Closing my Private Limited

[teck21]

Hey guys, I would appreciate any and all advice on this issue.

I have a Pte Ltd, I am the sole Director, 3 shareholders and we are looking to terminate the company.

It's only business activity has been the buying and selling of listed equities.

It's just that the rest of the company's assets are well, listed investments and I prefer to not have to liquidate them just to end the company.

Criteria for Striking off company:

1) The company has not commenced business since incorporation or has ceased trading.

Sounds easy enough to cease trading

2) The company has no outstanding debts owed to Inland Revenue Authority of Singapore (IRAS), Central Provident Fund (CPF) Board and any other government agency.

Zero employees, no issues with outstanding payments to any government agency.

3) There are no outstanding charges in the charge register.

Not sure what this means, I imagine no outstanding charges.

4) The company is not involved in any legal proceedings (within or outside Singapore).

Certainly not.

5) The company is not subject to any ongoing or pending regulatory action or disciplinary proceeding.

Certainly not.

6) The company has no existing assets and liabilities as at the date of application and no contingent asset and liabilities that may arise in the future.

The company has no liabilities whatsoever, but it certainly has got assets which I'm hoping don't need to be liquidated.

7) All/majority of the director(s) authorise you, as the applicant, to submit the online application for striking off on behalf of the company.

Sole director, but all shareholders are agreeable to whatever I propose.

Or is “members’ voluntary winding up” what I should be looking at?

Many thanks in advance.

[Myasis Dragon]

Here's the deal. As you read, you cannot wind up your company so long as there are outstanding liabilities or assets. For liabilities, the solution is easy; you either pay them off or work out an agreement with the creditor that removes them from your books.

A company that has assets cannot be wound up because ownership of those assets cannot simply vanish into thin air. Example: When I wound up my company, the company had $100,000 in the bank. Were the company to simply disappear there would be no legal owner of the assets.

This holds true for your company as well. You must dispose of those assets by distributing them one way or another before you can wind up the company. I'm guessing that by "listed equities" you're talking stocks or something similar. As shareholders, you each have an undivided interest in those investments, proportional to your stock holdings. So, if you wind up the company, how do you plan on dealing with the ownership of said investments?

For example, let's say your company owns 70 separate equities. How do you plan on distributing them? Will each person be assigned individual stocks or are you wanting to retain joint ownership in each individual's name? Once you have decided this, then you can look at the mechanics of the actual transfer.

I am most familiar with the US securities system. Almost all securities are in "street name", that is, owned by the brokerage and not by you (and actually, not even owned by the brokerage but that's another story). So, you'd go to your broker and create new accounts... individual or joint depending on how you are dividing up your assets. Then you would transfer your stocks from one account to another using the Automated Customer Account Transfer process in place in the USA.

If you're investing through SGX, then all stocks must be held in the Central Depository (CDP), a wholly owned subsidiary of SGX. CDP has two types of accounts, Direct and Sub Account. Direct means that your name (or your company's name) is on the securities. A Sub Account means that your broker's name is on the securities.

If you have a direct account, then you must follow the process to get the names on the stock certificate changed to whomever you have distributed them. I don't know this process and I assume that SGX or CDP can help you out.

If your stocks are held in a sub account by your broker, then that's the obvious contact point. I believe that you would again create accounts representative of how you are going to distribute your equities and then have the broker make the transfer to the new accounts.

This will empty all of the assets in your company and you can wind it up. Of course, your company financials will have to record this distribution and that's beyond the scope of my answer as I don't know how you're currently handling things.

Please post and let us know how it turns out.

Cheers.

[teck21]

Thanks for the reply Dragon,

Yes, of course those assets need to be 'disposed', I'm just hoping that can be done without needing to actually liquidate these holdings into cash first.
Some of them aren't very liquid even if they are listed on an exchange

As it stands, there is sufficient cash to return to the exiting shareholder, as a return of capital and cancel his shares.

The value of each share is simply the value of cash plus investments (all listed so there's an easy dollar value to assign to them) divided by the number of shares on issue.

I assume this is permissible, and that and return of capital does not need to be proportionate to each shareholder's share?

In this case I just want to return 'his capital'.

As for the balance, which would mostly be the listed equities (these are international equities so they're held by my broker, in this case it's Saxo), cash in Saxo and a corporate bank account.

If the remaining two shareholders (myself and my sibling) are agreeable, would it be possible for either one of us to simply be the 'beneficiary' of the liquidation and we will sort it out between ourselves post-company windup?

Neither of us is too fussed who does it, and the figures involved aren't consequential enough to cause any sort of falling out.

[Myasis Dragon]

Let me preface my remarks by saying that I am not a Singapore CPA, and I never exercised the process that I am about to describe. I highly recommend that you engage a qualified CPA to handle the mechanics of this process and to confirm what I am telling you.

Since you have enough cash to buy back the other shareholder's shares, you will want to call a general meeting and approve a share buyback. The share buyback gives the shareholders the opportunity (but they are not required) to sell their shares back to the company at a specified price.

Since you apparently don't want to return capital and retained earnings in proportions that reflect the proportion of stock ownership, you will make a "selective off-market purchase", which means that you are offering only specific shareholders a buyback at a given price. Of course, you could also authorize a "general off-market purchase" where all shareholders are offered the same deal, but only 1 or 2 takes up the offer.

Once the shareholder has been bought out, you would cancel the shares since you are winding up the company.

There are fees and limitations to this process, which is why I recommend a qualified CPA. But when you get through with this, you will be the only shareholder left and you will own the remaining cash and stocks as assets.

As sole shareholder you would pass a resolution paying you dividends for any remaining cash and authorizing the transfer of shares to you as part of the windup.

Which takes us back to SGX and CDP. Again, if you have a direct account with CDP, you must contact CDP to find out how to execute a share ownership transfer. And if you have a sub-account through a broker, you must contact the broker to find out how to allocate those shares into an account setup in your own name.