Striking off a company in Singapore is a legal process by which a business entity ceases to exist. This can be a voluntary decision made by the company's directors and shareholders, or it can be initiated by regulatory authorities. This article provides an in-depth guide to the steps involved in striking off a company in Singapore, including the reasons for doing so, the procedure, and important considerations.
Reasons for Striking Off a Company
There can be various reasons why a company may choose to strike off its operations in Singapore. Some of the common reasons include:
Inactivity: If a company is no longer actively conducting business and has no outstanding liabilities or assets, the directors may decide to strike it off to avoid ongoing compliance requirements.
Financial Difficulties: Companies facing insurmountable financial challenges may opt for striking off as a way to wind up their affairs and dissolve the company legally.
Simplification of Corporate Structure: Some businesses may decide to streamline their corporate structure by eliminating subsidiary companies that are no longer necessary for their operations.
Compliance Issues: Companies that consistently fail to meet regulatory requirements and obligations may face enforcement action by authorities. In such cases, voluntary striking off can be a proactive measure.
Mergers and Acquisitions: After a merger or acquisition, a company may decide to strike off any redundant entities to simplify its structure and reduce administrative burdens.
The Striking Off Procedure
The striking off procedure in Singapore is governed by the Accounting and Corporate Regulatory Authority (ACRA) and follows a series of well-defined steps.
Directors' Resolution: The first step is for the directors of the company to pass a resolution in a board meeting. This resolution should be approved by a majority of directors and should state the company's intention to strike off.
Shareholders' Approval: If the company has shareholders, they must pass a special resolution to approve the striking off. This resolution typically requires a 75% majority vote.
Submission of Documents: The next step is to prepare and submit certain documents to ACRA, including:
a. A duly signed Form - Application for Striking Off;
b. A copy of the company's financial statements up to the date of cessation;
c. A declaration of solvency signed by the majority of directors; and
d. Any other documents required by ACRA.
Public Notice: Once ACRA receives the application, a public notice of the company's intention to strike off is published in the government gazette. Interested parties are given a two-month period to raise objections.
Final Compliance: The company must ensure that all outstanding tax and annual return filing obligations are settled with the relevant authorities before proceeding with striking off.
Approval from ACRA: After the two-month objection period, ACRA will review the application and any objections received. If there are no valid objections and all requirements are met, ACRA will issue a striking off notice.
Striking Off: Upon receiving the striking off notice, the company is effectively struck off the register and ceases to exist as a legal entity.
Before initiating the striking off process, there are several important considerations that company directors and shareholders should take into account:
Outstanding Liabilities: The company must settle all outstanding liabilities, including taxes, debts, and employee wages, before applying for striking off.
Employee Rights: Ensure that employee rights are respected, and any outstanding employment-related issues are resolved.
Contracts and Agreements: Review and terminate any existing contracts, leases, or agreements. Notify creditors, suppliers, and customers of the company's intention to strike off.
Assets and Property: Dispose of or transfer any company assets or property as necessary before striking off.
Regulatory Compliance: Make sure all regulatory obligations are met, including filing of financial statements and annual returns.
Legal Consequences: Striking off does not absolve directors and officers of their legal responsibilities. They may still be held liable for any pre-striking off actions that contravene the law.
Professional Advice: Seek legal and financial advice to ensure compliance with all legal requirements and to facilitate a smooth striking off process.
Striking off a company in Singapore is a well-regulated process that allows businesses to cease their operations legally. It can be a strategic decision for companies facing financial difficulties, inactivity, or those looking to streamline their corporate structure. However, it is essential to follow the proper procedure, settle all outstanding obligations, and seek professional advice to navigate the process successfully. By understanding the reasons, procedure, and important considerations for striking off, company directors and shareholders can make informed decisions about the future of their businesses in Singapore.