From Strike Off to Liquidation: A Comprehensive Guide on How to Close a Business in Singapore

 

Businesses don't live forever. More often than not, they don't turn out how business owners expect them to for several reasons. Poor market conditions worldwide, financial challenges, segueing or pivoting into other projects, and even a global pandemic are some of the reasons businesses will stop operating.

In Singapore, closing down a business takes more than just deciding to close it down. To ensure a smooth and compliant business closure, understanding the process  is crucial. 

In this article, we will explore the essential steps, key considerations, and expert guidance needed to navigate the striking off process in Singapore. With a focus on empowering you to make informed decisions, we aim to provide clarity and support during this critical transition, making the road to business less daunting and more manageable.

Navigating Business Closure in Singapore - The Difference Between Strike Off and Liquidation

Closing a store in Singapore

In Singapore, there are two ways for you to close down your business properly, namely company strike off and company liquidation (or winding up a company).

Striking off a company is the faster and simpler process, often done by small-sized or dormant companies. It involves wrapping up the company’s businesses, ensuring there are no more assets and liabilities to take care of, and no more outstanding ACRA regulatory matters or insolvency issues. 

On the other hand, liquidation (or winding up a company) is more complicated and time-consuming, requiring the help of a professional liquidator. Winding up a company can be done regardless if it's insolvent or not. If a company faces legal issues, liquidation might be the better option.

Key Steps to Strike Off a Company in Singapore: Meeting Eligibility and Following the Procedures

Striking off a company in Singapore requires a thorough understanding of the necessary steps and eligibility criteria. Your company must meet specific requirements before moving forward. These include having no existing assets, obtaining shareholder consent, and settling tax matters etc.

This section outlines the key steps for striking off a company in Singapore. 

  1. Ensure eligibility: Confirm that your company meets the criteria for striking off, such as having no existing assets or liabilities, not carrying out business activities since incorporation, and obtaining written consent from the majority of shareholders. For a detailed list of eligibility criteria, please refer to the FAQ section at the bottom of the article.

  2. Settle outstanding liabilities and taxes: Clear all outstanding taxes, debts, and other liabilities, and ensure that your company has no ongoing legal issues or proceedings within and outside Singapore.

  3. Obtain tax clearance: Secure a tax clearance letter from the Inland Revenue Authority of Singapore (IRAS) stating that your company has no outstanding tax liabilities.

  4. Cancel GST registration: If your company is GST-registered, cancel the registration and resolve any outstanding fines or other matters.

  5. Settle CPF contributions: Ensure that your company has no outstanding Central Provident Fund (CPF) contributions due to employees.

  6. Waiver for dormant companies: If the company has remained dormant from the time of incorporation or since since submitting the last Income Tax Return and currently has outstanding Income tax Returns issued during the period of dormancy, the director or secretary should use the e-Service to apply for a waiver to submit tax returns (Dormant Company) before proceeding with the striking off application with ACRA.

  7. Apply for strike off: The company director or secretary can apply for the striking off online via the BizFile+ portal using CorpPass. Alternatively, you can apply through ACRA to remove your company's name from the Companies Register if it's no longer doing business.

  8. ACRA's Gazette Notification: After approving your application, ACRA will publish your company's name in the Government Gazette. This happens 30 days after your application approval.

  9. Final Gazette Notification: ACRA will publish the company's name again 60 days after the first Gazette Notification, and the company's name will be struck off the Register by this time. Gazette Notifications are sent to the business owner's registered address.

  10. Withdrawal option: You can withdraw your application anytime during the Final Gazette Notification period.

  11. Resolve objections: If there are any objections to your striking off application, your company must resolve them within two months after applying for the strike off.

  12. Retain records: After the company's dissolution, the business owner must ensure that all books and papers are retained for at least five years. Keep the company's bank account open until all outstanding issues are settled.

The entire process can take up to 4 months for assessment and review. Keep in mind that if the head office of a foreign company that has a branch office or representative office in Singapore ceases operations, the local branch is required to undergo liquidation as well. Companies will need to fulfill all of their tax obligations as part of striking off a company.


Are you considering closing down your business in Singapore?

Piloto Asia can help you with the process, from application to strike off to cancellation of GST registration to application of waiver for dormant companies and more.

All you have to do is fill in the form below…



Exploring Company Liquidation in Singapore - Understanding the Types and Procedure

Company liquidation, also known as winding up,  is an alternative to striking off for closing down a Singapore company. Unlike striking off a company, winding up a company is a more formal, complex, and lengthy process involving turning all its assets into cash to pay off all its liabilities and debts. Any remaining assets or surplus are then distributed to the creditors and shareholders, and the company is terminated.

