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Foreign investors coming to Singapore can start various types of companies, however, not every business opportunity is a success, and, in such cases, the owners are required to terminate their operations. This is procedure is called company liquidation and can be completed voluntarily or compulsory, based on the reasons to wind it up.
Liquidation in Singapore is a rather complex procedure, which is why it is best to ask for support. Our company formation agents in Singapore can offer assistance in both types of liquidation procedures, so do not hesitate to reach out for guidance.
Company liquidation procedures in Singapore
Companies in Singapore can be closed voluntarily or by court decision if certain conditions are met. According to the Companies Law in Singapore filing for insolvency falls under the duty of the company’s director or directors. An insolvent company has reached the point in which debts can no longer be paid. The most usual reasons a company is declared insolvent are unprofitable business undertakings, the inability to pay its debts and even disputes that can appear between shareholders. Companies in Singapore can be liquidated by striking off or winding up.
Legislation on company liquidation in Singapore
Considering the company liquidation procedures that can be initiated in Singapore, there are few legal frameworks that address each procedure. Members of Singapore companies may apply for voluntary liquidation according to Section 290 (1) (b) in the Companies Act. Creditors requesting company liquidation in Singapore must comply with the Companies Act, Sections 296, 297 and 298.
Compulsory winding up of a company in Singapore falls under the regulations of Sections 253, 254 and 255 (2) of the Singapore Companies Act. Striking off in Singapore falls under the regulations of Section 344 in the Companies Act.
You can read about the company liquidation procedure in Singapore in the infographic below:
Striking off a company in Singapore
According to Section 344 in the Companies Law, companies are allowed to file a petition with ACRA (The Accounting and Corporate Regulatory Authority) to have its name stricken off the Companies Register in Singapore. In order for ACRA to approve the company’s request there are some conditions to be satisfied. Our Singapore company formation experts present below these conditions:
the company is no longer engaged in trading activities,
the company is not engaged in any lawsuits in or outside Singapore,
all assets, debts and liabilities of the company have been liquidated prior the striking off procedure,
all company’s shareholders must agree with the striking off and each one of them must submit a letter of consent for the procedure to start.
If these requirements are met and the file contains all documents requested by ACRA, the striking off procedure should not take more than 7 days. Once the liquidation procedure is completed a striking off notice will be sent to the company’s registered office, its shareholders and also to the Singapore tax authorities. The final notification for company liquidation in Singapore will come in about 4 months after the first notice was released.
Company winding up - a procedure explained by our consultants in opening companies in Singapore
As mentioned in the first paragraph, company liquidation in Singapore may be voluntary or compulsory. The voluntary winding up procedure can be initiated by the creditors or by the company’s shareholders.
Shareholders can decide to liquidate a company if within 12 months form starting the winding up procedure it will be able to pay all its debts. At this point, a majority of the directors will write a declaration of solvency and file it with the Singapore Trade Register. Within 5 weeks from submitting the declaration an Extraordinary General Meeting must be held in order adopt a special resolution for company liquidation and the appointment of the liquidator or liquidators. The appointment and copy of the declaration of solvency must be published in minimum 4 daily newspapers in English, Chinese, Tamil and Malay languages.
A special resolution given to liquidators that will divide the assets of the company must be drafted. This resolution must be submitted with ACRA and must be published in one or more newspapers. After the winding up the company in Singapore, the liquidator will prepare a report in which all operations are stated. The report will be presented to the shareholders and will also be filed with ACRA and the Official Receiver. The liquidation of the company will be in effect after 3 months after submitting the request with the Singapore Companies Register.
Companies may also choose to let its creditors to conduct the liquidation process and the process will be the same as the shareholders’ voluntary liquidation procedure.
Members’ and creditors’ voluntary company liquidation in Singapore
There are two ways of liquidating a Singapore company voluntarily. The first and most common one is the members’ voluntary liquidation which is starts once the company directors consider that the business will manage to pay its debts within 12 from the starting of the procedure.
For this type of procedure to begin, the majority of directors must draft a Declaration of Solvency during a special meeting. The declaration must then be filed with ACRA and notifications must be sent to board members, while an Extraordinary General Meeting of the shareholders is convened. During this meeting, theshareholders will pass the Special Resolution for liquidation.
The second type of voluntary company liquidation can be commenced by the creditors if the directors believe the company cannot continue its operations and cannot pay its debts.
