Company Liquidation Singapore Complete Guide

Company liquidation Singapore- At times, business doesn’t go well as expected. There may be several reasons behind the failure of the business. However, whatever may be the reason if your business is not operating well, then there is no use to continue operating the business.

Basically, such kinds of situations raise due to credit problems, accumulating bills, waiting for payments that never happen, Lack of knowledge of business practices, and one of the exact translation of business documents to for understanding the contract, commercial operations. If this happens with you as well, then choosing to liquidate your company is an ideal option. This article describes the process of liquidation of the company in Singapore and the requirements associated with it.

Reasons for company liquidation in Singapore

A company can be liquidated by its owners or by order from the court under several situations, i.e. when the Company forbids the regulations. As per Singapore company law, company directors are responsible for winding up the insolvent company. An insolvent company is a company not having enough funds to pay off all its outstanding debts. However, a creditor can approach the court and register the report against the Company in debt. If this option is not helpful and creditors have not got the payment yet, then they can go for another option i.e. to request the court to order the company to wind up if the company is insolvent.

Some of the key reasons for the liquidation of the company are given below:

• The primary reason for the liquidation of the company is that company does not have enough funds and resources to pay all its debts and is insolvent.
• The owners of the company have discontinued all the business activities or are not giving any outcomes.
• The company is inoperative, and its owner doesn’t show any interest in paying ongoing compliance and maintenance costs.
• Another reason for the liquidation of the company is because of some serious dispute among the shareholders.
• Forbidding statutory provisions like committing an offensive act

What are the ways to liquidate a company in Singapore?

There are two ways under which a company can be liquidated, either by striking off or winding up—winding up and striking off both leads to company liquidation in Singapore. Moreover, both are different from each other, so do not get confused in their process.

If the private company is not operating, neither meet any other condition might request the company registrar to strike off the register. However, striking off is the much straightforward, faster, and less costly liquidation process of the company. It is the perfect option especially for small and dormant companies that continually fail to meet specific company requirements.

Winding up is another option for company liquidation in Singapore; it is a much precise process as it involves the orderly winding up of the company and its affairs. To use this procedure for company liquidation, you will require hiring a liquidator to handle all the processes of realizing the assets, paying all the debts (if any), ceasing or selling its operations, and dividing surplus assets among its employees (if any).

Further information regarding the striking-off and winding up method for company liquidation in Singapore are covered below. However, there are several issues and complexity involved in this procedure of company liquidation, so it’s better to consult with a professional to help you in this regard.

Striking off a Company

A  Singapore company could apply for   Accountants and Corporate Regulatory Authority (ACRA) to strike off their name from the register as per section 344 of the Singapore companies act. However, ACRA will only approve if they discover that Company is not properly operating its activities and also fulfills the requirements for striking off.

What are the requirements for a company liquidation?

Some of the requirements for company liquidation through the striking off are given below:

• The company that has requested liquidation through striking off should not be part of any court proceedings, whether inside or outside Singapore.
• The company requesting for liquidation should not hold any outstanding tax liabilities with IRAS (Inland Revenue Authority of Singapore)
• The details of the company directors must match with the records with ACRA.
• All the company shareholders should agree to the striking-off, and the company is also required to present the consent letter issued from every shareholder.
• The company should not have any available assets and be liable while filling the application.
• The company requesting liquidation should not be in debt with any of the concerned government departments.
• The company should not have any pending tax liabilities with IRAS (Inland Revenue Authority of Singapore)

Procedure for liquidation application

The liquidation Company application needs to be submitted to the Company registrar. Based on the clarity and complexity of the application and if the documents are provided in the right manner and are sufficient, then ARCA might take up to 7 working days to process the company liquidation application.

If Accounting and Corporate Regulatory Authority (ACRA) is convinced that Company entirely meets the requirements for striking off, then striking off notice will be sent to the company’s registered office, to its directors, and the company secretary at their registered residential address, along with the Singapore tax authorities. Once four months have been passed, the final notification will be issued mentioning that the company has been struck off the register. The final notification will include the date and time when the Company strikes off from the register. Still, if any individual wants to object to the striking-off, they can do so within the given time frame. The entire Striking off for company liquidation in Singapore will take 4 to 6 months.

