Closing a Singapore Company
Not all plans pan out as originally conceived. In the face of financial difficulties, an unsuccessful business model or indebtedness, entrepreneurs sometimes need to close down their ventures. This article describes the process of closing a Singapore company. The closing down of a business can be voluntary, or imposed upon its shareholders by a court order or bankruptcy. The latter option has recently been made more attractive in Singapore, with first-time bankrupts seeing unpaid debts written off within seven years. Nevertheless, bankruptcy is beyond the scope of this article, and it focuses primarily on the voluntary dissolution of unsuccessful companies.
Entrepreneurs who want to close a Singapore-based company have two options available to them. The first option is to wind up the company with the assistance of a professional liquidator. The second option is to apply to be struck off the Company Register by ACRA if your business meets all the necessary preconditions. To be eligible, a company must deal with all its liabilities, particularly taxes and debts, and liquidate all its assets. If the head office of a foreign company with a Singapore-based branch closes down, the local branch must also be liquidated.
This article does not address bankruptcy procedures. Entrepreneurs interested in finding out more about bankruptcy should refer to the relevant government website.
Company Wind Up
A company in Singapore can be wound up voluntarily by either its members or its creditors.
If its directors believe that the company will be able to pay its debts within one year of starting the wind up process, a company will typically choose to be wound up by its members. But if the directors believe that the company has too many liabilities to stay in business, they will appoint a professional liquidator to wind up the company’s affairs. In both cases, the process is as described below.
A majority of company directors sign a written Declaration of Solvency. This is filed with ACRA.
An Extraordinary General Meeting (EGM) of members is convened within five weeks of the above action, in order to pass resolutions winding up the company, appointing the liquidators and approving their remuneration. The resolution to wind up the company requires a 75% majority.
Between declaring solvency and the EGM, the directors appoint a professional liquidator, normally an accountant.
Within 14 days of appointing the liquidator, the directors post the Declaration of Solvency and the news of the liquidator’s appointment in at least four daily newspapers, one for each of the official languages (English, Malay, Chinese and Tamil).
Within a week of passing the resolution to wind up the company, a printed copy of the resolution is filed with ACRA.
Within 10 days of passing the resolution to wind up the company, details of this resolution are published in one or more newspapers.
The liquidator receives all the company’s records and takes over active management of the company from the directors. In particular, the liquidator settles creditors’ claims, files any outstanding income tax or accounts, and works out how much the company’s shareholders stand to receive following payment of all outstanding liabilities.
Once the company’s affairs are wound up, the liquidator draws up a document explaining how the winding up was conducted and how the company’s assets have been disposed of.
The liquidator presents this document to a general meeting of the company.
Within 7 days of this meeting, the liquidator notifies ACRA and the Official Receiver (the relevant regulatory body) that the meeting was held and attaches a copy of the document they prepared.
3 months after ACRA has been notified, the company is officially dissolved. The dissolution is final unless a court declares it to be void within two years.
During this process, the company should cease all business and ensure that any documents issued on its behalf include the words “in liquidation.” Shares cannot be sold or transferred without the permission of the liquidator.
In addition to this voluntary process, there are two ways in which a company can be forced to wind up its business:
A company can be forced to close by a court order. Either the court will appoint a liquidator to wind up the company’s affairs, or the Official Receiver will be the liquidator.
If a order needs to be enforced for the benefit of holders of the company’s debentures, a company can be forcibly placed under receivership.
Company Strike Off
Section 344 of the Companies Act gives the Registrar of Companies the power to strike off a company from the Register. In order to do this, the Registrar must have reason to believe that the company in question is no longer in business.
In order to be deemed no longer operational, your business should first settle all of its tax affairs. This means that any queries raised by the IRAS should be dealt with and all assessments should be paid.
If the company has previously applied for it, it should cancel its Goods and Services Tax (GST) registration. Singapore distinguishes itself from other jurisdictions by giving entrepreneurs many ways to settle their tax affairs quickly and cheaply online. To cancel GST, log in to myTaxPortal and fill out the appropriate application form online. Applications are normally processed on the day they are sent, but can take up to 10 working days in some instances.
Once your application has been accepted, the IRAS will inform you when your cancellation date is – this is day after which you should not collect GST. You should continue to charge GST and submit returns until this date. One day before your cancellation date, you will be issued a final form to file called GST F8, in which you should account for the GST incurred until the last day of business. You should also account for output tax on taxable assets (including capital assets and inventories) that you still own on the last day of GST registration.
Businesses should also submit all their income tax returns, regardless of whether they are a small business that files Form C-S or a larger one that files Form C. If the company files Form C, this must include accounts and details of tax computation up to the date of the cessation of business. If the company is a small business that is eligible for Form C-S, they are not required to also submit accounts and details of how the tax was computed. Nevertheless, it is highly advisable to prepare these documents for the eventuality that the IRAS asks for them. Dormant companies that have not engaged in any trading activities are advised to apply for a Waiver of Income Tax Returns.
