All You Need To Know About Company Winding Up And Corporate Recovery Services In Singapore

There are various highs and lows when one is running a business. Just like when a business is doing well, it continues to expand and brings better returns on investment, there are cases where a business might not be doing too well and it may need to be wound up and liquidated. The Covid19 pandemic has unfortunately caused problems for many businesses where some experienced severe losses and recovered whereas some of them weren’t that lucky.

If a business is indebted to its creditors, or it has ceased its business activities, or because of certain other factors it needs to close down the business, it will have to wind up the business. This process is a lengthy and difficult task which involves different aspects of liquidation and other procedures. Here we will describe briefly what all involves when a company is about to wound up and what corporate recovery services that you can avail in Singapore in such a situation.

Reasons For Winding Up

There could be several reasons that a business needs to be wound up. These include:

• There is no way to pay off the debts that the business owns to its creditors.

• The company has ceased its activities

• A business committed some offences and now it is ordered by the court to wind up

• There is a deadlock in management which cannot be resolved.

• The company breaches its scope of activities

Types Of Winding Up

When it comes to different types for business, there are two main categories: voluntary and compulsory. In voluntary type, either the members of the company or its creditors voluntarily decide to close the business and wind it up. On the other hand, compulsory type involves involuntary wind up on the order of the court. This compulsory wind up process involves presenting a wind-up application to the High Court on behalf of the business, creditors, liquidators, or the judicial manager. The court then decides whether to accept or dismiss the application. In the case of acceptance, the court orders the company or business to be wound up. However, you do not have to deal with such cases yourself as there are management companies like Morrison that can assist you. They also provide services like company formation services, corporation advisory and litigation support in Singapore.

What Entails In The Process Of Winding Up

The complete process of business wind up can further be divided into categories depending on whether the company is solvent or insolvent and if the wind up is voluntary or involuntary.

What Is A Solvent And Insolvent Company

A solvent company is one that has the ability to pay off its creditors within 12 months of a debt having its assets exceeding its liabilities. An insolvent company, on the other hand, has its liabilities exceeding its assets and thus it is unable to pay its debts.

Company Voluntary Winding Up

This process starts when the Director of the company files a Declaration of Solvency and shows its assets, liabilities, and the estimated cost. Then the company has 5 weeks during which it needs to pass a resolution and lodge it with ACRA and appoint a liquidator who winds up the business and distributes its assets. This is where you have the option of hiring professional corporate recovery services like us. Having extensive experience in all aspects of personal and corporate liquidation, they will assist you from pre-liquidation to the final processes.

In case of an insolvent company, it can apply for a creditors voluntarily or approach the court so it can order compulsory winding.

Creditor’s Voluntary Winding Up

This process is the same as that of a company’s voluntary dissolution with the addition of two more steps where the creditors appoint a provisional liquidator and a creditor’s meeting is convened. A liquidator is appointed who carries out all the process from start until the completion of winding up.

Court Ordered Winding Up

The Director of a company, a creditor, a liquidator, or a judicial manager can make an application to the court for dissolving an insolvent company. A winding-up application is created and passed on to the shareholders, officers, and employees of the company. They also have to submit an affidavit of service to court at least 5 days before the hearing, pay a certain depositor fee to the Official Receiver, and publish a notice of winding up in a local newspaper at least 7 days before the hearing.

As part of the process, the company is required to cease its operations and pay off its debts. It also needs to pay its employees and shareholders, terminate contracts with partners and inform all the stakeholders that they are ceasing operations. All kinds of telephone and internet services also need to be terminated.

After the whole process is completed, the liquidator creates a report of how everything was done and presents it to the shareholders and creditors in a meeting that is convened for this specific purpose. By engaging a professional corporate recovery service provider like us, all the processes will be carried out smoothly and efficiently owing to the extensive experience they have in this field.

Should you need help with other corporate-related matters such as IRAS tax investigation services, tax advisory, corporate recovery or litigation support, find our team and we can best advise you what to do next!