How to close a Singapore company
7 minute read
In such a fast-moving world, at times businesses don’t turn out the way you expect – perhaps due to poor product-market fit, not meeting annual revenue projections, or wanting to focus on other projects. If you’re considering shuttering your business, Singapore offers two main ways to close your company.
In this article, we will discuss the two ways you can close your company – winding up your company and company strike off.
What’s the difference between winding up my company and striking off my company? Which one is right for me?
Generally speaking, striking off is a faster, more simple 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 comparison, 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 its operations, and is a process that can be initiated whether your company is solvent or insolvent. If your company is embroiled in a more sticky situation, liquidation is the more likely option for your company.
Striking off a company
A director or company secretary can apply to the Accounting and Corporate Regulatory Authority (ACRA) for your company to get struck off from the Registrar. The application will only be approved if there are reasonable causes to believe that the company is not carrying business, and meets all the criteria for striking off:
Once you think your company has met with the above criteria, the director or the company secretary of your company can submit an online application through BizFile using CorpPass to proceed with the striking off.
What are the next steps after that? 30 days after your application has been approved:
It is important to remember that you can only proceed to the next step if there are no objections in your application. This whole process can take up to 4 months. If you change your mind, there’s a silver lining – a company can be restored within 6 years after the strike off.
(Want more in-depth information? Click here.)
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 distributes the remaining company assets 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:
There are 3 ways you can wind up a company in Singapore – members’ voluntary winding up, creditors’ voluntary winding up and winding up by the order of 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:
After the affairs of the company have been wound up, the liquidator then has to draw up an account which 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 liquidator has to lodge a return with 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:
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 court
What makes this process different from the others is that instead of members in your company (ie your directors) applying for a wind up, any party other than the company is 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:
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:
Towards a brighter future
Closing down one company is not the end of the road. You can always start something new again and we are here to help. Talk to us for practical advice if you have any questions about running a business in Singapore here.