All company owners leave their companies at some point or other. In this second of a two-part series, we discuss the alternative of striking off.
Several options exist for winding up a business in Singapore. In a previous post, we touched on the Members' Voluntary Liquidation (MVL) process. In this article, we take a closer look at another alternative, the strike off method.
Company owners planning to wind up their companies have the option of applying for a strike off, a process that sees the company - as indicated in the name - permanently struck off from the Singapore Register. For a registered company that has not commenced business since its incorporation, striking off is the fastest way of closing.
In order to do so, the company needs to clear all outstanding tax liabilities or charges and produce a written consent from the majority of company stakeholders. Often, stakeholders will engage the services of an accounting or law professional, who will advise the company on how to comply with the stringent criteria set by the Accounting and Corporate Regulatory Authority (ACRA), prepare the necessary documents and guide them through the process efficiently.
For a strike off to take place, the onus is on the directors of a company to ensure that the following criteria have been fully met, and that the company:
• Has not commenced business since its incorporation or has ceased trading.
• Has no outstanding tax liabilities with the Inland Revenue Authority of Singapore (IRAS).
• Must not be indebted to any other government agency.
• Must not have any outstanding charges in its charge register.
• Must not be involved in any court proceedings (within or outside of Singapore).
• Must not have any current/ contingent assets and liabilities.
• Must obtain the written consent of the company’s majority of shareholders.
• The last set of financial accounts attached in the application for strike off must be drawn up till the date of cessation as indicated in the application (if any) and be certified by the directors or auditor of the company. The financial accounts should have no assets and liabilities.
• A public company limited by guarantee must submit the last set of audited accounts.
Once the application for a strike off has been submitted, ACRA will process it within five working days. Once approved, ACRA wil send a striking off notice to the company, its officers (company's directors and secretary) and IRAS.
If there is no objection from the company in the following one month, ACRA will publish the name of the company in the First Gazette Notification.
If no objection is received in the following two months after the First Gazette Notification, ACRA will publish the name of the Company in the Final Gazette Notification and the name of the Company will be struck off the register. The date that the company's strike off will be stated.
The srike off method however is not without its drawbacks, the key issue being its finality.
• A strike off provides no finality against claims from creditors of the company.
• It is completely reliant on the directors of the company to determine that no liabilities exist.
• Unlike the MVL process where all liabilities (if any) are discharged upon dissolution, every officer of the company continue to be responsible for any outstanding liabilities even after the strike off process is completed, as if the dissolution had never taken place. For more information, refer to Section 344(4)(a) of the Companies Act.
• In the event that any person aggrieved by the strike off of the company’s name files an application within six years, the court may order the restoration of the name of the company. For more information, refer to Section 344(5) of the Companies Act.
For more details, do contact Baker Tilly TFW Restructuring & Recovery at firstname.lastname@example.org or 6336 2828 to set up a discussion with our professionals.