Winding up a Company

If you choose the winding-up option to liquidate a company in Singapore, then there are two options: voluntary winding up and compulsory winding up.

Voluntary winding up

Either the members or creditor can request for voluntary winding up of Singapore Company.

Members’ Voluntary Winding Up

A company might make the decision to wind up its affairs voluntarily; the directors of the company feel that the company can easily pay off all its debt within the timeframe of 12 months following the date of commencement of winding up.

In most companies, directors need to file the written declaration of solvency at the board of director’s meetings. After the declaration is filed with the registrar, the board of directors needs to send a notice of an Extraordinary General Meeting (EGM) to all the members out there to gather the reason behind passing the Special Resolution for winding up the Singapore Company along with the ordinary resolution to hire the liquidators and confirm their remuneration. The extraordinary General meeting will be organized within five weeks following the date of the directors meeting and implementing the solvency declaration.

At the same time, with organizing the meeting, the director or the company partners must also proceed to hire an approved liquidator to be the professional liquidator concerning the issuance of the declaration of solvency and holding EGM. The issued notice of hiring liquidator and a photocopy or statutory declaration needs to be advertised within 14 days following the hiring date of the professional liquidator in a minimum of 4 local daily newspapers and in each newspaper, the notice should be published in English, Malay, Chinese and Tamil languages respectively.

At the extraordinary general meeting, the Singapore Company’s voluntary winding up must be resolved to bypass the special resolution; this can be done if the majority of the members, i.e., 75% of the members’ votes, should be in favor and get liable to caste vote. Moreover, one or more natural persons who have already provided their written consent should be hired as liquidators. In Singapore, most accountants are usually selected for this position. At the same time, the second special resolution also needs to be passed, i.e., to grant the appointed liquidator to divide all assets of the company between the members.

After passing the special resolution within the seven working days, you will require to file the printed copy of the special resolution with ACRA. Within the time span of 10 days, the notice of the same resolution must be advertised in one or more newspapers that circulate throughout Singapore. Additionally, the company requesting liquidation in Singapore also needs to make sure that the documents issued by or on behalf of the company should state the company’s name and includes the words “in liquidation” after the company name. The company must submit all the company books and records to the appointed liquidator managing all the assets and liabilities of the company.

After the special resolution at the extraordinary general meeting has been successfully passed, then the member voluntary liquidation of the company process will also begin. The provisional liquidator or liquidator has the responsibility to wind up all the Company affairs and file the required notification that is needed according to the companies act.

The liquidator is responsible for preparing and submitting the required notice of advertisement along with the necessary settlements of the creditor’s claim. However, he is also required to present in the company income tax clearance, file all the necessary company accounts, and evaluate the total amount that will be shared among the company’s shareholders once the payment of all the outstanding liabilities and debts has been processed.

As quickly as the company’s affairs have been entirely wound up, the liquidator has to draw the account, presenting the process of wounding up and including how the company’s assets have been disposed of. After that, when all these things are done, they will require to attend a General meeting of the company to present and explain everything regarding the account. Then, within seven days of the meeting, the liquidator has to submit a return with ACRA and the official receiver mentioning the date of the meeting and providing a photocopy of the account.

After three months of the lodging of the form with the registrar, the company will be liquidated. However, the court still has the complete right to declare the company as null or void at any time within two years following the date of liquidation. The application can be filed either by the liquidator or by any other person.

Creditors’ Voluntary Winding Up

Despite its name, “creditors,” it doesn’t mean that the creditors will implement the company’s winding up.

Instead, the process of winding up the company will be initiated by the company itself. However, the creditor can suggest hiring a liquidator or inspecting if the company needs to be wound up or not.

The procedure of creditor winding up a company is quite similar to the member’s voluntary winding up. Moreover, two additional steps are included in the creditor’s voluntary winding up of the company compared with member’s voluntary winding up. These two steps are:

• The hiring of the provisional liquidator
• Involvement of holding of a creditors meeting

Hiring provisional liquidator

A provisional liquidator is the certified insolvency practitioner who aims to ensure that the company assets and resources are upholding within the period of filing a winding-up petition until the company gets wound up.

