Simplified Winding Up Programme Guide for Singapore SMEs

Man worried about company debts

What is the Simplified Winding Up Programme?

The Simplified Winding Up Programme (SWUP) provides small and micro companies with a simplified creditors’ winding up procedure. This applies when an insolvent company voluntarily wishes to be wound up.

The SWUP is one-half of the Simplified Insolvency Programme, which also includes a simplified debt restructuring process. It aims to streamline the existing creditors’ voluntary winding up proceedings in the Insolvency, Restructuring and Dissolution Act (IRDA).

What is a creditors’ voluntary winding up?

A creditors’ voluntary winding up is where a company’s members pass a resolution that the company be wound up, in a situation where there is a possibility that the company’s assets are insufficient to cover its debts. In other words, it is a voluntary winding up of an insolvent company.

In the winding up process, the business of the company will cease and the company will be dissolved. Creditors are paid what they are owed from the liquidated assets of the company.

A voluntary winding up (including a creditors’ voluntary winding up) is initiated by the company itself, as opposed to a court-ordered winding up where a party other than the company applies to court to have the company wound up.

This article will explain:

When Can I Apply for the Simplified Winding Up Programme?

Applications for the SWUP opened on 29 January 2021 and will close on 28 July 2022. This period is subject to changes as ordered by the Minister for Law.

Which Companies are Eligible for the Simplified Winding Up Programme?

To qualify for the SWUP, a company must:

  1. Be incorporated in Singapore;
  2. Have an annual sales turnover of $10 million or less;
  3. Employ not more than 30 employees;
  4. Have 50 creditors or fewer;
  5. Owe less than $2 million in debts;
  6. Have assets that may be sold amounting to not more than $50,000. This sum excludes secured assets.

Additionally, the company must not:

  1. Have a pending scheme of arrangement application or be undergoing any other winding up or judicial management proceedings (including the simplified debt restructuring programme);
  2. Be party to any other existing legal proceedings;
  3. Have any disputes as to the relevant affairs of the company;
  4. Have any wrongdoing including intent to defraud creditors, or have traded wrongfully;
  5. Require specialised expertise or supervision to be wound up.

Benefits of Using the Simplified Winding Up Programme

The SWUP is catered to insolvent small and micro companies looking to wind up, but are lacking the same resources that larger companies have access to. It also aims to be faster and cheaper than the existing winding up processes. Compared to the normal voluntary winding up process under the IRDA:

  1. No court application is required;
  2. The company may be dissolved earlier;
  3. No creditors’ meetings need to be convened; and
  4. The Official Receiver is automatically appointed as the liquidator.

How to Apply for the Simplified Winding Up Programme

The company must make an application for entry into the programme to the Official Receiver – a public officer who acts as the liquidator of the company in the SWUP. The application may be made via the Ministry of Law Insolvency Office E-Services website, and must include:

  1. The company’s UEN
  2. A special resolution passed by 75% of shareholders of the company authorising the making of the application, and which also resolves that the company be wound up voluntarily upon being accepted into the SWUP
  3. A copy of the company’s latest financial statements (audited/unaudited)
  4. A copy of the Statement of Affairs of the company showing that the company will not be able to pay or provide for the payment of its debts in full. This should include the particulars of its assets and liabilities and a list of creditors and what securities they hold
  5. (If available) A copy of unaudited balance sheet, profit and loss statement and cash flow statement of the company for period(s) subsequent to the financial statements
  6. A non-refundable application fee of $450

It is important to ensure that the information provided is accurate as a company that provides false or misleading statements, information or documents to the Official Receiver will be guilty of an offence.

If a company is eligible for the SWUP and complies with the application requirements, the Official Receiver will send a notice of application to the company and its creditors. It will also publish the notice on the Ministry of Law website.

This notice of application will set out the details of the company and the procedure for submitting an objection to the company entering the SWUP. These objections must be made within 21 days of the notice of application being published.

The Official Receiver has discretion to accept or reject the company’s application, taking into consideration the grounds of any notices of objection it has received (if any).

What Happens If the Application for the Simplified Winding Up Programme is Successful?

Company is notified and has to pay a deposit

If the application to enter the SWUP is successful, the company will be notified of its acceptance and the Official Receiver will also publish the acceptance on the Ministry of Law website. The Official Receiver will then publish a public notice of the acceptance in the Government Gazette as well as at least one local English newspaper within 10 days.

The company will then be required to pay a deposit of $2,700 used to cover the expenses incurred by the Official Receiver in administering the SWUP for the company. If the company fails to pay the deposit, it will not be accepted into the SWUP.

Commencement of winding up and effects of commencement

The winding up under the SWUP is deemed to have commenced when the Official Receiver makes the public notification. The Official Receiver, who also acts as the liquidator of the company in an SWUP winding up, can then begin the winding up process.