Entrepreneurs should be aware that they might run into difficulties if they close their company bank accounts before outstanding tax matters are settled. In particular, the IRAS will not pay out tax credits to companies whose accounts have been closed down. Instead, shareholders will have to approach the Insolvency and Public Trustee’s Office (IPTO), who will receive the funds on the shareholders’ behalf.
The IRAS will not issue a specific tax clearance letter to businesses applying to be closed, so companies should instead rely on their latest Notice of Assessment and Statement of Accounts to demonstrate the above.
In addition to settling their tax affairs, companies must fulfill the following criteria:
The company must have ceased trading or not have commenced business after incorporation.
The directors must have obtained written consent from the majority of shareholders.
No current or contingent assets.
No outstanding liabilities with customers, banks, creditors, or any government agency. This includes liabilities such as Central Provident Fund (CPF) contributions.
No outstanding charges or involvement in court proceedings. This includes legal matters outside Singapore.
If your business has been dormant since incorporation, you are additionally required to demonstrate that:
No business transactions have taken place since incorporation.
You have not opened a business bank account, or opened one and closed it without engaging in any transactions.
Your business has not yet held an AGM.
Note that in order to fall into this category, your business cannot be older than 18 months, since after this time the first AGM would have been due.
Mechanics of striking off a company
Once you have met all the preconditions, your company should submit an online application to ACRA to ask to be formally closed down. The application should be completed by a company director or secretary. Alternatively, businesses can engage a professional firm to complete it on their behalf. The application fee is S$35 and the entire process typically takes around five months. The application should include evidence that the company has no assets and liabilities remaining. If the company has not been dormant since incorporation, it should attach the latest set of audited accounts.
Sometimes, the fact that your company is closing down will be met by resistance from creditors, shareholders or other interested parties. In this instance, the individual or body in question will need to lodge an objection with ACRA. The fee for this service is S$10. If an interested party suspects that you are about to apply to have your business closed down, they are even able to apply preemptively for a “Notice of Attention to Lodge Objection to Future Striking Off Application.” This notice is valid for one year. If your business submits an application to be struck off within this time period, ACRA will notify the objector, who will then have an opportunity to make a formal objection.
If the company is able to resolve the objection within two months of submitting the application to be struck off, the objector should remove the objection. Removing an objection is free and will result in ACRA proceeding to move forward the the company’s application. If, however, the company is unable to resolve the matter within two months, its application will lapse. If it wishes to be struck off in future, it will have to submit a fresh application.
After it receives the company’s application, ACRA will process it within five working days. Once the application is approved, ACRA will send out a striking off letter to the IRAS, the company’s corporate officers and its registered address.
If there are no objections, ACRA will publish the name of the company in the Government Gazette one month after the date of the striking off letter. This is known as the First Gazette Notification. Three months after the First Gazette Notification, ACRA will publish the name of the company again in the Government Gazette. This is known as the Final Gazette Notification. The date that the company will be struck off will be stated. Both Gazette Notifications will be sent to the company’s registered address.
Up until five days before the date on which the company is scheduled to be struck off, the company can contact ACRA at any time to withdraw its application. The fee for withdrawal is S$30.
If, after your company has been closed down, you decide you’d like to start it up again, you should be aware that companies in Singapore can be restored. This can happen at any time, provided no more than 15 years have elapsed since the company was initially struck off. In order to restore your company, you will need to obtain a Court Order. After receiving this, you should file “Notification of Restoration of Company that has been Struck Off / Dissolved”. The fee for this service is S$10.
Closing a foreign company
The above guidelines for winding up and striking off a company apply to local companies registered in Singapore.
If you run a foreign business with a branch or representative office in Singapore, you should be aware that you have a legal obligation to inform the IRAS in writing if you decide to cease business in Singapore.
The way to do this is by filing “A Notification by the Agent of a Foreign Company of the Liquidation or Dissolution of a Company” via BizFile. This document should be filed by the local agents of the foreign branch.
Like local companies, foreign-owned branches have to submit accounts and tax computations up to the date of cessation of business. They must also settle all outstanding tax matters and liabilities in Singapore before ACRA will countenance accepting their application to be struck off. This includes cancelling GST as per the above guidelines for local companies.
If the head office of a foreign company with a branch in Singapore is liquidated, closed down or put into administration, the parent company must notify the IRAS in this way.
Conclusion
Singapore is a jurisdiction which gives entrepreneurs a range of options for closing down businesses, depending primarily on your company’s level of indebtedness, tax status and the state of its assets. Hopefully, your company will not have to confront this decision. But if you decide to close your company, it may be best to engage a corporate services firm to take care of the formalities.
