Section 10: Closing a Local Company - ACRA

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94 Closing a Local Company 10.2.1.1 Members’ Voluntary Winding up A members’ voluntary winding up involves the liquidation of a company that is still solvent. The process is initiated when the company has stopped operating and a general meeting of members is held. Before the members’ meeting, the directors must declare that they believe the company will be able to pay its debts in full within 12 months after the commencement of the winding up 2 . The members will then have to pass a special resolution 3 in a general meeting for the company to be wound up voluntarily 4 . A liquidator must be appointed to wind up the affairs of the company 5 and file the required notifications. Once a liquidator is appointed, the directors will no longer have any authority to run the company 6 . When does voluntarily winding up commence? Voluntary winding up is taken to have commenced when the resolution for voluntary winding up is passed 7 . 10.2.1.2 Creditors’ Voluntary Winding up The company may opt for a “creditors’ voluntary winding up” if its directors believe that the company cannot continue to operate due to its liabilities. Hence, unlike a members’ voluntary winding up, a creditors’ winding up is the liquidation of an insolvent company. If the company started out with a members’ voluntary winding up and it is later found that the company is not able to pay its debts in full within 12 months, then the winding up will be converted into a creditors’ voluntary winding up. 2 Section 293 of the Companies Act 3 More than 75% of those entitled to vote, vote in favour of the resolution. 4 Section 290 of the Companies Act 5 Section 294(1) of the Companies Act 6 Section 294(2) of the Companies Act 7 Section 255(1) of the Companies Act
Closing a Local Company 95 Where a company is insolvent, the members must at a general meeting pass a special resolution for it to be wound up voluntarily. A meeting of creditors will then be called and held 8 . At least 7 days’ notice of the meeting must be given to the creditors by post, and the company must also advertise a notice of the meeting in a newspaper circulating in Singapore. At the meeting, the directors will report on the affairs of the company and propose a winding up of the company. If all members are agreeable, a special resolution will be passed and a liquidator will be appointed to wind up its affairs and file the required notifications. 10.2.2 Compulsory Winding up A company may be wound up by an Order of the Court under certain circumstances, one of which is for reason of insolvency. When is a company deemed to be insolvent under compulsory winding up? A company is deemed to be insolvent when the company is unable to pay all its debts when they become due and payable 9 . The Court may then appoint a liquidator to wind up the company. When no liquidator is appointed by the Court, the Official Receiver will assume the role of liquidator of the company. The company may also be wound up through court order for other reasons 10 . Some common grounds where companies are wound up by court order are: • The company has not started business within 1 year from its incorporation or has suspended its business for the duration of one year or longer. • Directors have acted in their self interest rather than the company’s interest, or in a way which is unfair to the company or members. 8 Section 296 of the Companies Act 9 Section 254(1)(e) of the Companies Act 10 Section 254(1) of the Companies Act
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Section 10: Closing a Local Company - ACRA

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