Company Liquidation and Winding up
Closure of a company with
Company Liquidation and winding up
As a registered Liquidators and Receivers in Singapore, we assist companies with its closure of business either by striking off or winding up. Prior to taking the last resort, we offer advice on the feasibility of continuing with businesses in difficulty, corporate reorganization including negotiation for the sale of businesses.
What are the typical reasons to close down a company?
- Company has creased the operation and decided not to continue.
- Company does not have the ability to pay off its debts and is insolvent.
- Management deadlock – Argument between shareholders.
- Oppression – shareholders dispute under section 216 of the Companies Act (Cap. 50)
- Corporate Restructuring among a group of companies.
- Company is dormant and the owner does not want to incur ongoing compliance and maintenance costs
- Breach of statutory provisions, including offences committed
Compare to striking off of a company, winding up has a very different process and it required a liquidator.
What are liquidation and Winding-up?
Liquidation is a process whereby the company is not able to continue with its business due to the inability to pay off its debts when due. Therefore, the company’s assets will be seized and accounted, with the resulting proceeds used to pay off its debts and liabilities. Any surplus is then distributed among the shareholders of the company according to their rights and interests or otherwise dealt with as the constitution of the company directs.
Upon the completion of the liquidation, the company goes into dissolution and it ceases to exist.
The purposes of liquidation are:
- to ensure a fair distribution of the company’s assets among creditors and contributories
- to terminate the company’s existence by its eventual dissolution
- Just distribution of assets
When a company is being wound up, the business will cease operations and its assets with the affairs handed over to an independent liquidator whose powers, duties and functions are regulated by the Insolvency, Restructuring and Dissolution Act 2018.
The company assets will be “frozen” once the liquidation has commenced. Therefore, disallowing the company to pay any unsecured creditors to avoid unjust preference payment. Unsecured creditors are paid on a pari passu basis, i.e. they are paid out of the company’s assets equally. Any surplus is then distributed among the shareholders of the company.
1. Members’ voluntary winding up
The members of the company may convene an EGM and pass Special/Ordinary Resolution that the company should be wound up pursuant to Section 290 (1) (b) and appointment of liquidator to conduct the winding up and fixed his remuneration. This mode of winding up is applicable where the company is able to pay its debts in full within 12 months after passing of the resolution for the winding up. Winding up shall commence at the time of passing of the resolution.
2. Creditors’ voluntary winding up
If the company is unable to meet its liabilities, the company may convene a meeting of its creditors for the purpose to consider its proposal for a voluntary winding up of a company, set out in Section 296, 297 & 298 of the Companies Act. If a winding up Special Resolution is passed in the favour of the Creditors Voluntary Winding Up, the company shall nominate a liquidator, subject to any preference the creditors may have as to the choice of liquidator.
3. Compulsory winding up
Under section 124 of the Insolvency, Restructuring and Dissolution Act 2018, the company itself, creditors, contributories, liquidator, judicial manager or the Minister may present a petition to the High Court for the winding up of the company.
The winding up is deemed to have commenced as at the date of the presentation of the winding up application.
Section 125 of the Insolvency, Restructuring and Dissolution Act 2018 states all the grounds under which the Court may liquidate a company. The common grounds for a company to be wound up by the Court include:
- Inability to pay its debts
The company is deemed unable to pay its debts under section 125(2)(a) of the Insolvency, Restructuring and Dissolution Act 2018, if a company’s creditor, who is owed more than S$15,000, has served a demand for the sum owing at the registered office of the company, and the company has not paid this sum for 3 weeks thereafter.
- Just and Equitable
When the Court is of the opinion that it is just and equitable that the company be wound up.
4. Liquidation and Winding up Process
Depending on the complexity of the liquidation, the voluntarily winding up process will usually takes around 6 months to complete. There are several stages to go through before dissolution of a company.
- The board of director will have to hold a meeting to approve the winding up of the company and appoint a liquidator.
- The Liquidator will then take over the affairs of the company
- Place public notice on newspaper like business times to announced the winding up of company.
- Sending notices to all debtors and creditors
- Hold a creditors’ meeting
- Director to complete the statement of affairs.
- Realisation of assets, calling to claims, distributing of dividends
- Clear the liabilities and debts including tax, CPF, employee’s salary, creditors etc.
- Submit the accounts to ACRA and dissolve the company.
How we can help?
Sometimes, it may be excruciating to make the decision to close down a company, especially after you have committed wholeheartedly in running the business. Being in this industry for more than 20 years, our professional team are committed to guide you through this winding up process. Thus, bringing you out of those stressful moments.
Speak with us today and we will do our best to advice and support you to the end.