Closing A Company In Singapore
Yesterday I met 2 long time good friends, who have been in business for a short while, then decided recently to close their business due to economic downturn. I was amazed by their sheer ignorance on how to and what are impact of closing their business. Starting a business is easy, closing a business may be complicated and difficult. Perhaps for the benefits of everyone on this platform, allow me to put in my 2-cents worth, my principle all this while works for me, that is “Prepare for the Worst, Hope for the Best”…
How to close a company in Singapore ?
* A company may be closed voluntarily by its owners or by an Order of the Court
* Under Company Law, it is the duty of Directors to wind up an insolvent company.
* An insolvent company is a company that can’t pay its debts as they fall due.
* A creditor may go to court and apply for a judgement to be registered against the company in relation to the debt. If they are still unsuccessful in receiving payment, another option is that a creditor may apply to the Court to have a company wound up if that company is insolvent.
Typical reasons for closing a company include:
1. Company has ceased business activities or is not profitable
2. Company cannot pay its debts and is insolvent
3. Irrevocable dispute among shareholders
4. Corporate or financial restructuring of the group to which the company belongs
5. Company is dormant and the owner does not want to incur ongoing compliance and maintenance costs
6. Breach of statutory provisions, including offences committed
Companies can be liquidated either by “Striking Off” or “Winding Up“. Winding up and striking off both result in a company ceasing to exist. However, they are very different processes and should not be confused with each other. I shall not elaborate here as they are quite technical.
You just need to know the following :
* Your company would normally cease upon liquidation.
* The liquidator will start to review the assets of the company and the claims of creditors, and look into the conduct of its directors and other related persons to realise your company’s assets in a manner that is in the best interest of the company and its creditors.
* The liquidator may also carry on the business if he considers it the most beneficial option.
* The officers of the company are generally deprived of their power to run the company. However, they and any other persons who may have been concerned with the affairs of the company have the duty to assist and co-operate with the liquidator. This includes the submission of a Statement of Affairs on the company’s assets and liabilities.
* After all assets of the company have been assessed and realised, the liquidator will adjudicate all the claims lodged against the company and admit or reject them accordingly.
* Any surplus after paying the creditors and costs of liquidation will be returned to the shareholders.
Notification Requirements
A company must notify the following bodies as part of closing down its business:
1. Accounting and Corporate Regulatory Authority (ACRA)
2. Central Provident Fund (CPF) Board
3. Inland Revenue Authority of Singapore (IRAS)
4. Relevant Licensing Authorities
Professional Help
* Closing a company can be a fairly complex and time consuming procedure.
* Moreover, you must make sure that you comply with all the necessary legal and statutory requirements.
* If you have decided to close your Singapore company, it’s highly recommended that you seek the help of a professional services firm that can assess your unique situation, recommend the best course of action, and assist you with getting it done.
Good Luck on your business venture !
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