SETTING UP A BUSINESS IN SINGAPORE: INVESTIGATING LEGAL PROCEDURES FOR COMPANY DISSOLUTION

Closing a business can be just as daunting as setting up a business in Singapore. The process of company dissolution varies based on the type of company and its legal structure. Whether you are a foreign company with a branch in Singapore or a private limited company, understanding the necessary steps is crucial for a smooth and proper closure. This article serves as a comprehensive guide on how to close a business in Singapore, highlighting different scenarios and procedures.

Closing companies after a long time of setting up a business in Singapore

To close a company, the primary requirement is to notify the relevant authorities promptly. This helps to ensure that the closure is processed without complications, which is crucial for companies considering how to set up a business in Singapore again in the future.

Closing a representative office

A representative office (RO) serves as a temporary arrangement for foreign companies and does not possess legal status in Singapore. The process for closing an RO is relatively straightforward, but it requires prompt action to ensure compliance with local regulations.

Notification to enterprise Singapore: The RO or its parent entity must notify Enterprise Singapore within one month of the intended closure. This communication is essential to maintain transparency and comply with local business regulations.
Final reporting: Upon closure, the RO is expected to complete any pending administrative duties and settle outstanding obligations before the official termination of operations. This includes finalizing any business dealings and ensuring that all local regulatory requirements have been met.

Closing a branch office

For foreign companies operating branches in Singapore, there are specific procedures to follow for a proper closure. This process is more structured and involves several steps to ensure that all legal and financial obligations are settled.

Lodging a notice with ACRA: The foreign company must lodge a notice with the Accounting and Corporate Regulatory Authority (ACRA) within seven days of ceasing business operations in Singapore. This notice serves as an official declaration of the branch's closure. For companies that have previously engaged in setting up a foreign business in Singapore, this step is crucial.
Informing the inland revenue authority of Singapore (IRAS): The branch must inform the Inland Revenue Authority of Singapore (IRAS) in writing about the closure. This is to ensure that tax matters and liabilities of the Singapore branch can be properly settled. Adequate understanding of these tax obligations is essential for those involved in setting up a manufacturing business in Singapore, as it sets a precedent for managing financial responsibilities.

Closing a company in Singapore requires notifying the relevant authorities promptly

Closing a private limited company

Dissolving a private limited company in Singapore can be accomplished through several methods, primarily depending on the company’s financial status and obligations.

Striking off

Under Singapore’s Company Act, the power to strike off a company from its register lies with the Company Registrar. This application to the registrar should be made through a qualified professional, such as a company secretary or by the company director. For entrepreneurs who have previously learned how to set up a business in Singapore, this process may feel familiar.

Eligibility for striking off: To qualify for striking off, the company must meet several criteria:
- Business status: The company must not have commenced business since incorporation or must have ceased trading at the time of the application.
- Assets and liabilities: The company should have no existing assets and liabilities as of the application date. There must also be no contingent assets or liabilities that could arise in the future.
- Tax and debt obligations: The company must not have any outstanding debts owed to government agencies like the IRAS or the Central Provident Fund (CPF) Board.
- Regulatory and legal proceedings: There should be no ongoing regulatory actions or legal proceedings against the company, whether in Singapore or elsewhere.
- Director's authorization: All or a majority of the company’s directors must authorize the application for striking off.
Restoration application: If an objection arises regarding the striking off of the company’s name, a party may apply to the court within six years of the striking-off date to restore the company’s name to the register if deemed justifiable.
Time frame: The striking-off process typically takes about four to six months, subject to clearance from the tax authorities.

Members’ voluntary winding up

A company may decide to wind up its affairs voluntarily, known as Member's Voluntary Winding Up, when the directors believe that the company can pay off its debts in full within 12 months from the commencement of the winding-up process. For those who have navigated how to set up a small business in Singapore, this procedure may be particularly relevant.

Process initiation: Before initiating the winding-up process, the company's management must ensure that its audited accounts reflect a solvent position, meaning that the company's assets exceed its liabilities.
Liquidator appointment: The company will appoint a liquidator responsible for overseeing the winding-up process. The liquidator's duties include concluding the company’s operations and fulfilling mandatory notifications as specified by the Companies Act and the IRDA.
Distribution of assets: The company’s assets will be sold to generate cash for settling debts. After all obligations are met, any remaining assets or surplus cash will be distributed among creditors and shareholders.
Final submission: The liquidator must submit a return to ACRA and the Official Receiver within seven days after the final meeting, providing details of the meeting and attached accounts.
Timeframe: The dissolution is completed three months after the return submission, although the Singapore court may declare the dissolution void within two years from the date of dissolution.

Completing legal procedures is essential for dissolving a company in Singapore

Creditors' voluntary winding up

In instances where the company faces overwhelming liabilities and is unable to sustain its business, creditors’ voluntary winding up is an appropriate course of action.

Decision by directors: Directors may decide to wind up the company if it cannot pay its debts within 12 months of the winding-up process. If no Declaration of Solvency is filed, this method becomes crucial.
Liquidator role: The affairs of the company will be managed by a liquidator, appointed through a creditors’ meeting. The liquidator is tasked with managing the winding-up process, ensuring that notifications and requirements as per the Companies Act and the Insolvency, Restructuring, and Dissolution Act are fulfilled.

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Updating company information

During the winding-up or dissolution process, it may be necessary to update certain company information.

Changes to company information

A foreign company can make changes to its registered information, such as its name or registered address, through the BizFile portal.

Changing company name: A branch or subsidiary can only change its name if the parent company has also undergone a name change. Investors should check the BizFile database to ensure the new name is not already registered.
Application process: The process for changing a company name is similar to registering a new entity and involves a fee of S$15 (US$15). If in-principle approval is needed, it may take between 14 and 60 days to process.

Changing company structure

Currently, Singapore does not provide a direct method for changing a foreign company’s structure. For example, switching from a sole proprietorship to a limited liability partnership involves a complex process of deregistration and reregistration.

Deregistering existing company: Investors must deregister the existing company through the BizFile portal and then register a new entity, ensuring compliance with the criteria for the desired structure.
Asset transfer: All assets and contracts must be transferred from the old company to the new entity to ensure legal continuity.

Inward redomiciliation

In Singapore, companies incorporated overseas can transfer their registration to the country. This process requires the existing overseas company to be deregistered before redomiciling in Singapore.

Eligibility and application: Companies seeking redomiciliation must ensure they meet eligibility criteria. To apply, investors must fill out the Application for Transfer of Registration and submit it via the BizFile portal, along with a fee of S$1,000 (US$739.7). The processing time can take up to two months.
Deregistration proof: Following successful registration, investors must submit proof of the deregistration of the overseas company to ACRA within 60 days. Failure to comply can result in the need to apply for an extension.

Business owners must settle all outstanding debts before shutting down a company in Singapore

Closing a business in Singapore involves understanding and adhering to various legal procedures that depend on the type of business entity involved. For those looking for closing or setting up a business in Singapore, seeking professional guidance can help facilitate a smoother process. Let G2B be your trusted partner, guiding you through every stage of Singapore business registration with reliability and dedication. Contact G2B today to achieve your goal of expanding your business to Singapore!