Winding Up Businesses: A Simple How To Guide

This guide simplifies the process of closing your business in Singapore, including striking off and winding up.

Considering Closing Your Business?

There’s no shame in closing a business. Many factors can affect success, like competition. For example, the competitiveness of rival businesses may be too much to handle even for big developments such as JCube, which recently closed down due to the difficulty in competing with its neighbouring malls. However, it is important to follow proper procedures, be it striking off or winding up, to ensure compliance with the relevant regulations.

Striking Off vs. Winding Up

There are two ways to close down a business: striking it off, and winding up or liquidating it.

Striking Off A Business

This removes your business from ACRA’s register through an online application submitted via ACRA BizFile+. However, it has strict requirements.

To strike off your business, your company:

• Must have stopped all operations
• Is not be involved in any court proceedings
• Must have no outstanding charges
• Should be able to satisfy its debts and owes no liabilities to IRAS, CPF, or any other government agencies
• Should have no existing assets and liabilities as of the date of application, and no contingent assets and liabilities that may arise in the future

More information can be found on the ACRA’s website here. Since the conditions for business cessation through striking off can be hard to fulfil, business owners may choose to undergo the process of winding up a business instead.

 

Winding Up

This process involves selling your company’s assets to pay off debts and then dissolving the company. It’s generally used when striking off is not possible due to debts or ongoing operations.

The Process Of Winding Up

There are multiple steps you need to take to properly wind up your business. The company’s assets will be seized and converted into cash, with the proceeds being used to pay off the company’s debts. You will also need to realise the assets before final payments are made to members of your company. The following should also be done:

• Retrench your employees
• Terminate any contracts with business partners
• Terminate any subscriptions 
• Inform customers that the business will cease operations

Differences In Solvent Vs Insolvent Winding Up

For solvent companies:

• Can be voluntarily wound up through a Members’ Voluntary Winding Up

For insolvent companies:

• Can be voluntarily wound up through a Members’ Voluntary Winding Up or a Creditors’ Voluntary Winding Up
• Can be involuntarily wound up by an order of court through a Compulsory Winding Up
• If the company is micro or small, it can be simply and quickly wound up through the Singapore Simplified Insolvency Programme

Winding Up A Solvent Company

Solvent companies are wound up through a Members’ Voluntary Winding Up. This involves the steps  listed below: 

1. Directors must file a Declaration of Solvency with ACRA via the BizFile+ website
2. A Statement of Affairs should be attached to the Declaration of Solvency, in accordance with Form VWU-9
3. A special resolution for the purpose of winding up the company has to be passed within 5 weeks and should be passed in an Extraordinary General Meeting (EGM) of the company’s members
   1. Within 7 days of passing the resolution, you need to lodge a copy of the resolution with ACRA
   2. Within 10 days, give notice of resolution in the Gazette and at least one English local daily newspaper

In addition, the company must appoint a liquidator to wind up affairs and distribute the company’s assets. The entire business liquidation process must be in line with the Insolvency, Restructuring and Dissolution Act 2018.

 

Winding Up An Insolvent Company

A company is considered insolvent if it has more liabilities than assets. Hence, it is unable to pay off its debts and has to undergo liquidation. Here are your options:

1. Creditors’ Voluntary Winding Up

Despite the name, this process is not initiated by creditors themselves. Instead, the process of winding up a business is started by the company itself, similar to a Members’ Voluntary Winding Up. Creditors play a role in deciding the appointment of the liquidator and also in determining whether the company should be wound up. 

Before the creditors appoint the provisional liquidator, the directors of the company have to lodge a statutory declaration with the Official Receiver. In addition, they have to lodge a declaration with ACRA in Form VWU-1, stating that the company cannot continue its business due to its liabilities and that they will hold a meeting with their creditors within 30 days of the declaration. 

The processes of the Members’ Voluntary Winding Up and Creditors’ Voluntary Winding Up are very similar. However, there are some differences in the forms, declarations submitted, and regulations. Hence, you should read up on ACRA resources for company strike off and winding up or consider getting expert advice on business closure from SingaporeLegalAdvice.

2. Compulsory Winding Up

Compulsory Winding Up in Singapore occurs when a company has obtained a court order ordering them to wind up. Creditors, liquidators or even members of the company can make a Compulsory Winding Up application to the Courts. 

This application can be done by filing Form CIR-12 together with a supporting affidavit, a signed statement of fact made under oath. A total deposit fee of S$10,400 will also need to be made to the Official Receiver. The court will then appoint either a liquidator or an Official Receiver to file the necessary documents required. Do ensure that you adhere closely to the instructions provided by the Ministry of Law.

3. Simplified Insolvency Programme

The Simplified Insolvency Programme (SIP) was specifically introduced to help small and micro insolvent companies looking at the cessation of business with a simple, fast and easy winding up process. To qualify as a small or micro business, you need to have an annual revenue of less than S$10M and S$1M respectively.

If you strive to continue business operations and do not wish to close down your business, you can apply for the Simplified Debt Restructuring Programme under SIP. This programme helps businesses restructure their debts to rehabilitate their business. 

 

As One Door Closes, Another Opens

While closing a business can be tough, consider it a chance for a fresh start. Check out SingaporeLegalAdvice and ACRA for more information. Explore resources from Enterprise Singapore to help build your next venture.

Funding Your Next Business Venture in Singapore

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