Voluntary Suspension of Business in Singapore: How to Handle

Are you a local small and non-listed (i.e businesses not listed on the stock exchange) business owner in Singapore considering whether you need to voluntarily suspend your business operations?

If so, read on to learn more about whether this is the right step for your business and the actions you can take during the suspension.

What is a Voluntary Suspension of Business?

A voluntary suspension of business refers to a business deciding to temporarily delay, interrupt, or terminate business operations.

There is no fixed duration of time for how long a suspension should last – the business owner can choose to suspend operations for as long or as short a period of time as is required.

Business operations can be voluntarily suspended either completely or partially. A complete suspension means that all types of operations are temporarily shut down, such as:

1. Operations that are critical and need to be maintained
2. Operations that can be performed remotely
3. Operations that can be temporarily suspended

On the other hand, a partial suspension typically refers to suspension of at least one specific component of the business, excluding critical operations which would likely still be running.

Under what circumstances would I have to voluntarily suspend my business partially or completely?

The first and most common situation is if your business is in financial difficulties and you need to do financial restructuring, for instance, by implementing a scheme of arrangement.

In this case, you may need to suspend your business operations completely in order to ensure that no further financial expenditure is incurred.

Alternatively, you may suspend your business voluntarily if there are extenuating circumstances which could affect your daily and essential business operations, such as the weather conditions like the haze season.

For example, if your business offers outdoor tours, you may need to temporarily suspend such tours if the haze situation makes it impossible for you to hold them safely.

Nevertheless, there are certain advantages to voluntarily suspending a business, such as its cost-saving ability in times of economic uncertainties. It also gives business owners time to re-analyse future business plans and current company protocols to determine the best way forward.

Making Notifications Before Business Operations Can be Suspended

Notifying employees

Prior to a suspension of your business (whether it is a partial or full suspension), you should inform your employees of the suspension and activate any business continuity plans as required.

This is to keep your employees in the loop on current business affairs and help maintain critical business operations as far as possible.

Notifying creditors

Although this is not a legal requirement, you are strongly encouraged to at least notify and discuss the suspension with your creditors, especially if you are completely suspending your business operations.

This is because if your business is suspended for a whole year, your creditors can apply to the court for your business to be wound up.

Notifying ACRA

If your business is being completely suspended and this results in a change to your Financial Year End (FYE), you will need to notify the Accounting and Corporate Regulatory Authority (ACRA) of this change.

How to Handle a Suspension of Business Operations

Managing employees’ pay and leave entitlements

Employers are expected to continue paying their employees their salaries even during the suspension of business.

However, should the suspension carry on for a longer period of time lasting for over a month, you can take the initiative to discuss with your union and employees on the potential need to temporarily reduce employees’ working hours, leave and salary entitlements. These measures should only be carried upon after the employees have consented to them.

However, it is not recommended to put your employees on unpaid leave for a prolonged period of time of more than a few months, and especially without their consent.

The Ministry of Manpower may investigate if it receives complaints from your employees that you have reduced their salaries or put them on prolonged unpaid leave, without engaging them or seeking their consent.

You may also encourage your employees to take on part-time jobs with other companies for an extra source of income while your business operations are suspended.

Marking your business as temporarily closed on Google

In addition, you can consider marking your business as temporarily closed on Google if you have partially suspended operations by closing your business’ physical location and are temporarily offering only online services. Marking your business as temporarily closed will not affect the local search ranking for your business.

However, you should not mark your business as temporarily closed if your business continues to provide pickup or delivery services in a partial suspension, otherwise those services will not appear on Google.

(For partial business suspensions) Sustaining cash flow

In a partial suspension, it is important to sustain positive cash flow to maintain solvency as your business’s activities are reduced. You can do this by adopting cost-cutting measures to tide through financial difficulties.

These include reducing the number of employees and managing employees’ working hours, leave and pay entitlements as mentioned above.

Another example of how businesses can sustain cash flow is by renegotiating their contracts, such as for reduced rent and deferred payments to vendors.

(For complete business suspensions) Negotiation lease and licence termination

For lease and licence issues, if you are suspending your business partially, you may not need to negotiate with your landlord the conditions of the existing lease or licence.

However, if you are suspending your business operations completely, you are encouraged to do so instead of stopping office monthly rental payments altogether. This is because defaulting on rental payments can lead to your landlord commencing legal proceedings against your business. Your landlord can also exercise its right to terminate the lease, as well as its rights of re-entry and forfeiture.

Instead, try to negotiate with your landlord to:

• Delay or offset your current rental payments. For example, request the landlord to use the security deposit to offset the rental payment.
• Extend your lease and allow another tenant to temporarily stay in place. This is advisable only if your suspension of business operations is a total but prolonged one, lasting for more than a year. For instance, hotels may not be able to generate income all the time but have several other tenants in the properties as part of their business models. This can help generate rental income that you can hand to your landlord.

Ensuring regulatory compliance

De-registering GST

For GST-registered businesses, you do not need to cancel your GST registration because you are suspending your business operations only temporarily.

Submitting Income Tax Returns

You must still submit your business’ Income Tax Return unless it has been granted a waiver of Income Tax Return Submission. To be eligible for the waiver, your business must satisfy all of the following criteria:

1. It must be dormant (i.e. if your business has completely suspended operations for at least 12 months) and has submitted its tax filings up to the date of cessation of business.
2. It must not own any investments, for instance, shares, real properties and fixed deposits.
3. It must have been de-registered for GST purposes prior to this application if it had previously been a GST-registered company.
4. It must not have the intention to recommence business within the next 2 years.

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If you are unsure of how voluntarily suspending business operations may affect your legal obligations to your employees, creditors, government agencies and other stakeholders, please consult a corporate lawyer.