In Singapore, just as is the case anywhere else in the world, a company must be wound up when it is no longer able to use its remaining assets to pay all its outstanding debts. The winding up of a company based in Singapore may either be forced or voluntary, depending on the company's specific situation.
The winding up of a company involves the following of a legal process which would serve to shut down the operations of that company. The process is regulated by corporate laws, partnership agreements, and the company’s Articles of Association. There are various reasons that could lead to the winding up of a company. In some instances, a company’s creditors might seek the winding up of a company through a court order if they believe that the company is unable to settle its debts. These creditors usually resort to such a course of action if they have attempted to utilize all other means of recovery of their funds. Should the company indeed be wound up, it would be compelled to sell its assets so that it can meet its obligations of payment of its debts. The winding up of a company can either be forced or voluntary.
A company could also be voluntarily wound up after it has achieved its objectives. Certain companies are started for the purposes of delivery of a certain service or achievement of a particular target, after which it will be wound up. Under such situations, the company will voluntarily dissolve by ceasing its operations through the agreement of its directors. However, in most instances, companies are wound up following court orders with the intention of selling their assets so as to settle their outstanding debts.
Process of Winding Up a Company in Singapore
The procedure for winding up a Singaporean company involves certain important actions which must be taken. The company through its management is expected to hold a meeting, and during this meeting, a declaration of solvency will be made. A majority of the directors are expected to attend the meeting. During the meeting, they are to sign the written declaration of solvency. After the meeting, the company will then proceed to issue notice of the holding of an extraordinary general meeting (EGM). Before sending out the EGM notice, the company should lodge the declaration of solvency as well as the statement of affairs with the Accounting and Corporate Regulatory Authority (ACRA). A 21-day issuance of EGM notice should be unless the members opt for a shorter notice. Within five weeks of the lodging of the declaration of solvency and state of affairs, the company through its directors can hold the EGM and pass the resolution allowing for the winding up the company. A liquidator will then be appointed. Immediately after the EGM, the appointed liquidator will gain control of properties belonging to the company such as common seals, books, and other valuable documents and assets. A special resolution regarding the winding up of the company is then passed within seven days, then published within 10 days after the passing of the resolution.
It is vital to note that when a company is to be wound up due to the effects of a court order, a liquidator must first be appointed. The plaintiff or any other person applying for the company’s winding up might propose a person to serve as a liquidator during the process. Prior to filing the proposal, the plaintiff or plaintiff’s lawyers must file in writing the consent of the proposed person to the court. However, if there is no liquidator nominated, the official receiver will serve as the default liquidator. If such is the case, the applicant is required to pay S$10,400 to the official receiver. The proposal is then expected to be published in both English and Chinese local daily newspapers including the Government Gazette. Anyone who is willing to appear in the court to follow the hearings is also expected to issue a notice of intention by completing a form. The form must be given to either the plaintiff or the plaintiff’s lawyer. On the other hand, if there is anyone who wishes to oppose the originating summons for winding up the business, the person is to do so by filling an affidavit in opposition at least seven days before the date of hearing.
A company’s hearing regarding its winding up is fixed and conducted within six weeks from the date when the initial proposal was filed. The judge might then choose to either dismiss the case, give an order for the company’s winding up, or make an interim order. In case when a compulsory winding up of a Singaporean company is necessary, an originating summon for the process of winding up must be filed. It may be done by the company itself, any of the company’s creditors, one of the company’s shareholders, a liquidator, any minister as specified by the laws of Singapore, or a judicial manager.
During the process of winding up the Singaporean company, the company must cease all its business operations. All of its documents, including shares, can no longer be transferred without the permission of the liquidator.
Authorities Which Oversee the Winding Up of a Company in Singapore
The process of involuntary winding up of a Singaporean company will require that the affected company follows the related court case carefully to ensure that it has been compensated its dues. The court through its judges and the judicial system plays a primary role in ensuring that the company is successfully wound up. The entire winding up process will require the input of certain key stakeholders such as the directors of the company. The directors of the company could actively engage the court to ensure that they have received the amount which they are due according to the value of the assets and shares that they injected into the company. The Registrar of Companies will also work to ensure that the company to be wound up has indeed been deregistered. At this point, the company ceases to be an active Singaporean company.
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What Must Be Done After a Company Has Been Wound Up
After winding up, the company will have officially closed down its operations and thus ceases to function. The remaining assets and liabilities are then distributed accordingly. They will be sold in such a way as to settle debts owed to the company’s creditors. If the liquidation is a solvent liquidation, the funds raised from the sale of assets are distributed to the shareholders.
Selling of Assets
Assets are either to be sold to unrelated third parties or other companies. However, in some instances, a director of the company might choose to retain some or all of the company’s assets. The decision to do so might be brought about by plans to conduct future business activities or to subsequently distribute the assets to another person. Should a director choose to retain any assets, the director would then be expected to pay for the assets at the current market value as determined by an external evaluator. Once the sales have been made, the company’s outstanding debts should have been settled. In most instances, a company will enter the liquidation process because of excessive debts. Under such circumstances, the company in question owes its creditors more than it can afford to pay even after selling all of its existing assets.
Due to differences in the company laws of Singapore when compared to those of other countries, a Singaporean company which would otherwise have been dissolved or wound up might choose to relocate and operate in another country. In such cases, Singapore’s laws might not apply if the company has already commenced business operations in the other country. This is possible because Singapore’s laws allow for the re-establishment of a Singaporean company in another country.
To expedite the process of winding up, the owner of the company may choose to enter into a voluntary winding up process. Such a process is to be initiated from within by the directors of the company. The legal process can sometimes rigid and involve many complex and intricate steps. Despite this fact, it is possible to greatly simplify the process of winding up regardless of whether the company in question is owned by a local or foreigner. However, if the company in question is a foreign company, it will first be required to pay taxes due as required by the Singaporean government before it may compensate its creditors.
In summary, the winding up of a Singaporean company can be carried out in one of two ways. A company can decide to wind up its operations voluntarily once the company’s directors realize that the company is no longer productive and no longer able to pay its debts or compensate its creditors. Creditors also have the right to take the company to court so as to obtain a liquidation order; this liquidation order will allow the creditors to be compensated their dues.
Winding Up a Company in Singapore FAQs
After a company has been wound up, can the winding up be reversed?Tiwi2020-07-03T11:58:49+08:00