How To Close a Company in Singapore
In the business world, companies come and go. Not all business pan out as originally planned. Financial difficulties, poor management, unsuccessful business model, and competition are some of the factors contributing to a business's downfall. Competition is inevitable, and when new companies rise, there is always a risk that others who have struggled to adapt to the changes may not make it - it's simply the natural cycle of the business, no matter whether you're in Singapore or elsewhere in the world. So what happens when a business is no longer sustainable and has to be closed down? The owner has to decide whether to wind up or strike off a company.
While winding up and striking off a company are quite similar in concept, there are some differences and understanding them is crucial for a business owner's decision-making. In this article, we will explore the options and learn how to close a company in Singapore.
What is the difference between winding up and striking off a company in Singapore?
Striking off a company
In a simpler explanation, striking off a company is a process of deregistration of a company by the Registrar under the requests of the company director or secretary while winding up a company is the liquidation of the company's assets and using the cash to pay off all the company's liabilities before distributing them to all the company's shareholders.
Striking off is generally a simpler and faster way that involved lesser documentation, legislation, and fees. This method is more likely used for a small or dormant company that has no assets or liabilities. How do you strike off a company, and what happens when a company is struck off in Singapore? In the event of a company's closure, the company is first deregistered from Singapore's Accounting and Corporate Regulatory Authority (ACRA) registry, which will eventually formally dissolve the company. Generally, we can split a strike off into two categories: a voluntary strike off and an involuntary strike off.
Types of strike off
1. Voluntary strike off
A voluntary strike off occurs when the members or shareholders of the company want to strike off the name of the company from the register as they have no further use for the company and have opted to stop trading. This is sometimes referred to as voluntary dissolution or voluntary deregistration.
2. Involuntary strike off
An involuntary strike off happens under the registrar's motion whereby Singapore's Accounting and Corporate Regulatory Authority (ACRA) has reasonable grounds to believe that the company business is not being carried out any longer by the registered company and thus chooses to close it down. Other factors contributing to involuntary strike off include the failure to file the necessary financial documents, pay taxes, or maintain accurate records of the business.
This process is usually done without the consent of the business owners, directors, or any stakeholders. Involuntary strike off is also sometimes referred to as involuntary dissolution or involuntary deregistration.
Winding up a company
On the other hand, winding up required a more formal and long process as there is a need to assess the company's assets and liabilities before going through the liquidation process. Furthermore, liquidating takes time considering the amount of paperwork required. Normally, a professional liquidator is appointed by the directors to oversee the whole process. There are three categories for winding up a company: members' voluntary winding up, creditors' voluntary winding up, and compulsory winding up (by court order).
Types of Winding up
1. Members' voluntary winding up
A members' voluntary winding up takes place when the company's directors believe that the company can fully pay off its outstanding debts within 12 months after the winding up process is initiated.
Usually, the company will appoint a professional liquidator to assist with the wind up process, which includes the following criteria:
Signing the Declaration of Solvency by a majority of the company's directors.
Held an Extraordinary General Meeting of Members (EGM) and pass the resolution to wind up the company. This is where the professional liquidator is appointed.
Requisite solvency and publicity requirements are discussed and met.
The company will file the winding up solution with the Accounting and Corporate Regulatory Authority (ACRA) within 7 days and advertise the winding up of the company in a Singapore newspaper, one for each English, Chinese, Tamil, and Malay newspaper. This must be done within 10 days of passing the resolution.
Submitting all the necessary documents, including the final set of management accounts and tax computations to the Inland Revenue Authority of Singapore (IRAS).
Declare the final meeting date and publish a final advertisement after the tax clearance.
The liquidator will then work on the last few criteria before the wind up:
Advise the members on the final meeting regarding the wind up process and how the company's assets and properties will be disposed of.
Submit a return that shows the meeting was held to the Accounting and Corporate Regulatory Authority (ACRA) and Official Receiver. They should also submit a copy of the account.
The company's assets will be liquidated and converted into cash. This cash will be used to pay off any liabilities and debt. The remaining cash and assets will be distributed to the company's shareholders and creditors.
The company will be officially dissolved after 3 months from the date the return is lodged. However, the court has the right to void the dissolution of a company within 2 years after the date of dissolution.
2. Creditors' voluntary winding up
In the case where the company directors believe that the company will not be able to pay its debts within 12 months and no Declaration of Solvency is filed, then a creditors' voluntary winding up will be initiated. Similar to members' voluntary winding up, a professional liquidator will be appointed.
The company's directors will hold a meeting with the company's creditors to pass a resolution for winding up the company. A liquidator is appointed by the creditors if the wind up resolution is passed.
Next, a copy of the declaration will be filed to the Official Receiver and an advertisement is made in the Singapore newspaper in English, Malay, Chinese, and Tamil languages within the next 14 days.
After the date of the special resolution is passed, the company's business activities will come to a halt, along with the cessation of the power of all company's directors under the liquidator's supervision.
3. Compulsory winding up
A compulsory winding up takes place when the company is not closed by the business owners. It could be any party (eg. creditor, receiver, or liquidator) that applies to the court for the company's liquidation.
There are a few factors that may lead to the compulsory winding up of a company:
Insolvency (eg. the company's inability to pay off its debt)
Failed to lodge statutory reports
Failed to hold statutory meetings
No business is commenced after a year of incorporation
Conducted illegal activities that are forbidden by Singapore law using the company.
