the winding up by the court is void without the court’s sanction.
A secured creditor’s right to deal with or realise his security over company assets are not affected by the winding up order, however, no creditor is allowed to take out or continue attachment or execution proceedings against the company after a winding up petition has been initiated.
If in the course of investigations, the liquidator or Official Receiver finds that for a certain period prior to the winding up, the company engaged in any “voidable transactions” i.e. business or diversion/ divestment/ disposal of assets involving financial advantage of any sort eg. undervalue disposals, unfair preferences in paying creditors, extortionate credit transactions etc. with the intent of defeating or defrauding the creditors of the company or for any fraudulent purpose, then he, or any creditor or contributory of the company may apply to court to make the person who was responsible for such voidable transactions, or who was party to such activities to be personally liable for the debts of the company.
Dealings with mutual credits or debts between the company and a creditor may be set off against each other and the creditor or the company can only claim any balance sums due against the other; however, no claim for set off can be made if at the time of entering into such credit agreements, the creditor had known that a winding up petition was ongoing or pending against the company. These setting off rules may not be contracted out of and is mandatory.
Other legal requirements upon liquidation of a company
The following bodies must be informed by the company that it has ceased business, and therefore all outstanding matters with them resolved and settled:
- The Inland Revenue Authority of Singapore (IRAS)
- The Accounting and Corporate Regulatory Authority (ACRA)
- The Central Provident Fund (CPF) Board
- Other relevant licensing authorities and statutory bodies eg. the Monetary Authority of Singapore, the Customs and Immigration authorities, the Ministry of Manpower etc.
Seeking professional help to close your Singapore company
If you have decided to close your Singapore company, it’s highly recommended that you seek the help of a professional services firm like Rikvin that can assess your unique situation, recommend the best course of action, and assist you through the entire process. This is because closing a company is a very complex and time-consuming process, requiring you to comply with a myriad of all the necessary legal and statutory requirements.
Singapore company liquidation made straightforward
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