The liquidation in Singapore will begin only after the resolution will be filed with ACRA. However, there are several steps that need to be completed before it can be commenced.
If you need assistance in terminating a business, our Singapore company formation specialists are at your service for filing the necessary documents with ACRA.
Compulsory liquidation in Singapore
Compulsory liquidation of a Singapore company will occur with a court order. The court will appoint a liquidator that will see all business trading of the company is wound up. If no liquidator is appointed, the Official Receiver will act as a liquidator. He will assess all company’s assets and creditors’ claims and will decide on the best way to divide the assets. In compulsory liquidation, the directors of a company will only be allowed to cooperate with the liquidator during the procedure. If any surplus remains after paying off the creditors, it will be divided among the shareholders.
Upon company liquidation in Singapore there are several authorities to be notified. These are the ACRA, the Central Provident Fund Board (CPF), the Inland Revenue Authority (IARS) and the licensing authorities.
The liquidator must file all the notifications as requested by the Company Law. Then, he or she must draft the notices ad advertisement that need to be published in local newspapers. It is also the liquidator’s task to handle the income tax clearance and file the accounts with the Inland Revenue Authority in Singapore, as well as reconciling the payment of all debts and liabilities of the business.
Once these steps are completed, the liquidator must prepare an additional account showing how the winding up has went and how he or she has disposed of the company’s property. Following this, the liquidator will convene a last general meeting of the shareholders during which he or she will present the last account. No later than 7 days from the meeting, the liquidator must file a liquidation return to which he or she will attach a copy of the account with ACRA and the Official Receiver of the court.
If you need more information on liquidation in Singapore, our advisors can offer the necessary details. You can also rely on us if you need help to open a company in Singapore.
Authorities to be notified in case of liquidation in Singapore
Company winding up in Singapore implies filing notices with several authorities in order to cease the payment of all types of taxes, fees and contributions. Among these, we mention the following:
- ACRA – the Accounting and Corporate Regulatory Authority;
- IRAS – the Inland Revenue Authority of Singapore;
- CPF – the Central Provident Fund Board;
- all authorities the company has obtained licenses from.
Among the authorities to consider upon company liquidation in Singapore are the Monetary Authority (in the case of financial companies), the Customs authorities (in the case of trading companies), but also the Immigration Office in the case of companies that had foreign employees.
Our company registration representatives in Singapore can offer more information on the formalities that need to be completed upon the termination of a business.
Notification filing timeframes in Singapore
The liquidation of a Singapore company implies filing various notices and notifications which must be made in specific timeframes. Among these, the most important ones refer to:
- 7 days for filing the Special Resolution for liquidation with ACRA;
- 10 days for publishing the resolution in local newspapers;
- 7 days for the liquidator to file the final account with ACRA;
- 3 months for filing for company dissolution with ACRA.
In the case of compulsory liquidation, however, the procedures can take up to 2 years if the court finds any irregularities.
Signs that it is time to close a business in Singapore
The first sign that the time has come to shut down a company is when profits stars to diminish. If you have done anything that stood in your power to save it, then maybe you should consider closing it. The usual time to give to a company to come around is 5 years, according to experts. Another sign that might indicate winding up the company in Singapore is the best solution is when the products or services you have offered for a long time no longer have the same success. Even if you want to open company in Singapore but in a different field, it is recommended to shut down the previous business so you can concentrate on the new one alone.
Passion is the best incentive when starting a business, so if that passion no longer exists and you’ve grown tired maybe it is time to consider winding up the company in Singapore. Another good reason for closing a business is often represented by health issues. In this case, you should weigh if it’s worth ruining your health over a company. Also, can you ensure its success if you’ll be focusing on something else?
How to correctly shut down your company in Singapore
If the decision to shut down the Singapore businesshas been made, then you should do it correctly in order to avoid problems later. No matter the size of the company, the first step is to dissolve the company. It is recommended to request the services of specialists in this case. In order to correctly dissolve a company, you must de-register it from the Accounting and Corporate Regulatory Authority. Our Singapore company formation agents can also help you with the dissolution process of businesses.
You should also make sure all the company’s debts have been paid and then de-register with the tax authorities and with the social security authorities. Cancelling permits and licenses is also necessary when winding up a company in Singapore. At last, it is polite to announce all business partners and clients that your company is out of business.
Considering the complexity of the liquidation procedure, you can contact our representatives in company formation in Singapore for legal advice on the best course of action.