Once the winding up has commenced, multiple restrictions apply to the company:

  1. The company must immediately cease its business unless the liquidator believes that the continuing of the company’s business is beneficial for its winding up.
  2. Dealing or trading with the shares of the company is prohibited, and any share transfers made during this period without the liquidator’s permission are invalid.
  3. Any claim or legal action against the company is invalid unless the court permits it. Most importantly, this means that the company cannot be sued by creditors who wish to claim their debts.

The company must also add “in liquidation” behind its company name on its website and on all of its business receipts, invoices or correspondence. This is to notify parties whom the company deals with that the company may be unable to pay any debts incurred during this time.

Offences relating to dealing with the company’s property

After the winding up has commenced, it is an offence for the company to continue business fraudulently or incur further debts when the company cannot pay these debts. Directors or officers of the company who were responsible for any of the above may be guilty of an offence.

Additionally, they may be personally liable on behalf of the company. For example, if an insolvent company takes a loan of $10,000 which its directors know it cannot repay, these directors may be personally liable to repay the loan themselves.

The Winding Up Process

The winding up process involves the liquidator liquidating the company’s assets to repay the company’s creditors. As a result, the liquidator has authority to control the company for the purpose of obtaining the highest value possible from its assets. This includes selling the company’s property, proving claims of debts from creditors or obtain further loans using the company’s assets as security.

With permission from the court, the liquidator may also make compromises or arrangements with creditors and defend legal proceedings on behalf of the company.

The liquidator will use the funds realised from the assets of the company to pay its debts in the following order:

  • Secured creditors
  • Preferred creditors under the IRDA in the following order:
    • The cost and expenses incurred by the Official Receiver in winding up the company;
    • The remuneration of the liquidator, who is also the Official Receiver under the SWUP;
    • The applicant’s costs for applying for the winding up order;
    • The wages and salaries of employees, including any allowances or reimbursements under any contract of employment, capped at either $13,000 or 5 months’ salary (whichever is lesser);
    • Retrenchment benefits or ex gratia payment due to employees, capped at either $13,000 or 5 months’ worth of benefits (whichever is lesser);
    • All amounts due in respect of work injury compensation regardless of whether it became payable before or after the commencement of the winding up;
    • CPF contributions due to employees (up to 12 months’ worth of contributions per employee);
    • Remuneration payable to employees in respect of any unconsumed vacation leave, capped at either $13,000 or up to 5 months’ salary (whichever is lesser);
    • The company’s total assessed taxes, including GST;
  • Creditors who have a floating charge over the company’s assets;
  • Unsecured creditors; and
  • Members of the company.

At any point during the winding up, the process may be paused or terminated by the court if the liquidator or a creditor applies to do so. If the court makes such an order, this discharges the company from the SWUP.

Decisions made by the liquidator may be appealed to the court by creditors, the company or any person affected by the liquidator’s decision.

Dissolution of the company 

When the company’s assets are realised such that the company is fully wound up, the liquidator will submit an account of the winding up to the Accounting and Regulatory Authority of Singapore (ACRA). The liquidator must also publish the account and a notice thereof on the Ministry of Law website. 30 days after the publication of the notice, the company is dissolved.

Alternatively, if the liquidator believes that the assets of the company are insufficient to cover even the expenses of winding up, he may give a notice that the company will be dissolved in 30 days. At the end of the 30 days, the company is dissolved unless a creditor opts to appoint its own liquidator before the expiry of this period.

Discharge From the Simplified Winding Up Programme

The SWUP lasts until the company is dissolved or until the court, on application by the Official Receiver, makes an order to either wind up the company or prevent the winding up of the company. If the court makes an order to wind up the company, this would initiate the normal “non-simplified” winding up procedure.

The Official Receiver may apply to court for a winding up order on the basis that the company does not comply with the SWUP eligibility requirements, or that the company was accepted into the SWUP on the basis of false or misleading information.

If the company is discharged from the SWUP in this manner, the Official Receiver will lodge a notice of the discharge in the Government Gazette and on the Ministry of Law website.

If you manage a small or micro company that has become insolvent and wish to wind up the company, you should strongly consider applying for the SWUP while it is available. This is because it removes otherwise onerous requirements from the creditors’ voluntary winding up process, such as calling a meeting of creditors and appointing a liquidator.

However, it is important to bear in mind the other options available depending on the specific situation your company may be in. For example, if the company is still solvent, you may consider a members’ voluntary winding up instead, or if you wish to avoid winding up the company, the simplified debt restructuring programme will be more appropriate.

In deciding when and how to cease your company’s business, it is strongly advisable to consult a corporate lawyer on the best option available to you to do so. A corporate lawyer will be able to advise you on what winding up procedures are applicable to your company and their requirements.

If you decide to proceed with the SWUP, the lawyer will be able to assist you in providing the required information in your application. This is especially important as failing to disclose information or making a false statement can result in the SWUP application failing or even criminal liability.

A corporate lawyer will also be able to assess whether the liquidator is acting appropriately in realising the assets of your company and paying creditors, and will be best positioned to appeal against unfavourable decisions of the liquidator.

You may get in touch with experienced corporate lawyers here.