A Malaysian’s Guide To Compulsory Winding Ups Against Singapore Companies

Rule & Co Editorial Team
20 hours ago
4 min read

When a Malaysian creditor secures a judgment against a company incorporated in Singapore, one of the most powerful legal enforcement tools available is the threat of a compulsory winding up under the Insolvency, Restructuring and Dissolution Act 2018 (IRDA).

For Malaysian creditors dealing with a Singapore corporate debtor, in this guide we explain:

the difference between striking off and winding up
winding up thresholds in Singapore
the filing and hearing, and
strategic considerations for Malaysian creditors

Alternatively, skip the reading and get in touch for a free recovery assessment.

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Otherwise, let’s begin.

Winding up vs striking off

Let’s clarify for newer creditors that a compulsory winding up is not the same as striking off a company, both of which are terms you will commonly hear regarding the closing of a company.

A strike off is a voluntary removal of a company from the register initiated by its own owners and striking off services in Singapore are typically handled by Company Secretaries once a reliable accounting team is satisfied the company has no debts.

A compulsory winding up, on the other hand, is initiated by a creditor and ordered by the Singapore High Court, upon which the company is placed into liquidation and a third party called a liquidator is appointed to take over the company's management, asset sales, and debt repayment.

Winding up threshold

Under Section 125 of IRDA, the most common grounds relied upon by creditors is the debtor company’s inability to pay its debts, which is established when two conditions are met:

It owes more than S$15,000, and
It fails to pay, secure, or compound the debt within three weeks of a written statutory demand being served

Interestingly, while the demand period is the same in Malaysia (21 days), the debt threshold here is currently at RM50,000, significantly higher on a currency-adjusted basis.

In practical terms, this makes winding up proceedings a comparatively accessible enforcement mechanism against Singaporean debtors as opposed to Malaysia.

Procedure

A winding up application typically involves the following four stages:

Step 1: Place a deposit with the Official Receiver

Before filing, the applicant must place a deposit with the Official Receiver. This covers initial administrative costs.

Step 2: File documents via eLitigation

The application is filed electronically through Singapore’s eLitigation system (usually via a Singapore law firm or service bureau).

Step 3: Serve the application and file an affidavit of service

The winding up application must be properly served on the company. Proof of service must then be filed with the court.

Procedural compliance is critical as errors may result in dismissal.

Step 4: Advertise the application

The application must be advertised in accordance with the court rules. Public advertisement increases pressure, as suppliers, banks and counterparties become aware of the insolvency action.

Court hearing and decision

The court will usually schedule the hearing within four weeks from the date of filing, and according to the Singaporean Courts official guide, generally conducted in open court before a Judge of the High Court on Fridays.

At the hearing, the judge will hear from both parties before making a decision to:

grant a winding up order
dismiss the application, or
adjourn the hearing

If a winding up order is made, the company formally enters liquidation, and the aforementioned liquidator will be appointed to manage the sale of its assets to pay off fees and debts.

In reality however, for debt recovery, most creditors do not want it to get to this stage.

Why actual liquidation is rarely effective

While winding up is a powerful legal mechanism, actually liquidating is rarely an effective debt recovery tool for most creditors as companies that are truly insolvent often have limited assets and even then, liquidation costs and professional fees are paid first.

Even if there are funds left over secured creditors like banks and government agencies rank ahead of unsecured creditors, which often means the latter rarely recovers enough to justify the expense of initiating proceedings in the first place.

How to effectively use winding up petitions

A compulsory winding up application is most effective when used to pressure a still-operating company (not a shell company) as an ultimatum that they can either pay the debt or at least begin negotiations or lose everything.

As the threshold in Singapore is relatively low at S$15,000, even moderate debts qualify, and for most solvent and revenue-generating companies, the mere service and advertisement of a winding up application may trigger negotiations.

That’s all from us, and we wish you a smooth debt recovery 🙂

That’s it from us, and we wish you a smooth debt recovery. 🙂

Let Rule & Co handle your debt recovery