Before appointing a provisional liquidator, the company’s directors must issue and submit the statutory declaration with the Official Receiver. Besides this, they are also required to submit the declaration with Accounting and Corporate Regulatory and Authority (ACRA) mentioning the following things:

• The declaration should include that company is not granted to continue operating its business.
• They will also organize the meeting with the company creditors within 30 days following the date of declaration.

The declaration with ACRA needs to be submitted in the Form VWU-1 and should include the following things:

• The information of the Company director submitting the declaration.
• The present name of the company

After the provisional liquidator has been hired in the company, the statutory declaration is given above and appointment notice of the provisional liquidator must be publicized in a minimum of one English local daily newspaper in 14 days of liquidator appointment.

The provisional liquidator will be appointed for one month or until the date given by the appointing company, whichever comes first. However, the official receiver can extend the lasting time for the professional liquidator to more than one month.

Holding of a creditors’ meeting

The company needs to hold the meeting of creditors of the company on the same day when the special resolution for the company wind up has been passed. The time and place of the meeting will be decided considering the convenience of the majority of the creditors.

The invitation notice of the creditor meeting needs to be sent:

• Along with the statement mentioning the name of all the creditors and the required amount of their claims
• The notice of the creditor meeting must also be publicized in at least one English local newspaper seven days prior to the meeting.
• On the date that will allow at least ten days to prepare themselves for the meeting.

Compulsory Winding Up

Another way the company can be wound up is under compulsory winding-up, commonly known as wound up under court order. This happens under certain situations that can be when the company cannot pay the outstanding debt or when the court thinks that the company is forbidding the regulations and needs to be liquidated. The company’s creditors, shareholders, liquidator, and the company itself can initiate the liquidation process with the High Court. The liquidator will be appointed by the High Court to manage all the liquidation procedures and affairs of the company. In case there is no liquidator appointed by the court, then the official receiver will be considered as the liquidator of the company.

The appointed company’s liquidator will begin inspecting all the Assets of the company and claiming the number of creditors and look after the director and other members to dispose of the company’s assets in the best interest of the company and creditors. However, the liquidator might also carry on the business if they think continue operating is the beneficial option.

Once all the company’s assets have been realized, it is the liquidator’s responsibility to settle all the clients lodged against the company and accept or deny them accordingly. If there is any surplus that remains after paying the creditor claims and the cost of liquidation, then it will be distributed among the company’s shareholders.

Alternative Reasons for Winding up a Company Through Court Process

There are many reasons other than insolvency for which Court may order the company to be wound up. Some of the situations are given below:

• There are no available members in the company
• If the company doesn’t operate the business activities in the year of incorporation or suspend its business operation for the complete year
• If the directors of the company are thinking about their benefit only in the company’s affairs instead of showing interest towards the other members as well.
• If the company is involved in illegal marketing and selling activities to grow the business
• As per the opinion of the court, it is good for the company to be wound up.

Order of Payment of Debts

A winding up of the company means ending all the business activities, paying out all the outstanding debt, cashing out all the company’s assets, and paying to the shareholders. Besides this company is also required to do the following things:

• Pay the entire outstanding amount to the employees
• Eliminate all the phone and internet services
• You will require eliminating all the contracts with the business partners.
• Notify the customers that your business is no longer active
• You will also require to includes ‘in liquidation’ on the company website.

A creditor of the company require to file the application form CWU –1 in order to submit the proof of debt provided to the company:

• Name and address of the creditors
• The amount of debt that was outstanding from the date of commencement of winding up
• Complete details regarding when and how debt was incurred.
• Relevant documents supporting the evidence

Notification Requirements for liquidation

The company is responsible for informing the following statutory body regarding the liquidation of their business:

• Accounting and Corporate Regulatory Authority (ACRA)
• Central Provident Fund (CPF) Board
• Inland Revenue Authority of Singapore (IRAS)
• Relevant Licensing Authorities

After considering the above guide on liquidation of the company in Singapore, you might be aware of how complicated it is to liquidate a company in Singapore. So read the guide properly and implement the things step-by-step.

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