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How To Close a Company in Singapore

Running a business is never smooth sailing and you may not be aware that even closing your business in Singapore often requires a considerable process. For some, this will be necessary when a business’s bottom-line starts to deteriorate. For others, within months of starting operations, you could realise that you simply don’t have a viable business idea; or the market changed so drastically that you no longer have something relevant to offer your audience.

  • How long will it take to close your company in Singapore?
  • Will it be a pricey exercise?

We are sharing all the necessary details below to help you navigate this chapter of your business.

The Difference Between Winding Up my Company and Striking Off my Company

The first fact you’ll find useful is understanding that there are different ways of closing your company in Singapore. In general, the terms ‘winding up a company’ and ‘striking off a company’ are used for the two different methods.

What is Winding Up a Company?

Winding up a company is also called liquidating the business. This is a formal process for which a liquidator needs to be appointed, since it requires more work than being struck off, such as asset cessation. It can take place for solvent or insolvent companies.

There are different reasons for winding up a company, with the most prominent being:
– The company voluntarily winding up the business when its directors determine that it can deal with all its debt in 12 months or less after the winding-up started. You can pick this method for reasons such as disputes between role players in the company.
When the company realises it can’t continue a healthy business, because of the company liabilities that have become too difficult to handle, a creditors’ voluntary wind up becomes an option.
– If a company can no longer pay its debts, a court order may force it to wind up. This also happens if companies are found to be used for illegal activities, there was no start to the business one year after it was incorporated or if there are statutory irregularities like not holding meetings.

The company follows a liquidation process in order to turn the company’s assets into cash.

What is Striking Off a Company?

Striking off your company is an easier and more affordable way, where you’re simply asking ACRA to strike your company name from the Registrar. This is also called deregistering a company.

However, it’s not an option all business owners can take. You need to adhere to various conditions, such as not having unresolved matters with ACRA and no solvency processes are active. Usually, this method is the way to close down your company when you have a very small business or you’ve become a dormant company—or it has never started doing any business at all.

For both processes, you’ll need to apply to ACRA (Accounting and Corporate Regulatory Authority). Which of these will suit your situation?

Step by Step Instructions to Winding Up a Companyman walking down the stairs greyish background

When decisions from the director or factors like a court order result in bringing a stop to business activities, this is how you wind up a company:
– The Declaration of Solvency must be signed by most of the company directors.
At some time during the next five weeks, during an EGM (extraordinary general meeting), the team must agree on the way forward and get a liquidator.
– The company must meet the required solvency and publicity requirements.
The liquidator must file a notification with ACRA. This will include the resolution the board agreed upon.
– Within 10 days there must be advertisements about the winding up in the country’s newspapers. This must be available in all four of the country’s languages:
o English
o Tamil
o Malay
o Chinese
In terms of tax matters now it’s time to request tax clearance by notifying the IRAS. You’ll need to submit account information and tax details for all business activities taking place up to the cessation of your company. Your income tax returns history must be up to date.
– IRAS will provide you with tax clearance.
You can schedule a date for your final meeting.
– An advertisement will be placed, confirming the cessation.
The liquidator must compile a summary showing how the business’ assets were distributed.
– The final meeting will take place at which the details of the liquidator’s report will be shared.
No longer than a week after this final meeting, ACRA must receive a return from the liquidator, proving the meeting took place and providing an account copy.

The final dissolving of a company in this manner will be confirmed 3 months after the liquidator lodges the return. There is a period of 2 years after all of this takes place during which the court can still cancel the dissolution of a business if anything is found amiss.

For situations like a creditors’ voluntary wind-up of the company, creditors will have a say in who the liquidator should be, but it’s still the business itself applying for the closing of the company. In contrast, in the case of a court order, the court appoints a liquidator. This liquidator, or a creditor, or a judicial manager will submit the application to the court.

Step by Step Instructions to Striking Off a Company

On average, to strike off a Singapore company takes more or less five months. These are the main steps you’ll follow.

Determine if You Meet the Criteria

To prevent your application for striking off from being declined, consider if your business meets the criteria stipulated in this list:
Trading has ceased OR you never started trading after the business was incorporated.
– You don’t owe money to government agencies including:
o IRAS
o CPF
The charge register has no unsettled charges.
– Your company is not part of any legal procedures or court proceedings at the moment.
No disciplinary or regulatory proceedings are at hand.
– On the date of your application, your company doesn’t have company assets or liabilities.

Handling Tax Liabilities

tax payment graphicsTax issues form another important part of the deregistration process.

