Guide on Winding-Up a Company in Singapore
During the process of liquidation or winding-up of a Singapore company, its assets are seized and cashed to pay off its debts and liabilities. Company’s creditors and shareholders get a fair share. The company is then terminated as per the Insolvency, Restructuring and Dissolution Act (IRDA) of Singapore.
Are winding-up and Striking Off a Company Same?
- Closing Up Company in Singapore: The process of striking off is also used to close a company that is not active and have no assets or liabilities
- Winding-up Company in Singapore: On the other hand, an insolvent company is wound up and not struck off
Methods of winding-up a Singapore Company in Singapore
The process of winding-up of a company in Singapore is initiated while the company is still solvent, or after it cannot pay up its creditors and has become insolvent.
There are 2 methods that can be used to winding-up a company in Singapore:
- Voluntary: Creditors’ voluntary winding-up or members’ voluntary winding-up
- Compulsory: Involuntarily wound up or compulsory winding-up on the order of the Court
Determining the Solvency of a Company
Whether a company is a solvent or not determines how it should be wound up. It can be determined using:
- Cash Flow Test: The cash flow test used in the case of a company that has failed to meet its current debt
- Balance Sheet Test: The balance sheet test is used in the case of a company that has more liabilities than assets
Commencing a Members’ Voluntary winding-up of a Solvent Company
The company director files a Declaration of Solvency with ACRA using BizFile+ website. It states the company will be able to pay all its debts within 12 months after commencing the process of winding-up. The Statement of Affairs (Form VWU-9) should give the latest practicable date and shows company’s:
- Assets and the amount they can be converted into
- The estimated cost of winding-up
The company, within 5 weeks, needs to call an EGM to pass a special resolution for the winding-up the company. After passing the resolution, the company must:
- Within 7 days lodge it with ACRA
- Within 10 days, give notice of the resolution in the Gazette & at least a local daily newspaper published in English.
- Appoint a liquidator to wind up the company and distribute its assets
- Unless the liquidator approves, directors’ powers cease to exist
Commencing a Members’ Voluntary winding-up of an Insolvent Company
There are two methods to wind up a company that is insolvent and not able to pay all its debts within 12 months of the commencement of the winding-up process:
- Apply for creditors’ voluntary winding-up
- Apply for a winding-up by order of the court
Creditors’ Voluntary Winding-Up
Creditors do not initiate this process. The company initiates it. The creditors have a vote in deciding whether to appoint the liquidator or the company should be wound up.
The creditors’ winding-up process is same as that of members’ voluntary winding-up. It has two additional steps:
- Appointing a provisional liquidator
- Conveying of a creditors meeting
Appointing of Provisional Liquidator
A provisional liquidator takes care of the company’s assets between the winding-up petition and the actual winding-up of the company.
Before appointing of a provisional liquidator, the company has to lodge a statutory declaration with the ACRA (Form VWU-1) and Official Receiver. It states that:
- The company is unable to do its business because its liabilities
- It will hold a creditors’ meeting within 30 days of this declaration
The declaration to ACRA (Form VWU-1) must include:
- Company name
- Directors details making the declaration
The provisional liquidator’s appointment will be for one month or until the company appoints a liquidator. The Official Receiver may also extend it. The company needs to advertise the statutory declaration and the notice of appointment of the provisional liquidator in the Gazette and at least one local daily English language newspaper.
Winding-Up by the Court
The court may also order to wind up an insolvent company. The company itself or creditors can ask the court for an order. Who can make such an application?
- Company director
- A creditor/liquidator/judicial manager
Procedure for winding-up a Company By Court Order
- For the court order, file Form CIR-12. Submit a supporting affidavit.
- Serve winding-up application to shareholders, officers and employees, the Official Receiver and the liquidator
- Submit an affidavit of service to court at least 5 days before the hearing of the application to wind up a company
- Pay $10,400 in deposit to the Official Receiver
- Give notice of the winding-up application in the Gazette and in a local daily English newspaper at least 7 days before the hearing
Order of Payment of Debts
A winding-up means ceasing the company’s activities, paying debts, and cashing its assets then, paying its shareholders. The company also need to:
- Pay off its employees
- Terminate contracts with business partners
- Terminate phone and Internet services
- Inform customers that it no longer is active
- Include “in liquidation” on its business website, invoices and business communication
A creditor needs to use Form CWU-1 to file proof of debt:
- Creditor’s name & address
- The amount of debt at the date of commencement of winding-up
- Interest on the principal debt
- Details of how and when the debt was incurred
- Documents supporting the claim
The creditors are prioritized as follows:
- Secured creditors
- Preferred creditors
- Official Receiver
- Applicant initiating the winding-up order;
- Employees wages and salaries, unconsumed leaves, retrenchment benefits or ex gratia payment
- Work injury compensation
- CPF contributions
- Tax amounts
- Unsecured creditors
After winding-up a company, the liquidator draws up an account of how it has been done and presents it to the general meeting or to a shareholders’ and creditors’ meeting.
SBS Consulting is a registered filing agent in Singapore. It specializes in Singapore company incorporation services. If you have any questions, contact us on +65-6536 0036 or email us at email@example.com for more info.