An Originating Summons is filed to the court to initiate this process. A liquidator will then be appointed by the court (or Official Receiver will be the liquidator of the company). Similar to the other two methods, an advertisement for the winding up of the company will be published in the local newspaper in 4 languages within 14 days.
Keep in mind that any disposition of company properties and assets and transfer of shares is voided after the wind up process is initiated.
The process to close a company in Singapore (Strike off process)
Strike off is the most common way to close down a company in Singapore, which is also much more straightforward. The application can be applied online as long as it is done by the company director, company secretary, or a corporate service provider to the Company Registrar. In Singapore, this can be done via BizFile+ using SingPass or CorpPass. However, before the application for a strike off, there are a few things that a company should check and fulfill.
First and foremost, the company must have stopped any trading or commenced any business. It is the director's responsibility to obtain written consent from the majority of shareholders. The company has to make sure that it has settled all of its tax affairs and canceled its Goods and Services Tax (GST) registration. In order to do that, the quick and easy way is to log in to the myTaxPortal website by IRAS to apply for cancellation.
The company owner, directors, or secretary also needs to make sure that all the income tax returns are filed and submitted accordingly. If the company is a dormant company, then they should apply for a Waiver of Income Tax Returns in case it is required by IRAS.
At the time of strike off application, the company should not have any existing assets and liabilities. All the assets and liabilities that the company is eligible for should be disposed of. Furthermore, there should also be no outstanding debts and outstanding Central Provident Fund (CPF) contributions for employees.
Once all the criteria are met and fulfilled, the director or company secretary can submit the online application for striking off the company. Alternatively, the company can also appoint a professional firm to handle the strike off process. Once the strike off application has been submitted, it will take the ACRA approximately seven business days to approve the application depending on the case and the documents submitted. However, note that ACRA does not charge filing fees for the application.
2. Review & Approval
Upon obtaining the approval for the application, the Company Registrar will send a “strike off notice” to the company at its registered office address, to its directors and company secretary at their residential address, and the Singapore tax authorities.
The applicant will then have 30 days to raise any objections concerning the strike off. If no objections are raised, the Company Registrar publishes the "Notice of Intention to Strike Off" on the government gazette. This is known as the "First Gazette Notification".
3. Objection Grace Period
Interested parties will be given another grace period of 60 days to raise objections. The applicant will still be able to withdraw the application for striking off within this period. If no objections are raised, Company Registrar then publishes a final notice on the government gazette that the company has been struck off, including information such as when the company was struck off. This is the Final Gazette Notification. However, the company can always contact ACRA to withdraw the strike off application, up until five days before the date scheduled for the company to be struck off. There will be a S$30 withdrawal fee for doing so.
The process can only be carried out and proceed to the next part if there are no objections from interested parties. In the case of objection, the company needs to resolve the objection within two months from the date of application submission to proceed further.
4. Dissolution Of Company
Once everything is finalized, the company will then be dissolved (liabilities will continue, and the Court may wind up the company for further settlements). The entire process is estimated to take approximately six months. However, the public may still appeal against the strike off within six years of the strike off date.
Based on the above-mentioned steps, it's obvious that the striking off process is a tedious one. It's also rather long and something you don't want to keep track of constantly. Nonetheless, if a strike off is what you are pursuing but don't want the hassle of dealing with legal matters or the long process, then Atriox is here to help.
With Atriox, we will process your strike off application within two working days upon receipt of fully signed documentation. The entire strike off process will only take four months instead of the six months necessary if you were to handle it yourself. However, you should note that several factors may affect the duration of the strike off application process:
Age of the company
ACRA return status of the company
Company tax return status
Financial health of the company
Settlement of outstanding commitments with external creditors, landlords, and other parties
What happens after a strike off?
Now that you're aware of the steps required for striking off a local company, perhaps you may wonder what happens after a company has been struck off.
The company's name is struck off from the Company Register.
The company will lose its ability to engage in any business activities such as trading, selling assets, and making payments.
The struck off company name will become available for use by new companies.
Typically, the public can reverse a strike off and the company's registration status restored if there is an appeal via court order within six years after the strike off date. As with the application process, the restoration process has no filing fee.
However, a strike off is no child's play and should not be treated lightly as a company director who has managed at least three companies that ACRA struck off within five years will be disqualified from the director role. The individual will also not be allowed to take part in the management of any company for the next five years after the third company is struck off, so proceed with caution.
Why should you outsource the strike off process?
As previously mentioned, striking off a company is no walk in the park. We highly recommend you hire professionals to assist with dissolving the company for you if you wish to avoid the legal hassle and long waiting period. It will be more convenient and efficient, and you can also rest assured that a professional will handle the entire strike off process with utmost care and accountability. A professional will also ensure that the whole process complies with Singaporean laws while making it convenient for all parties involved.
If cost is the question, then fret not, as Atriox's professional fees for strike offs start from only $400. However, do note that there may be other variable fees, such as getting the final set of accounts done up, closure of bank accounts, etc., which will be charged separately. In a nutshell, the fee depends entirely on the client's demands and needs and the volume of work involved, so it's best to call or reach out to us to find out more about our strike off services and the processing fees.
Aside from the convenience, a trained professional's services can provide throughout a strike off application process, enlisting their expertise is highly recommended due to the legal and statutory regulations involved in a company's strike off. Instead of undergoing the headache and hassle alone, skip the inconvenience with Atriox. We have the right people with all the necessary qualifications to help you wrap up your strike off application in just an hour! Refer here for more information on our services.
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