Liquidation, also known as winding up, involves the orderly closure of a company’s affairs by realizing its assets, settling liabilities, and distributing any remaining funds to shareholders. It is a formal procedure governed by the Singapore Companies Act and can be either voluntary or compulsory. Here’s what you need to know:

Voluntary Liquidation: Voluntary liquidation occurs when shareholders resolve to wind up the company either by passing a special resolution or by expiration of the company’s duration or occurrence of an event specified in the company’s constitution. The process involves appointing an approved liquidators in Singapore, who takes control of the company’s assets, conducts the liquidation process, and distributes proceeds to creditors and shareholders.

Compulsory Liquidation: Compulsory liquidation, also known as court-ordered liquidation, occurs when the court intervenes to wind up a company due to insolvency or other statutory grounds. The court appoints an official receiver or approved liquidators in Singapore to oversee the liquidation process and ensure equitable distribution of assets among creditors.

Procedure: The liquidation process entails various steps, including convening meetings of creditors and shareholders, preparing financial statements, realizing assets, settling liabilities, and distributing surplus funds. The liquidator also files necessary reports and notifications with ACRA and other relevant authorities throughout the process.

Timeline: The timeline for liquidation can vary significantly depending on the complexity of the company’s affairs, the cooperation of stakeholders, and other factors. It typically takes several months to complete, but complex cases may extend to years.

Closing a company in Singapore demands careful consideration of the available options, with striking off and liquidation representing two distinct paths. Understanding the nuances between these methods is crucial, as they entail different procedures, implications, and outcomes. Here, we delve deeper into the key differences between striking off and liquidation, providing a comprehensive overview to aid business owners in making informed decisions:

Legal Status:

Striking Off: Striking off involves an administrative process whereby a company’s name is removed from the Register of Companies. It does not necessitate formal liquidation proceedings, leading to the cessation of the company’s legal existence without the involvement of a liquidator or court oversight.

Liquidation: Liquidation, governed by the Singapore Companies Act, is a structured process that entails the formal winding-up of a company’s affairs. Whether voluntary or compulsory, liquidation involves the appointment of a liquidator who oversees the process and ensures compliance with legal requirements.

Liability:

Striking Off: Directors of a company being struck off remain personally liable for any outstanding debts or obligations incurred before dissolution. This exposes directors to potential legal action if creditors pursue unpaid dues post-dissolution.

Liquidation: In contrast, liquidation provides a mechanism for the orderly settlement of debts and liabilities. The appointed liquidator assumes control over the company’s affairs, facilitating the proper settlement of debts and equitable distribution of remaining assets to creditors and shareholders.

Asset Realization:

Striking Off: Striking off may result in assets being deemed bona vacantia, subject to government seizure. Consequently, assets may not be realized or distributed among creditors or shareholders, leading to potential losses for stakeholders.

Liquidation: Liquidation involves the systematic realization of assets, which are subsequently distributed to creditors and shareholders according to statutory priorities. The liquidator ensures that assets are liquidated efficiently, maximizing returns for stakeholders involved.

Creditor Protection:

Striking Off: Creditors may have limited recourse in cases of striking off, as there is no formal mechanism for them to make claims. This lack of creditor protection can pose challenges for creditors seeking to recover outstanding debts post-dissolution.

Liquidation: Liquidation offers a structured mechanism for creditors to make claims and participate in the distribution of assets. The process ensures that creditors are treated fairly, with assets distributed in accordance with statutory requirements, thus providing greater protection for creditors.