Liquidation in Singapore
There are various reasons why a company cannot or chooses not to continue its operations.
These are some reasons why a company may consider closing down
- If the company has ceased business activities
- If there is a management deadlock
- If the company is in breach of statutory provisions, including offences committed
- If there is a dispute among shareholders
There are requirements that the company must fulfill
- The company must have ceased trading
- The company must not be involved in any court proceedings whether inside or outside Singapore
- The company must have no assets and liabilities at the time of making the application
- The company must not have any outstanding penalties or offer of composition owing to the Registry
- The company must not have any outstanding tax liabilities with IRAS (Inland Revenue Authority of Singapore)
- The company must not be indebted to other government departments
- The officers (e.g. Directors and Company Secretary) of the company must not have any outstanding ACRA summonses 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 two main ways a company can be closed down are as follows
- Winding up
- Striking off
While winding up and striking off can both result in the permanent end of an existing company, both of them aren’t the same and should not be confused with each other.
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 by the Company Registrar, ACRA may take about 7 working days to process the application, based on complexity of the case and whether the documentation submitted in support of the application is sufficiently furnished and/or comprehensive to meet the requirements.
Subsequently, if after assessing the documentation and doing its investigations, ACRA is satisfied that the company fully meets the criteria of 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 of 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. This is known as the Final Gazette Notification. If there is anyone who objects to the striking-off, they can do so at this point.
Winding up a company
The two main paths to winding up a company are voluntary winding up and compulsory winding up.
Members’ voluntary winding up
This is when the members of a company decide to liquidate their company voluntarily.
A company must be able to pay its debt within 12 months after the full commencement of the winding up process in order for its members to be able to wind it up voluntarily. The directors of the company are required to file a declaration of solvency.
Creditors’ voluntary winding up
If the company is not solvent, the company can convene a meeting with its creditors to consider its proposal for a voluntary winding up of the company.
Effects of voluntary winding up
- A liquidator needs to be appointed
- The authority and powers of the directors will cease, except where the shareholders and the liquidator decide or deem it fit for them to continue to have such powers
- Shares transfer is void unless it is sanctioned by or made to the liquidator
- After the date of the special resolution, the company must stop its business activities
Compulsory winding up
Under certain circumstances, a company may be wound up under an order from the court. The shareholders of a company, its creditors or the judicial manager can initiate the liquidation process by presenting a winding up application to the High Court. The court may appoint a liquidator to wind up the affairs of the company.
A company would normally cease upon the order of liquidation. The liquidator appointed will review the assets and liabilities of the company. Also, the liquidator will look at the conduct of directors and/or any other related people to realise the company’s assets in a manner that best suits the company and its creditors. The liquidator may choose to continue the business if he considers that is the best option available. The officers of the company generally will be deprived from their power to run the company but still has the duty to assist and advise the liquidator to run the affairs of the company. This also includes the submission of Statement of Affairs on the company’s assets and liabilities.
After all the assets and liabilities has been realized, the liquidator will adjudicate all the claims lodged against the company and admit or reject them accordingly. Any surplus after paying the creditors and cost of liquidation will be returned to the shareholders.
A company must notify the following authorities as part of liquidation
- Accounting and Corporate Regulatory Authority (ACRA)
- Inland Revenue of Singapore (IRAS)
- Central Provident Fund (CPF)
- Relevant Singapore Licensing Authorities