The Details Behind How to Close Down a Company in Singapore

Closing down a company in Singapore is a major decision that requires navigating numerous legal and procedural steps. Whether it is due to financial difficulties, strategic shifts, or personal reasons, understanding the intricacies of company closure is essential for business owners. This article provides a better look at the various methods to close down a company in Singapore, including the reasons behind such decisions, the striking-off and deregistration options, and the different types of winding-up processes. Additionally, we will highlight the differences between winding-up and striking-off and outline the final steps required to successfully close a company. 

Potentially the Best Solution to Close Down a Company in Singapore 

Not all business ventures thrive or endure as expected, with some going on for decades; others face inevitable closure due to factors like insufficient cash flow, inadequate profits, or a shift in focus to new opportunities. Even with a solid business concept and a meticulously crafted plan, challenges such as talent scarcity, funding issues, and market access can lead to business failure. 

Recognizing when to cease operations is crucial to avoid further distress. Key indicators include falling short of annual revenue projections, poor product-to-market fit, diminishing passion, and health issues. Closing a business, though disappointing, sometimes becomes a necessary step when faced with these challenging circumstances. 

Primary Reasons for Closure 

Closing a company is a natural part of the business cycle, and business owners may do so for various reasons. This decision can be made voluntarily by the owners or mandated by the Court. When a company fails to pay its debts as they become due, it is the responsibility of the company’s directors to initiate the winding-up process, recognizing that the business is insolvent. Having this process in place ensures that all outstanding obligations are addressed in a systematic and legal manner. 

Creditors also have the right to apply for the company to be wound up through the Court if they are unable to collect their debts from the insolvent company.

This legal recourse provides a structured method for creditors to recover their dues. The winding-up process, whether initiated by the directors or the creditors, is a critical aspect of ensuring financial accountability and resolving insolvency issues in a fair and orderly manner. 

Striking-Off and Deregistration Alternatives 

To apply for a company strike-off with ACRA in Singapore, ensure the company has no liabilities, assets, or business activities. This includes settling all taxes, debts, and obligations, disposing of assets, obtaining written consent from the majority of shareholders, and submitting the necessary financial documents. The company must have no outstanding tax issues, CPF contributions, GST matters, debts, charges, or legal proceedings. The application can be submitted for processing through the BizFile website via CorpPass. If the company has been dormant, a waiver for submitting tax returns may be required before proceeding. 

ACRA will publish the company’s name in the Government Gazette 30 days after submission of the application if there are no objections. With a lack of objections within 60 days from the date of the notice, ACRA will proceed to publish the name again with the company officially struck off the register. If objections arise, they must be resolved within two months. The entire process can take up to four months, and the company can be restored within six years if necessary. After dissolution, company officers must retain all company records for at least five years and ensure all matters are settled before closing the company’s bank account. 

Winding-Up Alternative 

To determine the winding-up method for a company in Singapore, assess insolvency using cash flow and balance sheet tests. A company is insolvent if it cannot meet debt demands, if liabilities exceed assets, or under the Insolvency, Restructuring and Dissolution Act (IRDA), if it fails to pay SGD $15,000 within three weeks of demand, or if a court rules it cannot repay its debts considering contingent and prospective liabilities. 

Voluntary Winding-Up by Members’

A company may choose to undergo voluntary winding-up if it is able to settle all its debts within 12 months. This involves appointing a liquidator, liquidating assets into cash, and settling liabilities. If assets exceed liabilities, surpluses are distributed among creditors and shareholders. Common reasons include insufficient profit, shareholder disputes, or statutory breaches. The process includes signing a Declaration of Solvency, holding an Extraordinary General Meeting (EGM) to pass a special resolution for winding up, and filing the resolution with ACRA within 7 days. The company must also advertise the winding-up in local newspapers, notify IRAS for tax clearance, and hold a final meeting to discuss asset disposal. The liquidator must file a return with ACRA within 7 days of the final meeting, and the company is officially dissolved 3 months later, though dissolution can be contested in court within 2 years. 

Voluntary Winding-Up by Creditors’ 

In a Creditors’ Voluntary Winding-Up, company directors initiate the process if they believe the company cannot meet its debts within 12 months and a Declaration of Solvency isn’t filed. The process involves filing a declaration with the Official Receiver, holding an Extraordinary General Meeting (EGM) with creditors to discuss the winding-up, appointing a provisional liquidator, and passing a resolution for the winding up. Creditors vote on the winding-up and the appointment of a liquidator, with a provisional liquidator being appointed for up to one month or until a liquidator is chosen. Business activities cease, and directors’ powers end, except with shareholder and liquidator consent, while share transfers are restricted. 

Winding-Up Ordered by the Court 

Compulsory winding up occurs when a company is closed by someone other than its owners, such as a creditor or liquidator, usually following an Originating Summons filed in court. Reasons for compulsory winding-up include insolvency, failure to submit statutory reports, non-compliance with statutory meetings, not starting business within a year, or using the company for illegal activities. The court may appoint a liquidator, or the Official Receiver will serve as liquidator if none is appointed. The liquidator is obligated to inform the public and advertise the winding-up process. During compulsory winding-up, any transactions or changes in company status made after the process starts are void, and individuals involved in fraudulent activities may be held liable for the company’s debts. Mutual credits or debts between the company and creditors can be offset, with only the balance due claimed. 

How Striking-Off and Winding-Up Differs 

In Singapore, company closure can be achieved through two methods: striking off or winding up. Striking off is a quicker, simpler process suited for small or dormant companies without assets, liabilities, or pending ACRA matters and is generally less costly. Winding up, or liquidation, is a formal and lengthy process involving a liquidator to manage a company’s closure and assets, especially when there are unresolved liabilities or insolvency issues. 

Closing Stages 

To close your company, first announce the closure to employees, detailing the reasons, timeline, and severance packages. Settle all debts and taxes, ensuring you address any creditor claims and outstanding tax issues via the myTax Portal or IRAS hotline. Return capital to shareholders, terminate office space rental, end contracts with suppliers and service providers, and notify clients of the closure. 

Premia TNC’s Strike-Off Services 

At Premia TNC, we streamline the strike-off process for companies in Singapore, ensuring a hassle-free dissolution with minimal disruption. Our expert team handles all the regulatory requirements and paperwork, so you can close your business efficiently and focus on what matters most. 

Frequently Asked Questions