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| 1. |
What are the common grounds to wind up a company under an order of Court?
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The common grounds for winding up a company under an order of Court are as follows:
a) Inability to pay its debts. This is the most common ground. Section 254(2) of the Companies Act Cap 50 deems that a company is unable to pay its debts if:
- A creditor has served on the company a demand for the sum of more than $10,000 owing to the creditor and the company has, for 3 weeks thereafter neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor;
- Execution or other process issued on a judgement in favour of a creditor of the company is returned unsatisfied wholly or partially; or
- It is proved to the Court's satisfaction that the company is unable to pay its debts, taking into account its contingent or prospective liabilities
b) The directors have acted in the affairs of the company in their own interests rather than in the interests of the members as a whole, or in any other manner whatsoever which appears to be unfair or unjust to other members.
c) The Court is of the opinion that it is just and equitable that the company be wound up.
d) Default is made by the company in lodging the statutory report or in holding the statutory meeting
e) The company does not commence business within a year from its incorporation or suspends its business for a whole year.
f) The number of members are reduced to less than two (except in the case of a company which is a wholly-owned subsidiary).
g) An inspector appointed under Part IX of the Companies Act has reported that he is of the opinion:
- That the company cannot pay its debts and should be wound up; or
- That it is in the interests of the public or of the shareholders or of the creditors that the company should be wound up.
h) When the period, if any, fixed for the duration of the company by the Memorandum or Articles provide that the company be dissolved.
i) The company is being used for an unlawful purpose or for the purposes prejudicial to public peace, welfare or good order in Singapore or against national security or interest.
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| 2. |
Who can apply for compulsory winding up of a company on grounds of corporate insolvency?
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The following may apply for a company to be wound up under compulsory liquidation:
1. Any creditor, including a contingent creditor.
2. The liquidator of a creditor including the Official Receiver when acting as a liquidator.
3. The company itself.
4. A contributory or any person who is the personal representative of a deceased contributory or the trustee in bankruptcy or the Official Assignee of the estate of a bankrupt contributory.
5. The Judicial Manager appointed pursuant to Part VIIIA of the Companies Act Cap 50.
6. The Minister.
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| 3. |
What are the consequences when a company receives a Winding Up Order?
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Section 255(2) of the Companies Act states that winding up commences at the time of the making of the application for winding up. The consequences are:
a) Any disposition of the company's property, any transfer of shares and any alteration in the status of members is void
b) Any attachment, sequestration, distress or execution against the company's property is void.
c) Any transactions at an undervalue or any transactions where the company has given an unfair preference to a creditor or an associate is void or voidable (refer to Section 329 Companies Act and Sections 98 to 103 Bankruptcy Act)
d) No action or proceeding can be proceeded with or commenced against the company except:
- by leave of Court;
- in accordance with such terms as the Court imposes
e) A floating charge on the undertaking or property of the company created within 6 months of the commencement of the winding up shall, unless it is proved that the company immediately after the creation of the charge was solvent, be invalid except to the amount of any cash paid to the company at the time of or subsequently to the creation of and in consideration for the charge together with interest on that amount at the rate of 5% per annum. Any floating charge given by the company in the 6 month period will, unless the company was solvent immediately afterwards, be invalid except that it was given to secure new money. Only the floating charge is invalid, the debt remains, but only as an unsecured debt.
f) The company's business ceases but the liquidator may carry on the business if it is necessary for the beneficial winding of the company's business, with the authority of the Court.
g) The powers of the directors cease.
h) The company's contract of employment with its employees is terminated.
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| 4. |
What are the major stages of compulsory winding up in a corporate insolvency case?
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The major stages are:
1. Presentation of the application to wind up the company.
2. Hearing by the Court at which the winding up order is made.
3. Separate meetings of the company and creditors summoned by the liquidator to decide whether or not to appoint a Committee of Inspection to act with the liquidator.
4. Liquidator files notice of his appointment on Form 70 with the Registrar of Companies and the Official Receiver within 14 days of his appointment.
5. Liquidator carries out his duties to wind up the company.
6. If assets have been realized and the amount recovered is sufficient to pay creditors, the liquidator will proceed to declare and pay dividends.
7. When all monies recovered have been distributed the Liquidator will apply to Court for an order for his release and that the company be dissolved.
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| 5. |
When can I obtain the status of a company that is being wound up on grounds of corporate insolvency?
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A summary of the wound up company's affairs will be sent to all creditors and contributories once the Statement of Affairs is submitted by the directors' of the wound up company.
Creditors and contributories will also be informed when there are any significant developments in the company's liquidation. The Liquidator may also write to the creditors or convene a meeting to request for their financial support when there are insufficient funds in the company's liquidation account for the Liquidator to take legal or other enforcement action in the recovery of any assets.
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| 6. |
Who can I write to for more information on the status of company that is being wound up a in corporate insolvency case and where do I file my claims against that company?
