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Should You Strike Off Your Company in Singapore? Pros and Cons

Striking off a company refers to the formal process of removing a company from the official register, rendering it legally non-existent. This process, governed by stringent regulations, is a strategic decision that requires a comprehensive evaluation of its implications. Grasping the advantages and disadvantages of striking off a company is, thus, crucial for business owners. This understanding ensures that the decision aligns with both the immediate and long-term objectives of the enterprise. This article aims to provide a detailed exploration of the pros and cons associated with striking off a company in Singapore, and seeks to equip business owners with the necessary insights to make informed decisions. 


Understanding the Striking Off Process 

Striking off a company involves removing its name from the official register, effectively dissolving the business. 

According to the Companies Act, this process is governed in Singapore. The Accounting and Corporate Regulatory Authority (ACRA) oversees the application and execution of the striking off process. 

Certain criteria must be met for a company to be eligible for striking off, including ceasing business operations and settling all liabilities. These conditions ensure that the striking off does not adversely affect creditors or stakeholders. 


Advantages of Striking Off a Company 

When contemplating the closure of a business in Singapore, opting for striking off the company can present several advantages. Understanding these benefits is crucial for making an informed decision.

1. Cost Savings 

Striking off a company eliminates the need for ongoing operational expenses, such as office rent and utilities, if any, resulting in substantial cost savings. The cessation of business activities translates to a reduction in these expenses, improving the company’s overall financial health.

In addition, maintaining compliance can also be costly. Striking off eliminates these recurring expenses, such as corporate secretarial fees, tax filing costs and licensing fees, allowing resources to be redirected to more productive endeavours. This significantly reduces the financial burden on the company.

  1. 2. Simplified Administrative Requirements 

Striking off simplifies the business structure, making it easier to manage and reducing the complexity of corporate governance. Once a company is struck off, it is no longer subject to the administrative demands of annual filings and other compliance obligations. Once the administrative burden associated with compliance and reporting is lifted, it allows for a more streamlined operational process, leading to enhanced operational efficiency.

  1. 3. Finality and Closure 

Striking off provides a definitive end to the business, allowing owners to move on without the lingering responsibilities associated with a dormant company. This finality offers peace of mind and clarity for business owners. 

  1. 4. Elimination of Dormant Company Risks 

A dormant company poses potential risks, including inadvertently overlooking compliance obligations. Striking off mitigates these risks by formally dissolving the entity, ensuring that no future compliance issues arise.

  1. 5. Financial Benefits 

Striking off can offer tax benefits, such as the avoidance of future tax liabilities and the potential for tax refunds on overpaid taxes. These advantages contribute to a more favourable financial position for the company. 

Moreover, resources previously allocated to the upkeep of the company can be redirected towards new ventures or personal investments. This reallocation leads to improved financial flexibility and growth opportunities. 

This reduction in expenses and elimination of compliance costs will also contribute to improved cash flow management, providing greater financial flexibility and stability.

  1. 6. Operational Benefits 

With the company struck off, business owners can focus on their core activities without the distractions of maintaining a non-operational entity. This focus enhances overall business performance and efficiency, leading to streamlined operations and improved performance. 

  1. 7. Legal and Compliance Benefits 

Striking off ensures that the company is no longer subject to penalties and fines associated with non-compliance, providing peace of mind and reducing legal liabilities. It will also be relieved from the burden of meeting regulatory obligations, simplifying the legal landscape and improving corporate governance. This focus on active and compliant entities enhances overall governance and operational health. 


Disadvantages of Striking Off a Company 

Assessing the potential drawbacks is crucial before deciding to strike off a company. This section outlines the key disadvantages associated with striking off a company, helping to ensure a well-rounded evaluation of this significant business decision.

1. Loss of Business Continuity and Strategic Opportunities 

Striking off a company results in the permanent cessation of business activities, disrupting business continuity and eliminating potential future strategic opportunities.

  1. 2. Potential Loss of Assets and Future Profits 

Assets held by the company may be lost if not properly managed before striking off, and the process also eliminates the potential for future profits, which can be significant for growing businesses.

  1. 3. Impact on Stakeholders and Employees 

Stakeholders, including employees, customers, and suppliers, may be adversely affected by the decision to strike off the company. Employees, in particular, face potential job losses and morale issues.

  1. 4. Reputational and Creditworthiness Risks 

The decision to strike off a company can have reputational implications if not communicated effectively to stakeholders. Additionally, the creditworthiness of the business owners may be affected, impacting future financial opportunities.

  1. 5. Legal Complications, Liabilities, and Potential Disputes 

Unresolved legal issues can complicate the striking off process, leading to potential liabilities that must be addressed. The decision can also lead to legal disputes with stakeholders, including creditors and shareholders.

  1. 6. Costs Associated with the Striking Off Process and Tax Implications 

While striking off can save costs in the long term, there are initial costs associated with the process that must be considered. Additionally, there may be tax implications, including potential tax liabilities that must be settled. 

  1. 7. Disruption to Ongoing Projects and Operational Efficiency 

Ongoing projects may be disrupted by the decision to strike off the company, leading to potential financial and operational losses. The elimination of non-essential activities can enhance overall operational efficiency, but the process itself can be resource-intensive if the decision is reversed. 


Alternatives to Striking Off 

If striking off your company seems like a drastic step, there are alternative options to consider before making a final decision. Understanding these alternatives can help you choose the best path forward for your business.

1. Dormant Company Status 

If your company is currently dormant and not engaged in any business activities, you can apply for dormant status with ACRA. This option allows you to keep your company registered while avoiding the need to comply with certain statutory requirements.

  1. 2. Mergers and Acquisitions 

Consider merging with or being acquired by another company as an alternative to striking off. This strategic move can offer opportunities for winding down operations in a different manner.

  1. 3. Business Restructuring 

Instead of striking off, you might explore restructuring your business. This could involve changing your business model, or selling off parts of the business to address any underlying issues. 


Factors to Consider Before Striking Off 

Before deciding to strike off your company in Singapore, several factors should be carefully considered. Firstly, assess the financial health of your company to ensure that it is financially viable to proceed with striking off. Secondly, align the decision with your long-term business goals to ensure that striking off supports your overall business strategy. Additionally, consider the impact on stakeholders, such as employees and customers, to mitigate any negative repercussions. Lastly, ensure that you understand and fulfil all legal obligations to ensure a smooth and compliant striking off process.  


Consultation and Professional Advice 

When contemplating the striking off of your company in Singapore, seeking professional advice is paramount. Legal advisors play a crucial role if your company is entangled in legal complexities which must be resolved before striking off. Accounting consultants are instrumental in evaluating the financial implications and benefits of striking off, providing valuable insights into the financial aspects. Additionally, corporate secretarial advisors offer strategic guidance and support, helping you make informed decisions about the striking off process. Their expertise can be invaluable in ensuring that the process is conducted smoothly and efficiently. 


How Premia TNC Can Help 

Premia TNC offers comprehensive support for companies considering striking off in Singapore. Our experienced team guides you through the entire process, ensuring compliance with all regulatory requirements. We provide expert advice on the implications of striking off, helping you make informed decisions. With our assistance, you can streamline the process, minimize potential risks, and navigate any challenges that may arise. Trust Premia TNC to handle your striking off process efficiently and effectively.