It is possible to close companies either by winding up or striking off. Both these actions cease the company operations. However, they are very different processes and cannot be mistaken with each other for closing down a company in Singapore.
In general, striking off is a very straightforward process but liquidation can be of three different types: Court Winding Up, Creditor’s Voluntary Liquidation, and Members’ Voluntary Liquidation. When a company is under liquidation, the liquidator is allowed to take complete control of operations.
There are so many reasons to go for company liquidation process Singapore; mainly when a company has stopped doing all operations. Few other reasons for liquidation include management deadlock, oppression, financial restructuring, minimizing tax liabilities, maximizing tax advantages, breach of statutory provisions, and out-of-scope operations of the company.
The terms winding up, striking off, and liquidation are often used interchangeably. They are mainly linked to the disposal of company assets to settle its liabilities and debts. This step is taken when the company is not able to pay off the pendency.
Liquidation process Singapore – Types of liquidation that people can follow for Singapore company liquidation in 2022:
- Voluntary liquidation
In the voluntary liquidation process, members or creditors of the company are required to pass a resolution to wind up company operations. The process of Singapore company liquidation starts from the time when this resolution is passed. It is possible to proceed ahead in two different ways: members’ voluntary liquidation or creditors’ voluntary liquidation. The first one is the most appropriate exit strategy and is widely used to liquidate solvent companies. When a company is able to pay all its debts within 12 months, this kind of winding up works well. In case the company is insolvent, creditors will consider the liquidation proposal. The process involves the appointment of an external liquidator on approval of all creditors.
- Compulsory liquidation
If an insolvent company becomes unable to pay off its liabilities and debts, the court is authorized to announce compulsory wind up. In order to proceed ahead with this procedure, an Originating Summons appeal must be made in front of the court; it can be done by a creditor, shareholder, judicial manager, or liquidator. One can go ahead with the compulsory liquidation process Singapore in a few circumstances only; mainly when creditor claims include an amount of more than $10,000 against the company. Other than this, it can be done when the execution of the judgment of the creditor against the company stays unsatisfied as a whole or in part. Moreover, if the company is declared to be unable to pay off its debts by the court itself; then also it is possible to proceed ahead with compulsory liquidation.
As there can be so many situations leading to the closure of a Singapore company, it is important to take expert assistance to proceed ahead safely. For beginners, the procedure of Singapore company liquidation may appear extremely time-consuming and complex but experts can help you handle all statutory and legal requirements with ease.