What You Need To Know
The world may have recovered from the 2008- 2009 recession however, there are still many companies that are closing down. There are so many reasons why companies choose to liquidate or wind-up. In order to recover some, companies choose to wind up some of their businesses.
Strike Off The Company Versus Winding-Up
Winding up is a process where in parent companies sell the assets of a business and then pay off its creditors before ‘dissolving’ the business hence it is sometimes referred to as dissolution. This is usually done when the company can no longer survive and has declared bankruptcy. Furthermore, winding-up is done by parent companies when one of their businesses seems to be more of a liability. These businesses often lose prospects and are no longer gaining any profits.
Winding-up a company can be classified into two: voluntary winding up and compulsory winding up. In Singapore, a company can be dissolved voluntarily when it is solvent and if it has paid all its debts within 12 months. After making a written Declaration of Solvency, the company can now apply in the Accounting and Corporate Regulatory Authority Singapore (ACRA) for the specific business to be dissolved. The application will only be approved by ACRA if they find acceptable reasons for the company to halt their business. Compulsory winding up happens when the court orders the company to be dissolved for reasons such as insolubility and inability to pay off debts.
A cheaper alternative to dissolution is striking off the name in the register. The application to strike off a company is similar to that of winding-up. A company name can only be struck off the register according to Section 344 of the companies act if it has been approved by ACRA.
Prior to striking off a business it is essential that the business has been inactive since its incorporation. This means that the company must not have any business transactions since its incorporation and has not opened any bank account or the bank account has already been closed. Any company that wishes its name to be struck off the register must submit its last audited accounts to ACRA. The following accounts that would be submitted must not have any accounts or liabilities.
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