There are three ways to wind up a company in Singapore, namely member's voluntary winding up, creditors' voluntary winding up, and winding up by the order of the court. Each type has specific procedures and requirements.

Let's go over them one by one.

#1 Members’ voluntary winding up

Company directors go for this option if they believe they can pay the company's debts within 12 months of starting the winding up process.

Once a company decided to go for this process, the following steps are taken:

  • The majority of directors need to sign the Declaration of Solvency, along with an attached statement of affairs.

  • An Extraordinary General Meeting of Members (EGM) must take place within a five-week timeframe to adopt resolutions for winding up the company, appointing liquidators and deciding on their fees.

  • The company needs to have met the requisite solvency and publicity requirements.

  • Once the resolution has passed, it must be filed with the Accounting and Corporate Regulatory Authority (ACRA) within 7 days and advertised in a Singapore newspaper within 10 days. For newspaper publication, it needs to be done in English, Chinese, Tamil, and Malay.

  • The company needs to acquire tax clearance from IRAS, and then submit final tax computations and management accounts up to the date of business cessation. Once IRAS grants the tax clearance, the final meeting date is decided, and the final advertisement is published.

  • The liquidator prepares an account of the winding up process (whicht covers how the winding-up process was done and how the company property was disposed of), organizes a final meeting, and lodges a return with ACRA and Official Receiver within 7 days of the meeting.

  • The company is dissolved 3 months after lodging the return, but the court can declare the company's dissolution void within 2 years of the dissolution date.

#2 Creditors’ voluntary winding up

This option is chosen when the company directors believe they can't continue the business activities due to their liabilities, and no Declaration of Solvency is filed. 

Despite the name creditors’ voluntary winding up, this process is still initiated by the company but involves creditors in the decision-making process.

Key procedures for creditors' voluntary winding up include

  1. Filing a declaration by the directors stating the company's inability to continue operations due to liabilities.

  2. Appoint a provisional liquidator to preserve the company's assets.

  3. Passing a resolution for winding up.

  4. Holding a creditors' meeting within 30 days of declaration to nominate and finalize the appointment of an official liquidator.

  5. Advertising the notice of the creditors' meeting in at least an English local daily newspaper at least 7 days before the meeting date.

  6. Liquidator winding up the company's affairs and distributing its assets.

Meanwhile, the creditors have three duties to fulfill here:

  • They decide whether or not the company needs to be wound up

  • They choose who will be appointed as liquidator

  • They hold a creditors' meeting

#3 Winding up by the order of court

Unlike the previous methods, various parties can initiate this type of winding up through applying to the court to liquidate the company, such as

  • Company itself

  • A creditors

  • Shareholders

  • A judicial manager appointed for the company

  • A liquidator

Reasons for this type of winding up include:

  • Insolvency

  • Failure to hold any statutory meetings

  • Non-lodgement of statutory reports

  • Inactivity after a year of company incorporation

  • Involvement in illegal activities

To initiate winding up by court order, an Originating Summons is filed in court to start the process. Upon receiving the court order, the liquidator is responsible for assessing and realizing the company's assets, adjudicating creditor claims, and cooperating with the company's officers and other related persons. The liquidator may also continue the business if it is deemed beneficial.

The officers of the company and any other persons concerned with the company's affairs are required to assist and cooperate with the liquidator, including submitting a Statement of Affairs detailing the company's assets and liabilities.

Once the company's assets have been evaluated and liquidated, the liquidator will examine all claims filed against the company and accept or deny them as appropriate. After settling the debts and covering the expenses of liquidation, any remaining funds will be distributed back to the shareholders. 

What Else Needs To Be Done Before You Cease Business Operations?

Whether you go for deregistration (striking off) or complete company liquidation (winding up), a few loose ends still need to be taken care of.

Properly Handling Employee Terminations

Please handle your employee terminations properly
  • Provide employees with a few weeks' notice before closing the business, allowing them time to prepare and search for new jobs.

  • While not legally required, consider offering employees an employment reference, career advice, or assistance in finding new positions.

  • On their last day of work, ensure that employees receive their salaries, payment for unused annual leave, and any retrenchment compensation as determined by employment contracts or collective agreements.

Distributing Company Assets

For this part, we will go over how assets are usually distributed depending on the business structure.

