Compulsory winding up begins with the application for a winding-up order through the courts. Parties with the authority to initiate this process include creditors, shareholders, the company itself, and regulatory bodies. Creditors often take this route when the company is unable to meet its financial obligations.

Compulsory winding up can occur for various reasons, including:

• Inability to Pay Debts:

                The company’s insolvency, where it cannot meet its debts as they come due.

• Just and Equitable Grounds:

               Instances where the court deems it just and equitable to wind up the company, often due to disputes among shareholders or severe

              operational disruptions.

• Public Interest:

                Regulatory authorities may intervene when a company’s activities pose a threat to public interest or safety.

The party seeking compulsory winding up files a petition in court. The court evaluates the grounds presented, and if it finds them valid, it issues a winding-up order, officially commencing the process.

With the winding-up order in place, a licensed insolvency practitioner, known as the liquidator, is appointed by the court. The liquidator assumes control over the company’s assets, financial affairs, and operations.

The liquidator is responsible for notifying all creditors, shareholders, and relevant parties about the initiation of the compulsory winding-up process.

Asset identification, valuation, and realization become the liquidator’s core responsibilities. This involves selling assets through auctions or private sales to generate funds for settling outstanding debts.

Proceeds from asset sales are used by the liquidator to repay creditors in a specified order of priority. Secured creditors are typically paid first, followed by preferential creditors (e.g., employees), and finally unsecured creditors.

Following the successful realization of assets and debt settlement to the extent possible, the liquidator presents a final report to the court. Upon the court’s satisfaction with the liquidator’s actions, it issues an order for the company’s dissolution, effectively terminating its legal existence.

Compulsory winding up becomes a matter of public record in Singapore, potentially affecting the ability of the company’s directors to serve in similar roles in the future.

In specific cases, the court may order investigations into the conduct of the company’s directors and officers, particularly if there are suspicions of wrongful trading, fraud, or mismanagement.