If a trusted accountant reports that your business is not performing well financially, you may want to consider undergoing the company liquidation Singapore process.
Just like humans, animals, projects, and even journeys; everything that begins must come to an end, and businesses or companies are not an exception.
Businesses have a life cycle, after which they may either have to be rebranded or closed down. Keep reading to find out more about the company liquidation Singapore process and the reasons why companies may choose to shut down their business operations.
Company Liquidation Singapore: What Is Liquidation?
The company liquidation Singapore process can be defined as the process of selling off a company’s assets and inventory, usually at a discount to raise money.
Liquidation is usually the first stage of losing a business; however, the business is only fully closed once all the assets have been sold.
Company Liquidation Singapore: 4 Reasons For Closing Down A Company
There are several factors that can be responsible for the businesses having to go though the company liquidation Singapore process and some of them include:
1. Lack of a good business plan
One reason why some businesses or companies get to the point of facing the company liquidation Singapore process is because of the lack of a good business plan
A good business plan is one that properly defines the goals and objectives of the business and has a clear outline on how to achieve these goals.
A business without a good business plan is like one without direction and in no time, it’ll face issues that will lead to the business undergoing the company liquidation Singapore process and eventually a shutdown of the business.
2. Poor management
Another factor that can lead to a business closing down and undergoing the company liquidation Singapore process is poor management of the business.
Business management has to do with overseeing of the operations and activities of staff within the business and requires organizational, conflict resolution, and risk management skills. Poor management can lead a business to face the company liquidation Singapore process.
3. Emergencies and disasters
Every business should have plans to handle emergencies and unforeseen circumstances if they arise. However, certain events could lead to a business facing the company liquidation Singapore process, such as the loss of an important person in the company.
Natural disasters like hurricanes and tornados could affect a business so badly that the only choice would be to undergo the company liquidation Singapore process.
4. Lack of funding
This is one of the most common reasons for businesses who go through with the company liquidation Singapore process. A business needs funds to run its operations, market its products and services, pay its employees, and more.
Lack of funding will make a business incapable of handling one or more of these activities and this would eventually lead to the business closing down and undergoing the company liquidation Singapore process.
Company Liquidation Singapore: What Does It Mean To Wind Up A Company
Winding up a company refers to a process through which a company’s assets are sold to pay off debts owed by the company. Whatever is left of the money after debts are paid off can be shared amongst the shareholders or given to the company owner when there are no shareholders.
Company Liquidation Singapore: 3 Ways To Wind Up A Company
There are three main ways of winding up a company, which are:
1. Compulsory wind up
A compulsory company wind up is usually forced on a company by the high courts. A compulsory company liquidation Singapore is usually initiated by a lawsuit against the company by its creditors.
In response to the suit, the court issues an order to the company to assign a liquidator to oversee the sale of the company’s assets and distribution of the proceeds to the creditors.
2. Members’ voluntary wind up
This type of wind up does not involve a court order but is usually initiated by the company’s shareholders to pay off debts.
A voluntary wind up is usually brought about by the passage of a resolution by the company shareholders, who sometimes take personal responsibility for their debts to avoid bankruptcy.
3. Creditor’s voluntary wind up
A creditor’s voluntary wind up takes place when the shareholders or members of the company have expressed their inability to pay off the debts owed by the company and the creditors agree to winding up the company.
The procedures on how this type of wind up should take place is contained in Chapter 50 of the Singapore Companies Act and the wind-up rules.
Company Liquidation Singapore: Winding Up Procedure
Here are the procedures for the different methods of company winding up:
1. Compulsory wind up
Apart from bankruptcy, there are several other factors that could cause the court to force a company wind up as stated in Section 254 of the Singapore Companies Act, such as:
- Dormancy of the company for an entire year
- Illegal operations of the company
- Abuse of the company’s resources by the directors or managers of the company.
The procedure for a compulsory company wind up is stated below:
- The procedure begins with filing an affidavit and originating a summons that will be applied to the court. The application can be done by a liquidator, the creditor of the company, a shareholder of the company, a judicial manager, or any minister on basis provided by the law.
- The originating summons must be published in the government gazette and any Singapore local newspaper.
- A hearing will be fixed for the originating summons, usually six weeks from the application and the hearing will be held in an open court in the presence of a High Court Judge. Any objections against the summons must be made at least 7 days prior to the hearing.
- After the hearing, the applicants must appoint a liquidator to handle the sale of the company’s assets and distributions of funds to the creditors if the wind up is ordered. In a situation where no liquidator is appointed, the responsibility falls on the official receiver.
2. Members’ voluntary wind up
The members or shareholders of a company may pass a resolution to wind up the company if:
- The company is dormant, and the owner would rather shut it down
- The company is not making enough profit to keep its operations running
- There are unresolved issues between the members or shareholders
The procedure for a members’ voluntary wind up is as follows:
- The process begins with a solvency declaration made by the company’s directors to the ACRA stating the following:
- A query into the operations of the company has been carried out.
