Closing Down A Company – The Strike Off Option
Managing the End Stage of your Business Cycle
There are essentially two categories of company closure: Winding Up and Striking Off.
In general, you may close down a company via Striking Off if there are, or there will be arrangements to ensure that there will be no assets and no liabilities within the Company at the point of application for Strike Off. In other circumstances, whereby there will be issues with fully discharging the company liabilities, you can only close down a company by way of winding up.
In this article, we will discuss on the more common method of company closure – The Striking Off of a Company.
Duration of a Company Strike Off
The entire duration of a strike off will take approximately 5 months from the date of application. During this 5 month period, there are no requirements for the owners or directors to do anything unless someone objects to the striking off of the Company.
Criteria for Application of Company Strike Off
- The company has ceased business activities or has never commenced business since incorporation
- The company has closed ALL company bank account(s).
- The company has no outstanding penalties or offers of composition fine owing to ACRA.
- The company has no outstanding tax liabilities owing to IRAS and is not indebted to any other government department.
- The company has no outstanding charges in the Register of Charges.
- The company is not involved or threatened with legal proceedings within or outside Singapore.
- The director(s) have obtained the written consent of the majority of shareholders to strike the name of the company of the register.
- The company has no contingent assets and liabilities.
- The Assets and Liabilities of the Company have been disposed/discharged.
- The director(s) consent to the application to strike off this company.
Considerations before Applying for Company Strike Off
Consent must be obtained from the majority of the shareholders (unless otherwise stipulated in any shareholders’ agreements or explicitly stated in the Memorandum & Articles of Association of the Company).
You must be sure that the Company has fully extinguished all existing and potential liabilities of the Company. The table below illustrates some of the existing and potential liabilities you may have to discharge before commencing any strike-off.
|EXISTING LIABILITIES||POTENTIAL OR CONTINGENT LIABILITIES|
|Trade Payables to your Suppliers and Creditors||OFFICE LEASING WHICH ARE NOT OFFICIALLY TERMINATED, RESULTING IN COMPANY HAVING FIXED COMMITMENTS FOR THE REMAINING LEASE PERIOD, OR|
|Current year tax payable||POTENTIAL BREACH OF CONTRACTS|
|Existing fines and penalties to government bodies (e.g. ACRA fines/penalties).||NON-FULFILLMENT OF CONTRACTS AND WORKS|
|Bank or third party loans||REPAYMENT OF TAXES FOR NEXT YEAR OF ASSESSMENT|
|Amounts due to directors/shareholders||EXISTING LAWSUITS PENDING RESOLUTIONS|
|Finance lease obligations|
Work to be Performed before Strike Off
1. Bookkeeping up to date of business cessation, inclusive of disposal of assets and liabilities.
2. Complete Tax filings and tax payments to IRAS for all relevant years of assessment.
3. Company resolutions and/or documentation to validate strike-off application.