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Options for Closing a Singapore Company
Every company has its life cycle. If faced with financial difficulties, an unsuccessful business model, or unplanned losses and debts, entrepreneurs may sometimes need to close their companies. This article will introduce the process of striking off or winding up a company in Singapore. The closure of a business can be voluntary, or it can be court-ordered or forced upon shareholders due to bankruptcy. This article primarily focuses on the former case of voluntary company dissolution.
Entrepreneurs who want to close a Singapore company have two options: Winding Up a Singapore Company vs. Striking Off a Singapore Company.
- Winding Up a Singapore Company is the process of closing a company with the help of a professional liquidator.
- Striking Off a Singapore Company means that if your business meets all the necessary prerequisites, you can apply to the Accounting and Corporate Regulatory Authority (ACRA) to have the company struck off.
Generally, striking off a Singapore company is a more economical, faster, and more convenient method. If you have ceased all business activities, settled all liabilities, especially taxes and debts, and liquidated all assets, you can strike off the company to complete the final stage of closure. This process is most suitable for dormant or small-scale companies. If the headquarters of a foreign company with a branch in Singapore closes, the local branch must also be liquidated.
However, closing a company can sometimes create other problems due to liabilities. In such cases, you will need to handle your company through winding up (or liquidation). This process not only takes more time but is also more complex compared to striking off a company.
Winding Up a Singapore Company (Company Wind Up)
A Singapore company can be voluntarily wound up by its owners or creditors. If the directors believe the company can pay its debts within one year of commencing the winding-up process, the company will usually choose to conduct the liquidation itself. However, if the directors believe the company is too indebted to continue operations, they may appoint a professional liquidator to close the company’s affairs.
There are three ways to apply for the winding up of a Singapore company:
1. Company-initiated winding up
2. Creditor-initiated winding up
3. Court-ordered winding up
1. Company-Initiated Winding Up
The process of a company-initiated winding up is as follows:
- The majority of the company’s directors sign a written Declaration of Solvency and file it with ACRA.
- An Extraordinary General Meeting (EGM) is convened within five weeks of signing to pass resolutions for the company’s winding up, the appointment of a liquidator, and the approval of their remuneration. A majority of at least 3/4 of the votes is required to pass the resolution to close the company.
- Between the signing of the Declaration of Solvency and the EGM, the directors appoint a professional liquidator, who is usually an accountant.
- Within 14 days of appointing the liquidator, the directors publish the news of the Declaration of Solvency and the appointment of the liquidator in at least four daily newspapers, one in each of the official languages (English, Malay, Chinese, and Tamil).
- Within one week of passing the resolution to close the company, a written copy of the resolution is submitted to ACRA.
- Within 10 days of passing the winding-up resolution, the details of the resolution are published in one or more newspapers.
- The liquidator receives all of the company’s records and takes over the company from the directors. Specifically, the liquidator settles creditors’ claims, files any outstanding income tax returns or accounts, and calculates how much money the company’s shareholders will receive after all outstanding debts are paid.
- Once the company is liquidated, the liquidator drafts a document explaining how the liquidation was conducted and how the company’s assets were disposed of.
- The liquidator presents this document to a general meeting of the company’s shareholders.
- Within 7 days after the meeting, the liquidator informs ACRA and the Official Receiver (the relevant regulatory body) that the meeting has been held, and attaches a copy of the prepared document.
- Three months after ACRA receives the notification, the company is formally dissolved. The dissolution takes effect unless a court declares it void within two years.
During this process, the company should cease all business operations and ensure that any documents issued include the words “In Liquidation.” No shares may be sold or transferred without the liquidator’s permission.
2. Creditor-Initiated Winding Up
If a company’s creditors believe that the company cannot continue its business due to its liabilities and that the company will not be able to pay its debts within one year of commencing liquidation, the creditors can file an application for the company’s winding up.
In this case, the company’s creditors decide whether the company should be wound up and appoint a liquidator to carry out the liquidation. After the liquidator completes the process, a meeting of creditors is convened, and an announcement must be published in a Singapore newspaper at least one week in advance.
3. Court-Ordered Winding Up
In addition to voluntary procedures, a third party can apply to the court for the company’s winding up. Any liquidator, company creditor, or judicial manager can file a winding-up application.
