Two ways to close a company in Singapore
If you are considering closing down a company, Singapore offers two main ways to close your company, depending primarily on your company’s level of indebtedness, tax status and the state of its assets.
In both cases, a company must complete all the necessary final procedures to properly close the business. Certain consequences will follow from the omission of these actions, and business owners must be prudent to ensure that no further liability arises.
In this article, we will discuss the two ways of closing a company in Singapore – winding up your company and company strike off (also known as deregistration).
1- What’s the difference between winding up and striking off? Which one is right for me?
There are two categories/methods of company closures in Singapore.
Generally speaking, striking off is the faster way, a simpler process with less costs involved.
A strike off is the last step that is available once everything in the company has been “wrapped up” – specifically, that the company has no assets or liabilities (including any outstanding fines with IRAS), it is not the subject of any outstanding ACRA matters and it isn’t subject to any insolvency proceedings. Striking off is a process that is more suited for small or dormant companies.
In other circumstances, whereby there will be issues with fully discharging the company liabilities, you can only close down a company by way of winding up.
Winding up a company (or liquidation, as it is sometimes known) is a longer and more formal process. It requires the appointment of a liquidator to help manage the cessation of the business and its assets. It is a process that can be initiated whether your company is solvent or insolvent. For example, if your company is embroiled in a more sticky situation, liquidation is the more likely option for your company.
2 - Striking off a company/deregistration
A company director or company secretary may apply to the Accounting and Corporate Regulatory Authority (ACRA) for your company to get struck off from the Registrar. To be eligible, your company must deal with all its liabilities, particularly taxes and debts, and liquidate all its assets. Note that if the head office of a foreign company with a Singapore-based branch closes down, the local branch must also be liquidated. Companies must pay outstanding taxes and fulfill all tax obligations as part of the process of striking off the company.
- Applications will only be approved if there are reasonable causes to believe that the company in question is not carrying business, and meets all the criteria for striking off:
- Company has not started business since the incorporation date or has never commenced business (i.e No business transactions have taken place since incorporation)
- Company has no existing assets and liabilities
- The assets and liabilities of the company must have been disposed
- The directors must have obtained written consent from the majority of shareholders.
- Submitted the last set of audited account (for a public company limited by guarantee)
- Submitted the latest unaudited balance sheet (for all other companies)
- No outstanding tax liabilities with IRAS – IRAS will not issue a tax clearance letter for the purpose of applying for strike off (Latest Statement of Accounts)
- No outstanding tax issues and tax matters with IRAS( Last Notice of Assessment)
- No outstanding Central Provident Fund (CPF) contributions for employees
- GST registration has been canceled and there are no outstanding GST matters
- No outstanding debts (creditors will file claims against your business for outstanding debts – the responsibility is on your business to inspect these claims)
- No outstanding charges to the register or court proceedings
- Company is not involved in any legal proceedings and doesn’t have outstanding penalties (within or outside Singapore)
Once you think your company has met the above criteria, the director or the company secretary of your company may submit an online application through the BizFile website using CorpPass (government agency website) to proceed with the striking off. You may apply to ACRA to strike your company’s name off the Companies Register if it is no longer carrying on a business.
If your company has been dormant since the date of incorporation or since the submission of the last Income Tax Return (Form C-S/ C) and it has outstanding Income Tax Returns (Form C-S/ C) that were issued to it during the dormant period, please use the e-Service to Apply for Waiver to Submit Tax Return (Dormant Company) before proceeding to apply for strike off with ACRA.
- 30 days after your application has been approved:
- The Accounting and Corporate Regulatory Authority (ACRA) will publish the company’s name in the Government Gazette
- After 60 days from the first Gazette Notification, ACRA will publish the company’s name in the Gazette again and the company’s name will be struck off the register. Gazette Notifications are sent to the registered address.
