CPA Clinic: Options to Close Local Firms
 

What are the options available to close a local company?

Depending on the circumstances, there are five ways to close a local company: (i) strike off, (ii) voluntary winding up, (iii) compulsory winding up, (iv) receivership and (v) judicial management.

(i) Strike off

A company may apply to Accounting and Corporate Regulatory Authority (ACRA) to strike its name off the Register pursuant to Section 344 of the Companies Act. ACRA may approve the application if there is reasonable cause to believe that the company is not carrying on business, and that the company is able to satisfy the criteria for striking off. To do this, a company should have no outstanding liabilities with the Inland Revenue Authority of Singapore; must not be indebted to any other government agency; must not be involved in any court proceedings within or outside Singapore; must not have any outstanding charges in the company’s charge register.

(ii) Voluntary winding up

Winding up is a more formal liquidation procedure as the company will appoint a liquidator, or provisional liquidator, to wind up its affairs and file the necessary notifications required under the Companies Act.

There are two modes of voluntary winding up:

(a)  Members’ voluntary winding up:

A company may decide to wind up its affairs voluntarily if the directors believe that the company will be able to pay its debts, in full, within 12 months after the commencement of the winding up.

(b)  Creditors’ voluntary winding up:

A company may decide to opt for a “creditors’ voluntary winding up” if its directors believe that it cannot, by reason of its liabilities, continue its business.

In both situations, the company will appoint a liquidator, or provisional liquidator, to wind up its affairs and file the necessary notifications required under the Companies Act.

(iii) Compulsory winding-up

A company may be wound up under an Order of the Court under certain circumstances - for example, the company is unable to pay its debts. The Court may appoint a liquidator to wind up the affairs of the company. Where no liquidator is appointed by the Court, the Official Receiver shall be the liquidator of the company. The liquidator will file the necessary notifications required under the Companies Act.

(iv) Receivership

A company may be placed under receivership, if a receiver is appointed to enforce a charge for the benefit of holders of debentures of the company.

(v) Judicial Management

If a company, or its creditor(s), considers that the company is/will be unable to pay its debts and there is a reasonable probability of rehabilitating the company, instead of resorting to a winding up, the Court may upon an application, order that the company be placed under judicial management. A judicial manager will be appointed.

Companies should refer to the Companies Act or seek professional advice.

For more information, go to the Institute of Certified Public Accountants of Singapore’s website at www.icpas.org.sg or visit www.icpasresearch.org.sg for more online resources.

(CPA Clinic is joint initiative between ICPAS and The Straits Times. It features a monthly column in the Money section dispensing tips and advise relating to small medium enterprises. This marks the end of a series of 8 articles for CPA Clinic Series 1. CPA Clinic Series 2 will be coming soon.)