Company Winding Up Proceedings

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”.

Compulsory Winding Up

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

  • A creditor having a claim against the company for more than S$10,000.00 has served a written demand requiring payment, and the debt is not paid within 3 weeks;
  • 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.

The following parties can file an Originating Summons to wind up a company compulsorily:

  • The company itself;
  • A creditor of the company;
  • A shareholder of the company;
  • A liquidator;
  • A judicial manager; or
  • Various Ministers on grounds specified under the law.

 

Procedure

The Originating Summons for the winding up of a company by the Court in either Form 2 or Form 3 of the Companies (Winding Up) Rules must be filed together with a supporting affidavit (in Form 5).

When filing the Originating Summons, the plaintiff or applicant may nominate a person to be appointed as the liquidator if a winding up order is made by the Court. Before the hearing of the Originating Summons, the plaintiff or applicant, or his lawyer, must obtain and file the written consent of the nominated liquidator. If no liquidator is nominated, the Official Receiver is the default liquidator.

The Originating Summons must be served on the company, the Official Receiver and the nominated liquidator (if any). In addition, the plaintiff or applicant needs to pay a deposit of S$10,400.00 to the Official Receiver.

An advertisement of the Originating Summons is required to be placed in an English and a Chinese local daily newspaper as well as in the Government Gazette.

If any person intends to appear at the hearing, a Notice of Intention to Appear in Form 8 must be given to the plaintiff or applicant, or his lawyer.

Any person who wishes to oppose the originating summons for winding up may file an affidavit in opposition at least 7 days before the hearing date.

The hearing of the originating summons is usually fixed within 6 weeks from the date of filing of the Originating Summons. Hearings are usually conducted in open court before a High Court Judge each Friday. The judge may dismiss the Originating Summons, 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 presentation of the Originating Summons for winding up. Upon the commencement of winding up, the company’s officers have no power to carry on the business of the company. The liquidator takes over control of the company.

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 make a report to the Court. The statement of affairs contains details of the company’s assets and liabilities, and enables the liquidator to carry out investigations into the affairs of the company.

After the Originating Summons for winding up is presented, 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 Companies (Winding Up) Rules.

 

Voluntary Winding Up

Usually, a voluntary winding up is effected by the passing of a special resolution by the members of the company. The winding up commences at the time of passing the resolution.

The two types of voluntary winding up are:

  1. Members’ Voluntary Winding Up

    For this to happen, a company must be in a position to pay its debts in full within 12 months after the commencement of winding up. The directors of the company are required to file a declaration of solvency to the above effect. The liquidator will be appointed by the company.

  2. Creditors’ Voluntary Winding Up

    Where a company is unable to pay its debts and wishes to be wound up, it may do so by way of a creditors’ voluntary winding up. In addition to the requirement of a members’ resolution to wind up the company, the company must also convene a meeting of its creditors to consider the proposal for a voluntary winding up. The company will appoint a liquidator, subject to any preference the creditors may have as to the choice of liquidator.

    If no declaration of solvency is filed or if the liquidator is satisfied that the company is unable to pay its debts within the specified period of 12 months after the commencement of winding up, the winding up will proceed as a creditors’ voluntary winding up.

No originating summons is filed in Court for the voluntary winding up of a company. This is dealt with by the Accounting and Corporate Regulatory Authority (ACRA) instead.

 

Main Effects of Voluntary Winding Up

From the commencement of winding up, the company shall cease to carry on its business. However, the corporate powers of the company shall continue until the company is dissolved. The company’s shareholders cannot transfer their shares in the company without the sanction of the liquidator.

YOU MAY ALSO BE INTERESTED IN