- A company may be forced to close by a court order. Either the court appoints a liquidator to wind up the company’s affairs, or the Official Receiver acts as the liquidator.
- If enforcement is required for the benefit of the company’s bondholders, the company can be forced into receivership.
For a court to order a business to be wound up, the applicant must file a Writ of Summons. A court-ordered winding up may be due to the following reasons:
- The company is insolvent.
- The company has failed to complete filings required by regulations.
- The company has not held meetings required by regulations.
- The company is engaged in illegal activities.
Striking Off a Singapore Company (Company Striking off)
The first method of closing a Singapore company is to strike it off. In this case, the company’s director or secretary must apply to the Accounting and Corporate Regulatory Authority (ACRA) for striking off.
For the company to enter a non-operational state, all tax issues should be resolved first. This means that any questions raised by the Inland Revenue Authority of Singapore (IRAS) should be answered, and all assessments accepted.
If the company was previously registered for Goods and Services Tax (GST), the GST registration should be canceled first. A key difference between Singapore and other jurisdictions is that Singapore offers entrepreneurs multiple ways to resolve tax issues quickly and conveniently online. To cancel GST, you can log in to myTaxPortal and fill out the corresponding application form online. The application is usually processed on the day it is sent, but in some cases, it may take up to 10 working days.
Once your application is accepted, the Inland Revenue Authority of Singapore (IRAS) will notify you of the deregistration date—after this date, you will no longer collect GST. Before this date, you should continue to collect GST and submit your returns. The day before your deregistration date, you will receive a final application form called GST F8, in which you should state the GST incurred up to the last day of business. You should also declare the output tax on taxable assets (including capital assets and inventory) that you still own on the last day of GST.
If the company’s bank account is closed before all outstanding tax issues are resolved, things can become difficult. IRAS will not pay tax credits to a company whose bank account has been closed. When a company is dissolved, any tax credits due to the company will be paid to the Insolvency and Public Trustee’s Office (IPTO). If the company’s shareholders wish to claim the tax credits, they can contact the IPTO. Please note that the IPTO may charge a fee.
IRAS does not issue a specific tax clearance letter to businesses applying for closure, so companies should rely on the latest Notice of Assessment and statement of accounts to prove the above.
In addition to resolving tax issues, the company must also meet the following conditions:
- The company must have ceased trading or have not yet commenced business.
- The directors must obtain written consent from the majority of shareholders.
- There are no current assets or contingent assets.
- There are no outstanding debts with customers, banks, creditors, or any government agencies. This includes Central Provident Fund (CPF) contributions.
- There are no pending charges or court proceedings. This includes legal matters outside of Singapore.
If your company has never conducted business since its incorporation, you will also need to prove that:
- No business transactions have occurred since incorporation.
- You have not opened a business bank account, or if you did, it was closed without any transactions.
- Your company has not held an Annual General Meeting.
Please note: To meet these conditions, your company cannot have been incorporated for more than 18 months, as the first Annual General Meeting would be due after that time.
The Process of Closing/Striking Off a Company
The entire process usually takes about five months.
Objecting to a Company’s Striking Off
Sometimes, the fact that your company is about to be closed may be met with resistance from creditors, shareholders, or other stakeholders. In this situation, the concerned individual or institution needs to file an objection with ACRA.
The company has 2 months to resolve the matter. If the company cannot resolve it within 2 months, the striking off application will lapse. The company can only submit a new application after the objection is cleared.
Closing a Foreign Company
The above guidelines for company winding up and striking off apply to local companies registered in Singapore.
If you operate a foreign enterprise with a branch or representative office in Singapore and decide to cease your operations in Singapore, you have a legal obligation to notify the Inland Revenue Authority of Singapore (IRAS) in writing.
This is done by submitting a “Notification by the Agent of a Foreign Company of the Liquidation or Dissolution of a Company” through BizFile. This document should be submitted by the local agent of the foreign branch.
Like local companies, a foreign branch must submit its accounts and tax forms up to the date of business cessation. It must also resolve all outstanding tax issues and liabilities in Singapore. Only then will ACRA agree to process the striking off application.
If the headquarters of a foreign company with a branch in Singapore is liquidated, closed, or taken over, the parent company must notify the Singapore tax authorities in this manner.
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