Liquidation and voluntary winding up of a Singapore company
A Singapore company might decide to wind up as a result of various reasons and such procedures may be a challenging and lengthy task. The difficulties faced and time to complete is dependent upon many factors, including how well the company has been managed and administered throughout its existence, the method chosen for closing down and who performs such a processes.
There are two main methods of dissolving a Singapore company:
(i) Strike off method; and
(ii) Member’s Voluntary Winding Up.
Strike Off Method
A company may apply to ACRA to strike its name off the Register under Section 344 of the Companies Act. ACRA may approve the application if it has reasonable cause to believe that the company is not carrying out business and the company is able to satisfy the criteria for striking off.
Criteria for ACRA to consider approval of striking off if the company has:
- Ceased business operations, or has not started business operations since incorporation.
- No outstanding tax liabilities with IRAS – tax clearance .
- No outstanding employers’ CPF contributions owing to Central Provident Fund Board (CPFB).
- No debts owed to government agencies.
- No outstanding charges in the company’s charge register.
- No involvement in any court proceedings either within Singapore or outside.
- Written consent of the majority of the shareholders for the voluntary winding up.
- No current or possible assets and liabilities.
- Preparation of the up to date accounts of business cessation indicated in the application.
In case a company has been dormant since incorporation, the said company must submit a covering letter that the company had:
(i) No business transaction since incorporation.
(ii) Not opened a bank account or the bank account has been closed.
(iii) Not held an AGM or the first AGM to be held within l8 months from the date of incorporation is not due.
If the company has submitted its last audited accounts, the accounts should have no assets and liabilities. However, if the accounts show that the company has assets and liabilities, the applicant must submit documentary evidence to show that the assets have been disposed of and that the liabilities have been settled or waived.
Application to strike off the company
The company Director, the corporate secretary or professional firm can submit an online application via BizFile to strike off the company.
Procedure of Strike off:
Upon submission of an application to strike off a company, ACRA will process the application within 5 working days. Once the application is approved, ACRA will send a striking off letter to the company’s registered office address, its officers at their residential address and to IRAS.
Any time after 1 month from the date of the striking off letter, if there is no objection, ACRA will publish the name of the company in the Government Gazette, known as the First Gazette Notification.
After 3 months from the First Gazette Notification and if there is no objection, ACRA will publish the name of the company in the Government Gazette again and the name of the company will be struck off the register. The date that the company is struck off will be stated and this is known as the Final Gazette Notification. The entire process lasts least 5 months.
Lodgement of Objection
Any interested person can lodge an objection against a company via BizFile. If the interested person suspects that a company intends to apply for striking off, he may lodge a “Notice of Intention to Lodge Objection to Future Striking off Application”. Such notification is valid for 1 year. During the 1 year period, if the company submits an application for striking off, the objector will be notified via email.
To object to a striking off application, any interested person can submit “Lodgement of an Objection against Striking Off”. ACRA will withhold the striking off and send letter to inform the company to clear the outstanding matter within 2 months from the date of the objection.
Clearance of objection
If the company is able to resolve the matter within the 2 month period, the objector is required to lodge a “Clearance of an Objection to Striking Off” via BizFile before ACRA can proceed with the striking off application. There is no fee required for this transaction.
If the company is unable to resolve the matter within the 2 month period, the striking off application will lapse and revert to live. The company will have to submit a fresh striking off application if it still wishes to be removed from the register.
Withdrawal of application
A company can apply to ACRA for withdrawal of its application for striking off at least 5 working days before the company is scheduled to be struck off the Register. The reason(s) for withdrawal should be clearly stated.
After the company has been struck off, it can be restored within 15 years from the date of striking off. A Court Order is required in order to restore a struck off company. Upon receiving the Court Order, the "Notification of Restoration of Company that has been Struck Off / Dissolved" via BizFile must be filed for this purpose.
The Inland Revenue Authority of Singapore (IRAS) has the ability to object to a strike-off.
To avoid an IRAS objection, the company must ensure that it does not have any outstanding tax liabilities by doing the following:
(i) Submitting all outstanding Income Tax Returns;
(ii) Submitting all accounts and tax computations up to the date that business ceased;
(iii) Ensuring there are no outstanding tax matters;
(iv) Cancelling Goods and Services Tax (GST) registration, and ensuring there are no outstanding GST matters.
If the company never commenced business, or if the company hasn’t engaged in any business since filing its last Income Tax Return, then, instead of filing an Income Tax Return, it can file an application for a waiver submission by a dormant company, along with a cover letter stating its intention to apply for strike-off.
Members voluntary winding up
A company can be put into liquidation voluntarily at the instigation of its Directors and a members voluntary winding up happens when the company is solvent. In particular when the Directors believe that the company is in a position to pay its debts and liabilities in full within 12 months after the commencement of the winding up. The company will appoint a liquidator to wind up its affairs and file the necessary notifications required under the Companies Act. The effect in either case is that a liquidator is appointed to bring the company’s existence to an end so that it can be ultimately dissolved.
The catalyst for a members’ voluntary liquidation is a decision by the Directors that the company has no further purpose and that available assets should be realised and distributed to Shareholders.
An important requirement for this type of winding up is that the Directors make a statutory declaration in the form of an affidavit confirming that they have made a full enquiry into the company’s affairs and have formed the opinion that the company will be able to pay its debts in full, together with statutory interest, within a specified period (not exceeding 12 months) from the commencement of the liquidation. The declaration must incorporate a statement of the company’s assets and liabilities at the latest practicable date. The declaration must be made no longer than 5 weeks before the liquidation and to be effective must also be filed with the Registrar of Companies within 15 days of the commencement of the liquidation. The Director making this declaration has to have reasonable grounds for his opinion that the said company will be able to pay its debts in full for the period specified and the onus of proof lies with the Director to show that he had reasonable grounds for his opinion or otherwise he may be liable to imprisonment or a fine.
A special shareholders resolution is required for the member’s voluntary winding up. The resolution has to be advertised in the Gazette within 14 days and filed with the Registrar of Companies within 15 days of its adoption. In a members’ voluntary liquidation the company must, in addition to passing the resolution for winding up, pass a resolution for the appointment of one or more liquidators.
A voluntary liquidation commences at the time of the passing of the resolution and from that time the company exists only for the purposes of winding up, even though its corporate state and powers continue until it is dissolved. The company can continue its business only in so far as is necessary to benefit from the liquidation. In practice a liquidator might continue the business for a short period either in a limited way for the beneficial disposal of assets, or to facilitate the sale of the company’s undertaking as a going concern.
As a result of voluntary liquidation, the powers of the Directors cease and any transfers of the company’s assets require the sanction of the liquidator to be valid and the corporate structure of the company cannot be changed.
Our experienced staff are more than happy to assist you with giving you advice as to which method is applicable for your purposes and close your company in a legal manner.
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