Before you apply, do thorough tax computation to ensure your company doesn’t owe any tax, since IRAS can use this as a reason to reject the application. Form C-S/C must be completed and submitted for all your business transactions relevant to the time until the cessation of business kicks in. You also have the responsibility of answering all queries IRAS may have made to you in the past.

In the case of your company becoming dormant, you may need to apply for a waiver of submitting your tax return. Then you won’t have to submit from C-S/C since there won’t be anything to report.

If you’re GST registered, make sure none of these relevant matters are outstanding and cancel your GST registration. This can be done online with an e-service and you’ll wait up to 10 days for the results.

Also, make sure there’s no tax credit that needs to be paid to the company itself. When there is, after dissolving of the company shareholders can apply for this tax credit from the IPTO (Insolvency and Public Trustee’s Office) but a fee may be payable.

Your company won’t receive a tax clearance letter to communicate its tax assessment status, but your statement of accounts or the latest assessment notice will suffice as proof of no outstanding tax obligations.

Submit an Application

Note that whoever takes up the tasks of applying for the deregistration must be appointed as the representative of the company. This is usually a company director or company secretary. A majority of the directors must agree with the choice of representative.

You can submit your application online and this is a free service.

Review Process

ACRA has the responsibility to determine whether the company is currently involved in business activities. It must also ensure it meets the relevant criteria mentioned above.

ACRA will send confirmation to the provided address, such as the head office of the business.

Process After Approval

There will be a First Gazette Notification 30 days after ACRA approved the striking off. This advertisement is placed in the Government Gazette. Two months (60 days) later, the company will be removed from the register and the business name once again published, called the Final Gazette Notification.

Other Things to Consider

Asian woman thinking throughDeregistering or liquidating your company is not the only process you need to consider, so you’ll need action plans for the following as well.

Employee Matters

To be reasonable towards your employees, you should give them ample notice of the plans to close down the business; at least a few weeks. This will give them time to process the information and look for other work.

You have no legal obligations about retrenchment packages, except what is stipulated in your employee contracts. Remember that you need to pay salaries during the last weeks before cessation, and possibly payout for unused leave and notice pay. This will be due in each person’s bank account on the last day of work.

Best practices for this time are also to issue reference letters to your employees to use in their job applications. If you can assist with job searches it will go a long way in promoting your reputation as a business leader, which could benefit you in future ventures.

Shareholders’ Capital

You can only consider paying back shareholders’ capital after all the company’s debts have been paid. You need to divide the leftover money according to the type of shareholders you have:
– Preference shareholders will be given priority and payments calculated according to share issue terms.
For ordinary shareholders, the cash available will be divided into portions relating to the shares they own.

Tenant Agreements

Unfortunately, the cessation of your company may not align with the end of your office space’s lease agreement. Inform your landlord well ahead of time of your plans to move out so you can discuss a practical solution.

Some landlords may accommodate you and terminate the agreement, especially if they find a tenant to replace you. Alternatively, be prepared to pay a penalty fee or keep the lease in place and sublet the space to cover the monthly costs.

Service Provider Agreements

Your service providers also need to be warned well in advance so you can cancel their services. This prevents you from paying for services you no longer need after the company doors are closed. If you’re still waiting for goods from them, make sure they deliver before your final day of work so there won’t be any delivery fees due later on.

Communicate an alternative address for delivery of their final account, so they don’t feel you’re trying to avoid them. Once again this can help maintain good relationships with your business network, in case you need them in the future.

Customer Relations and Ending All Online Marketing

Don’t simply close down companies without ever communicating with your customers about the process. This is an excellent time to show your honesty and authenticity, so clients won’t have doubts about doing business with any future companies you’re involved in.

Inform your customers about the timeline of your business closing down, as well as the reasons if you feel comfortable sharing. You also need to discuss refunds and outstanding accounts. Provide contact information in case they need to contact you in the future.

Social media and your website are excellent platforms to engage with your customers about this matter. Just remember to plan for their closing down as well.

You need to:
– End your contract for website hosting
Make a backup or print out of relevant information you want to keep from your website
– Disable third-party services active on your page
Cancel subscriptions
You don’t want to become liable for expenses after the company is closed down.

Conclusion

Closing down businesses can be a traumatic time, especially if you envisioned your future differently. Use the knowledge and guidelines above so it seems a little less unfamiliar. If you have any questions, please share your thoughts in the comments below. Or, if you know of someone who can benefit from this information, simply contact us.