Company Winding Up Proceedings

Impact of COVID-19 (Temporary Measures) Act 2020 on Bankruptcy and Winding Up Applications

Part 3 of the COVID-19 (Temporary Measures) Act 2020 (“C19TMA”) provides for temporary relief for financially distressed individuals, firms and other businesses and has introduced modifications to, amongst others, the Bankruptcy Act, the Companies Act and the Insolvency, Restructuring and Dissolution Act 2018, which apply during the prescribed period, which is presently 6 months commencing on 20 April 2020, subject to any further extensions. The modifications increase the monetary threshold for the bankruptcy of individuals and firms to $60,000 and increases the monetary threshold for the insolvency of other businesses to $100,000. 

The information provided below in respect of bankruptcy and winding up applications is subject to any modifications arising from the C19TMA and should be read together with these modifications.

More information is available at

https://www.mlaw.gov.sg/news/press-releases/2020-04-20-covid-19-temporary-measures-act-provisions-relating-to-temporary-reliefs-to-commence-on-20-april-2020

You may also wish to refer to the FAQs at

https://io.mlaw.gov.sg/bankruptcy/covid-19-faq/

https://io.mlaw.gov.sg/debt-repayment-scheme/covid-19-faq/

https://io.mlaw.gov.sg/corporate-insolvency/covid-19-faq/

What is Winding Up or Liquidation of a Company?

The winding up or liquidation of a company is the process by which a company’s assets are collected and sold in order to pay its debts. Any monies remaining after all debts, expenses and costs have been paid off are distributed amongst the shareholders of the company. When the winding up has been completed, the company is formally dissolved and it ceases to exist.

Broadly speaking, a company can be wound up in one of two ways. First, the Court can compulsorily wind up a company. Secondly, the shareholders or the creditors of the company can themselves apply to wind up the company in proceedings known as “voluntary winding up”.  The following is a brief overview of compulsory winding up.

Compulsory Winding Up

There are certain grounds upon which a company can be wound up compulsorily by the Court. A company’s inability to pay its debts is a common ground for presenting an application for compulsory winding up. A company is deemed to be unable to pay its debts if:

  • A creditor having a claim against the company exceeding S$15,000.00 has served a written demand requiring payment of the sum so due, and the company has for 3 weeks after the service of the demand neglected to pay the sum, or to secure or compound for it to the reasonable satisfaction of the creditor;
  • Execution of a judgment obtained by a creditor against a company remains unsatisfied in part or in whole; or
  • It is proved to the Court’s satisfaction that the company is unable to pay its debts.

An application to wind up a company compulsorily may be filed by:

  • The company itself;
  • Any director of the company;
  • A creditor of the company;
  • A contributory;
  • A liquidator of the company;
  • A judicial manager of the company;
  • Where the company is carrying on or carried on banking business, the Monetary Authority of Singapore; or
  • Various Ministers on grounds specified under the law.

Procedure

The application for the winding up of a company by the Court in either Form CIR-11 or Form CIR-12 of the Insolvency, Restructuring and Dissolution (Corporate Insolvency and Restructuring) Rules 2020 must be filed together with a supporting affidavit. In addition, the plaintiff or applicant needs to pay a deposit to the Official Receiver before the filing of the application. Please see https://io.mlaw.gov.sg/corporate-insolvency/practice-circulars/ for the practice circulars issued by the Official Receiver for more information.

When filing the winding up application, the plaintiff or applicant may nominate a licensed insolvency practitioner to be appointed as the liquidator if a winding up order is made by the Court. Before the hearing of the application, the plaintiff or applicant, must obtain and file the written consent of the nominated licensed insolvency practitioner to be appointed as liquidator.

The winding up application must be served on the company, the Official Receiver and the nominated licensed insolvency practitioner (if any). An affidavit of service in either Form CIR-13 or Form CIR-14 must be filed at least 5 days before the hearing of the winding up application.

An advertisement of the winding up application is required to be placed in an English local daily newspaper or in any other newspaper directed by the Court, as well as in the Government Gazette not less than 7 days before the hearing of the winding up application.

If any person intends to appear at the hearing, a notice of intention to appear in Form CIR-15 must be served on the applicant.

Any person who wishes to oppose the winding up application may file an affidavit in opposition which must be served on the applicant at least 5 days before the hearing of the winding up application.

The hearing of the winding up application is usually fixed within 6 weeks from the date of its filing. Hearings are usually conducted in open court before a High Court Judge each Friday. The Judge may dismiss the winding up application, adjourn the hearing or make a winding up order or an interim order.

Main Effects of a Compulsory Winding Up Order

When a company is wound up compulsorily by the Court, the winding up is deemed to have commenced at the time of the making of the application for the winding up.

Within 14 days of the winding up order, the directors and the secretary of the company must deliver a statement of the company’s affairs to the liquidator, who must then file a copy of the statement with the Court. The statement of affairs contains, amongst others, details of the company’s assets and liabilities and other information required by the Official Receiver or the liquidator, and enables the liquidator to carry out investigations into the affairs of the company.

After the winding up application is filed, the company, its creditors or its shareholders may apply to restrain any pending proceedings against the company. Once the winding up order is made, no action against the company may be commenced or continued without the leave of the court. Any disposition of the company’s property and any transfer of its shares after the commencement of winding up shall be void unless the Court orders otherwise.

The Court Fees payable for the filing of documents in respect of Compulsory Winding Up Proceedings may be found in the Second Schedule of the Insolvency, Restructuring and Dissolution (Corporate Insolvency and Restructuring) Rules 2020.

YOU MAY ALSO BE INTERESTED IN