COVID-19 has taken toll on most businesses from the economic fallout, many companies which are not viable anymore have two options to strike off or wind up their company. In order to make an better assessment and decision, business owners have to understand what are the key differences between striking off and winding up a company. Most importantly, they need to be well informed of the situation that their companies are in before they can make the final call.
Striking off means removing a dormant company off the Register and there are requirements to meet for a strike off which are:
1. The company has been dormant since its incorporation or has ceased operation
2. There is no outstanding debts to Government agencies like IRAS and CPF, Banks, Suppliers, Employees and other payables
3. The company is not involved in any legal proceedings and not subjected to any disciplinary action
4. Zero assets and liabilities prior to date of strike off
5. No contingent asset and liabilities which may arise in the future
The Director or members of the company has come to term and has reasons to believe that the business in no longer active. It is more cost efficient means of closing down a company, However, within six years from the date on which the company has been stuck off, any person who wants to pursue can still apply to Court to have the name restored on valid justification.
A strike off has to be notified to all members of the company and it can be objected within 30 days of notice. If the Registrar did not receive any objection within the stipulated period, a notice of intention for striking off will be published in the Government Gazette. The whole process of the company striking off to final stage of when the company is struck off takes approximately 3-6 months.
Wind up simply means closing down a company, the procedure of closing down a company requires a longer time and it is more formal as compared to strike off. This involves getting an appointed liquidator to manage the entire liquidation process, which then includes realisation and distribution of company’s asset and payment of outstanding debts.
As compared to striking off, winding up is more costly and it is usually meant for companies which are insolvent. The severity of winding up could range from the followings:
1. Members’ Voluntary Winding up. The directors believe that the company will be able to pay its debt in full and will appoint a liquidator to wind up its affairs and file the necessary notifications required under Companies Act
2. Creditors’ Voluntary Winding up. The directors believe that the company cannot full fill to repay its liabilities or continue its business. The company will appoint a liquidator to wind up its affairs and file the necessary notifications required under Companies Act.
3. Compulsary Winding up. A company may be wound up under an Order of the Court under certain circumstances such as the company is unable to pay its debts. The court may appoint a liquidator to wind up the affairs of the company. Where no liquidator is appointed by the Court, the Official Receiver shall be the liquidator of the company.
At Skillridge Partner, we provide professional advice and assistance to assess which is the best mode of closure for your business whilst ensuring the company and its stakeholders’ interest are protected. We have the expertise to guide you through the entire closing process from the beginning to the completion of the closure of your company.
To find out more and how we can further assist you, please consult our specialists.