- A decision has been taken to ensure all creditors are paid within 12 months of the wind-up which should be supported by a statement of affairs.
- The company’s assets and estimated amount to be realized from the sales.
- The estimated cost of the wind-up process.
- The company’s liabilities.
- After the declaration is made, a resolution must be passed within 5 weeks of the declaration with at least 75% votes.
- A copy of the resolution should be submitted to the ACRA within 7 days of its passing and published in any local Singapore newspaper within 10 days of the passing.
- Next step is to appoint a liquidator to oversee the sales of assets and distribute resources to the creditors as stated in Subdivision 2 of Division 3 of the Singapore Companies Act
3. Creditor’s voluntary winding up
A creditors’ voluntary winding up can come into play if the company is no longer able to continue running its operations due to numerous debts and liabilities. The procedure for creditors’ voluntary winding up includes:
- The company director will file a declaration with ACRA and the Ministry of Law stating that:
- The company can no longer continue its operations due to debts and liabilities
- A date has been set for a meeting with the company’s creditors within a month of the declaration
- According to section 219 of the Companies Act, the company director is to immediately appoint a provisional liquidator to perform the tasks of a liquidator during the one month waiting period, except when the time is extended by the official receiver or until the official liquidator is appointed.
- Similar to the members’ voluntary winding up, a resolution should be passed with at least 75% votes.
- The meeting with the creditors should be held and an official liquidator should be appointed in accordance with the guidelines in Subdivision 3 of Division 3 of the Companies Act.
How We Can Help – Our Professional Striking Off Services
You may want to consider engaging outsourced accounting and bookkeeping services to assist you in carrying out the Singapore company liquidation process of winding up a business.
The current financial standing of the company will be taken into consideration as well as the estimated revenue from the winding up process.
Attempting to keep all your books and accounts yourself as is required of every company in Singapore can be very tedious, which is why employing professional accounting and bookkeeping services is advised.
Our services cover a broad customer base including new companies. We ensure that your accounts and books are always up to date for submission to the ACRA or IRAS.
The Singapore Companies Act demands that all registered companies must have correct and updated books and accounting records for easy day-to-day operation of the company as well as for decision-making.
Using Premia TNC accounting and bookkeeping services guarantees always updated records and books, complete and correct financial reports, and an experienced team of dedicated accountants and bookkeepers. We also offer consultancy and advisory services.
Company Liquidation In Singapore – Frequently Asked Questions
1. Does accounting and bookkeeping mean the same thing?
Accounting and bookkeeping do not mean the same thing. Bookkeeping has to do with daily records of all business transactions in the company, while accounting uses information from bookkeeping to provide insight into the financial condition of the company.
2. What is the difference between company liquidation and winding up?
The company liquidation Singapore process refers to the selling off a company’s assets and inventory, usually at a discount to raise money. Liquidation is usually the first stage of losing a business; however, the business is only fully closed once all the assets have been sold.
A company winding up refers to the sale of assets and stocks owned by the company in order to pay debt. Winding up usually comes about either as an order from the court or the agreement of the company’s shareholders by passing resolutions.
3. What are the different types of company wind ups in Singapore?
There are three main types of company wind ups in Singapore; which include:
- Compulsory wind up that is ordered by the court.
- Members voluntary wind up that comes about via a resolution by members of the company.
- Creditors voluntary wind up that is brought about by the agreement of creditors for the company to wind up following its inability to run its operations.
4. Can my company wind up because I’m not making profit?
Yes, a dormant company without significant growth or insufficient profit can find itself in a lot of debt with no means of paying back and would have to wind up to clear its debt. If your business is stuck in this situation, you may want to consider undergoing the company liquidation Singapore process.
5. Can a wound-up company in Singapore be reinstated?
Yes, it can. A wound-up company in Singapore can be reinstated within 6 years of the wind up. However, it would require some legal proceedings and a court order to be reinstated as stated in the Singapore Companies Act.
6. Should you outsource bookkeeping services in Singapore?
It may be easier and more efficient to outsource bookkeeping services in Singapore due to how much work is involved. However, its best to ensure that you find the right company for the job.
Premia TNC keeps you well assured that your accounts and books are in the right hands and your information is safe.
7. How do I oppose a wind up?
To oppose a wind up, you must file an affidavit, which has to be submitted at least 5 days before the hearing of the wind-up application.
8. Can I attend the hearing of a wind up that I did not file?
If you have intentions of either opposing or supporting a wind up and you’d like to attend the hearing, you’ll have to serve a Notice of Intention to Appear on the applicant.
9. Can I be reimbursed for a wind-up application after the wind-up order is given by the court?
The wind up proceeds are not only used to cover debts and liabilities but also to fund the entire wind up process. An applicant can be reimbursed if there are sufficient funds from the proceeds.
10. Is bookkeeping important for every company?
As stated by the IRAS and ACRA, correct and updated books are required of every registered company in Singapore. It makes taxing and other financial obligations easier as well as improves the decision-making process of the company.