For sole proprietorships

Assets that belong to the owner before, during, and after the business' lifetime are considered the owner's personal property. But sole proprietors don't have limited liability, meaning they are still liable for the business’s debts.

If they cannot pay their debts incurred during the business' lifetime, the necessary assets must be sold to fulfill tax and creditor claims.

For partnerships

For partnerships, assets are categorized as either partnership property or personal property. 

An asset is considered partnership property if it's bought with partnership funds, and in such cases, every partner shares an interest in that particular asset. Conversely, assets bought with an individual partner's fund for personal uses, without reimbursement from the partnership, are deemed the purchaser's personal property.

It is crucial to determine the statutes of assets in partnership, as mentioned in section 44 of the Partnership Act. Losses are first paid out of profits, followed by capital, and finally by the individual partners in proportion to their shared profits.

For companies

Company assets are collected and sold off, if necessary, to pay outstanding debts. Business owners cannot reclaim their company assets until the proper liquidation procedure is done. This is because the assets belong to the company, a separate legal entity, not the individual who owns the company.

Once all debts and obligations are settled, the company owners can claim any  remaining assets. However, similar to  a partnership, assets bought for personal use rightfully belong to the buyer if the company has not reimbursed them.

Accounts and note receivables are part of the company's assets, so it is in the best interest of the business owners to collect them. There's no obligation to inform the company's debtors that the company is closing down.

Once the company's closed, either through striking off or winding up, company officers need to ensure that all company books and records are retained for at least 5 years from the date of the company closure.

Return of Company Capital to Shareholders (Applicable to Companies Only)

Unlike sole proprietorship or partnership, a company obtains funds from shareholders in exchange for an ownership stake in the company.

When a company is dissolved, the company's liabilities need to be settled before any cash or property is distributed to the owners/shareholders.

Any remaining funds, minus the costs for liquidation and hiring a professional liquidator, will be released to the shareholders. Preference shareholders determine their entitlement by the share issues' terms and are given priority over ordinary shareholders.

Ordinary shareholders will divide among themselves the residual assets in proportion to their share ownership.

Determine Your Office Space's Tenancy Agreement

Be sure to let your landlord know about your business cessation and go over your tenancy agreements

Business owners should give their landlords proper notice with regards to ending their tenancy agreement. The minimum notice period is 30 days, but it is essential to check the specific terms of your tenancy agreement.

Closing down the business doesn't automatically terminate your tenancy agreement. You still need your landlord's consent to end your tenancy agreement prematurely. Note that your landlord might reject your request to do so.

Most tenancy agreements include penalty fees for early termination, so be prepared for potential costs. When your landlord permits, you can sub-lease your tenancy agreement to continue earning rental income.

Terminate Service Contracts With Providers and Suppliers

Like tenancy agreements, your business must terminate all contracts with your suppliers and providers. This means you'll need to cancel your Internet, phone lines, electricity and water (if applicable), and other business-related contracts.

You need to make sure that you cancel these contracts. Otherwise, you'll end up paying for professional services that're no longer needed by your company.

Shut Down Websites, Social Media Accounts, and Customer Service

You may proceed with this step once the business is closed or when the entire liquidation or striking-off process is almost completed.

One of the final tasks is to notify your customers and clients about the closure of your business. You can make announcements on your website or social media accounts. Be transparent about why the business is ending and whether there is any possibility of reopening in the future.

If you have customers or clients with pending transactions, notify them about the closure and offer them full refunds as needed.

Be sure to set a date for shutting down websites, social media accounts, and other communication channels,  so your customers and clients have an idea on how long they'll be able to get in touch with you.

But ensure you provide your customers and clients with a way to get in touch even when everything has been shut down.

The Wrap Up

Closing down a business in Singapore is more complicated than saying, "I'm closing down the business". Both the striking off and liquidation processes apply to local companies and Singapore-based branch companies or representative offices of foreign companies.

While striking off and liquidation are different processes, they ensure proper distribution to the company’s assets and settlement of all obligations. Following these processes is crucial to avoid legal issues in the future.

Remember that going through the cessation of business processes, whether a local company or a branch office, is crucial for a smooth and legally compliant closure of your business in Singapore.

As a top corporate service provider in Singapore, Piloto Asia can guide you through the complexities of closing down a business and help you manage these processes effectively. By working with our experienced team, you can ensure a seamless transition while generating valuable leads for your future endeavors.

Don't hesitate to reach out to Piloto Asia for expert guidance on closing your business and generating new opportunities in Singapore.

FAQ About Business Closure in Singapore