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How to Handle the Process of Liquidating or Winding Up a Company
If you are preparing the handle a Singapore company liquidation or winding up, then this guide is for you.
What Does It Mean to Liquidate or Wind Up a Company?
There are two ways that a company can be closed in Singapore. It can be closed either by:
- Voluntary basis by the owners
- Court order
Per the Singapore Company Law, if a company is insolvent, the directors have a responsibility to wind up the company. A company that can’t pay its debts is considered insolvent.
Creditors can go to court and apply for judgment if a company cannot pay its debts. If they still have not received their payment, the next step is to apply for a company to be wound up by the Court.
Why Close a Company?
A Singapore company liquidation or winding up could happen for several reasons. Generally, common reasons a company closes includes:
- Disputes between shareholders that can’t be resolved
- Company is not making profits
- Company is not in business anymore
- The company can’t pay its debts
- Company is dormant
- Company has breached statutory offences
- Corporate restructuring
- Financial restructuring
With a Singapore company liquidation or winding up, a company will cease to exist. While the result is the same, liquidation and striking off are two different processes.
What is a Strike Off?
Private companies can apply for a strike off with the Singapore Company Registrar. The application will be submitted with the Accounting and Corporate Regulatory Authority (ACRA). In doing so, they will be struck off the register. Strike offs are faster and easier. They are also less costly. However, this process is not suitable for all businesses. Usually, you would need to meet specific requirements.
To be able to strike off your company, you must meet the following conditions:
- No longer trading
- Not involved in any court proceedings in or outside Singapore
- No outstanding penalties owed to the Registry
- No debts owed to the Government
- No outstanding liabilities with IRAS
- No assets and liabilities
- No outstanding summonses with ACRA (applicable to directors and Company Secretary)
- Director’s details must match ACRA’s records
- All shareholders must consent to the strike-off
- Obtain a letter of consent from each shareholder
Applications will be processed by ACRA within seven days. The speed would depend on how complex the case is. If your company is eligible, you will receive a “Striking Off Notice”. This will be delivered to the registered office address and the tax authorities.
The final notification will be given within four months. This will announce that your company has officially been struck off from the Registry. The entire process will take between five to six months to finalise.
What is the Winding Up Process?
This process is formally liquidating a company. This means a company appoints a liquidator to officially handle its affairs and manage the process. Payment of debts and distribution of assets will be divided among the members.
Both the Singapore company liquidation or winding up are complex processes. This is why it is best to engage the services of a professional like 3E Accounting to help you navigate the proceedings.
Winding ups can be done either voluntarily or compulsory. For a voluntary wind up, majority directors must produce a Declaration of Solvency. This must be a written document presented at the Board meeting. It will be filed with the Registrar and a notice will be sent to all members of the EGM (Extraordinary General Meeting). The EGM is help specifically to pass the resolution to wind up the company.
An ordinary resolution will be conducted to appoint a liquidator. Usually, the liquidator will be an accountant. This must be done between the period leading up to when the EGM was held. A copy of the Statutory Declaration and the appointed liquidator must be advertised within fourteen days. The announcement must be published in the English, Chinese, Malay, and Tamil language newspapers.
The liquidator will have power after a second Special Resolution has been approved. They will then have the power to divide properties and assets among the shareholders. Special Resolutions must be filed within seven days to ACRA. Within ten days, the notice of resolution must be published in more than one newspaper in Singapore. The liquidator then has the authority to handle the company’s assets, liabilities and debts.
Once the process is complete, the liquidator will complete the final accounts. Details of the winding-up process will be in here, including how assets and properties were disposed of. The liquidator will present this at a called-for General Meeting. They will have seven days to then lodge this with ACRA and the Official Receiver. After three months, a company is considered dissolved.
When voluntary wind-ups have been approved, a business must cease operations. Directors will no longer have power too. Transfer of shares is also prohibited.
As for compulsory wind-ups, these are done via Court Order. The Court will appoint a liquidator or Official Receiver if none has been selected yet. The liquidator must review the company’s assets and the claims made by the creditors. The liquidator will then adjudicate all the claims lodged against the company. Once done, they will deal with the assets accordingly. Once the cost of the liquidation has been settled from the company’s assets, any remaining surplus will be returned to the shareholders.
Seed Help with Your Singapore Company Liquidation and Winding Up?
The process of winding up and liquidating a company can be time-consuming, complex, and costly. Therefore, it is highly recommended you seek the advice of a professional if you do decide to close your company.
At 3E Accounting, we can assist you based on your unique situation. Our team of professionals will recommend the best solution for your business. We will assist you throughout the entire process from start to finish so you never have to worry about missing a step. For more information about our services, contact the 3E Accounting team today.