- The above step is known as the Final Gazette Notification. During this period, you are allowed to withdraw your application at any time
It is important to remember that you can only proceed to the next step if there are no objections in your application. For instance, if there is an objection from interested parties, your company needs to resolve the objection within two months of submitting the application to be struck off, the objector should remove the objection. The whole process can take up to 4 months to review the assessment. If you change your mind, there’s a silver lining – a company can be restored within 6 years after the strike off.
Note that the officer of the company immediately prior to the dissolution of the company needs to ensure that all books and papers of the company are retained for a period of at least five years after the date on which the company was dissolved. You must not close the company’s bank account until all outstanding matters are settled.
3 - Winding up your company
Winding up (also known as liquidation) of your company is a formal process where your company’s assets are converted into cash, which is then used to pay off the company’s debts and liabilities. This step contains the distribution of the company’s remaining assets/surplus among your creditors and shareholders. Once this process is completed, it terminates the company’s existence. Some reasons why you may choose to voluntarily wind up your company include:
- Surrendering your business activities
- Not making enough profit to continue the business
- Disputes among shareholders
- Company or its officers (a person employed in an executive capacity) have breached their statutory duties
There are 3 ways you can wind up a company in Singapore:
- Members’ voluntary winding up
- Creditors’ voluntary winding up
- Winding up by the order of the court
#1 Members’ voluntary winding up
You can choose to go through this route if your company’s directors believe that the company’s debts can be paid in full within 12 months after the start date of their winding up. Once the decision has been made to choose the members’ voluntary winding up process, the following steps have to be taken:
- Majority of directors have signed the Declaration of Solvency (with an attached statement of affairs)
- An Extraordinary general meeting of members (EGM) shall be convened within five weeks in order to adopt resolutions to wind up the company, appoint liquidators, and approve their remuneration.
- Pass a special resolution for winding up the company and receive the assistance of a professional liquidator (held during an EGM)
- Meet the requisite solvency and publicity requirements
- After the resolution has been passed, it must be filed with the Accounting and Corporate Regulatory Authority (ACRA) within 7 days and be advertised in a Singapore newspaper within 10 days (one for each of the official languages English, Chinese, Tamil, and Malay).
- Notify IRAS for tax clearance (ie. by submitting a final set of management account and final set of tax computations up to the date of business cessation).
- Once tax clearance has been received from IRAS, the final meeting date will then be decided and the final advertisement will be published accordingly
After the affairs of the company have been wound up, the liquidator then has to draw up an account that will show how the winding up process was conducted and how the company’s property was disposed. Once the above steps have been done, the liquidator will then organise a final meeting where the account will be explained to the people present.
Within 7 days after the meeting has been held, the Companies Act requires that the liquidator lodge a return with the Accounting and Corporate Regulatory Authority (ACRA) and Official Receiver showing that the meeting was held with a copy of the account attached.
3 months after the return has been lodged, your company will finally be dissolved. It is important to remember that the court can declare the dissolution of a company to be void at any time within 2 years after the date of the dissolution.
#2 Creditors’ voluntary winding up
If your company’s directors believe that the company cannot continue the business because of its liabilities and no Declaration of Solvency is filed, they can choose for a creditors’ voluntary winding up. A company will choose this route because they are unable to pay their debts within 12 months after the start date of their winding up.
Even if this process is chosen, it is the company that applies for winding up, not its creditors. What do the creditors do? They have 3 duties:
- have a say in whether or not the company should be wound up
- choose who should be appointed as the liquidator and
- hold a creditors meeting
The notice of the meeting has to be advertised in a Singapore newspaper at least 7 days before the date of the meeting.
#3 Winding up by the order of the court
What makes this process different from the others is that instead of members in your company (e.g your directors) applying for a wind up, other parties are allowed to apply to the court to have your company liquidated. The following listed below can apply to the court for this motion to take place:
- Any creditor of the company
- A liquidator
- A judicial manager
An Originating Summons has to be filed in court for the process to take place. As well as insolvency, other reasons which may lead to this include:
- Company has failed to lodge statutory reports
- Company has failed to hold statutory meetings
- Company did not start a business since a year from its incorporation
- The company has been used for illegal purposes