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You may wish to ascertain first whether the company has been wound up. To find out whether a company is in compulsory winding up, you may wish to conduct an
insolvency search.
For details on voluntarily wound up company, you may refer to the Accounting and Corporate Regulatory Authority of Singaporersquo;s (ACRA) website and search under the heading 'Ask ACRA' to obtain more information about the company you wish to enquire on.
Thereafter, you may refer your queries to the liquidators appointed to administer the affairs of the wound up company.
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| 7. |
Are shareholders of wound up companies required to file their claims with the liquidator?
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Shareholders, also known as contributories, need not file a Proof of Debt against the wound up company to make a claim on the share capital. Any available surplus funds, after all expenses are paid, dividends to creditors are declared and amount due to them are paid in full, shall be distributed to the shareholders.
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| 8. |
What can the creditors/shareholders do if they are not satisfied with the services provided by the private liquidator?
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The creditors/shareholders can inform the Official Receiver that the services provided by the private liquidator have not been satisfactory. If there are no objections from the other creditors/shareholders, they may initiate an action to replace the liquidator.
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| 9. |
How can I claim against a wound up company for the amount owing to me?
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For compulsory winding up cases in which the Official Receiver is appointed as the liquidator, you may claim against the wound up company by lodging a Proof of debt for Company Liquidation (Form 77) online. Please ensure that supporting documents are mailed or faxed to us thereafter. A fee of $5.00 is payable via credit card or cash card for online submission.
If you are unable to lodge your claim online, you may do so manually by downloading the Proof of Debt form (Form 77) from the Insolvency & Public Trustee’s (IPTO) website and submit the completed form together with supporting documents, at our office. A fee of $8.00 is payable at our Office via Nets or cash card for manual submission.
For more information, please visit IPTO’s website.
For cases where the Official Receiver is not the appointed liquidator, please file the form manually with the appointed liquidator. To find out the details of the liquidator appointed for a compulsorily wound up company, you may wish to conduct an insolvency search.
For details on voluntarily wound up company, you may refer to the Accounting and Corporate Regulatory Authority of Singapore’s (ACRA) website and search under the heading 'Ask ACRA' to obtain more information about the company you wish to enquire on.
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| 10. |
How do I determine if my claim against a company being wound up on the grounds of corporate insolvency is preferential?
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Section 328 of the Companies Act states the following:-
Subject to the provisions of this Act, the following shall be paid in priority to all other unsecured debts
(a) 1st priority goes to the costs and expenses of winding up which includes costs of winding up, remuneration of the liquidator and costs of any audit carried out pursuant to section 317;
(b) secondly, all wages or salary (whether or not earned wholly or in part by way of commission) including any amount payable by way of allowance or reimbursement under any contract of employment or award or agreement regulating conditions of employment of any employee;
(c) thirdly, the amount due to an employee as a retrenchment benefit or ex gratia payment under any contract of employment or award or agreement that regulates conditions of employment whether such amount becomes payable before, on or after the commencement of the winding up;
(d) fourthly, all amounts due in respect of workmen’s compensation under the Workmen’s Compensation Act (Cap. 354) accrued before, on or after the commencement of the winding up;
(e) fifthly, all amounts due in respect of contributions payable during the 12 months next before, on or after the commencement of the winding up by the company as the employer of any person under any written law relating to employees’ superannuation or provident funds or under any scheme of superannuation which is an approved scheme under the law relating to income tax;
(f) sixthly, all remuneration payable to any employee in respect of vacation leave, or in the case of his death to any other person in his right, accrued in respect of any period before, on or after the commencement of the winding up; and
(g) seventhly, the amount of all tax assessed and all goods and services tax due under any written law before the commencement of the winding up or assessed at any time before the time fixed for the proving of debts has expired.
However, please take note that the amount payable under subsection (1) (b) and (c) shall not exceed an amount that is equivalent to 5 months salary whether for time or piecework in respect of services rendered by the employee to the company or $7,500, whichever is lesser.
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| 11. |
Who is responsible for filing the Winding Up Order against a company on the grounds of corporate insolvency with the relevant agencies?
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Section 262 of the Companies Act (Chapter 50) states that within 7 days after the making of a winding up order, the applicant for the winding up order shall lodge with the Registrar notice of the order and its date; and the name and address of the liquidator. The Registrar in this context refers to the Registrar of Companies.
On the passing and entering of the winding up order, the applicant for the winding up order shall within 7 days —
(a) lodge an office copy of the order with the Official Receiver and a copy of the order with the Registrar;
(b) cause a copy to be served upon the secretary of the company or upon such other person or in such manner as the Court directs; and
(c) deliver a copy to the liquidator with a statement that the requirements of this subsection have been complied with.
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| 12. |
What are the ways of closing a company on the grounds of corporate insolvency?
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You may wish to refer to the Accounting & Corporate Regulatory Agency’s website for information on the closing of a local or foreign company
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