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Enforcement Proceedings: Winding Up

What can you do if you have obtained a Judgment against a company debtor who owes you and cannot (or do not want to) repay the debts owed to you of at least $10,000.00?

One of the options available to you as a creditor is to apply to wind up the company debtor to enforce the Judgment against the company debtor.

How Does Winding Up Application Help in Repaying your Debts?  

Immediately upon the winding up of the company debtor, all assets and properties belonging to the company debtor will be vested in the hand of the liquidator appointed by the Court or a trustee appointed for the liquidation of the company debtor. The company debtor will no longer be allowed to deal with their assets/properties, and any attempt to transfer their assets/property are voidable. The liquidator/trustee of the company will also be responsible for the dealing of the company.

The liquidator/trustee will then “managed” the assets/properties and distribute the assets/properties to the creditors. The liquidator/trustee has the power to sell, auctioned or to allow the Debtor to keep his / her assets/properties to repay the debt owed to his / her creditors. The liquidator/trustee will also hold the power to carry out any dealings of the company including continuing the performance of a contract entered into by the company debtor or to initiate and defend the company for and from any legal action.

Once all the assets of the company had been realized to repay all the accrued debts, the company debtor then will be dissolved.

When can you apply for winding up against the Company Debtor?  

You may only apply for a creditor winding up against the company debtor if the debt owed to you is more than $10,000.00 and the company is deemed by law that the company debtor is unable to repay the debt to you.

Under the law, a company will be presumed to be unable to pay its debt if:

It failed to comply with the Statutory Demand, i.e. by failing to make good of the debt within 21 days from the date of the service of the Statutory Demand or does not set aside the Statutory Demand within 14 days (21 days if it was served to a Debtor overseas) from the date of service of the Statutory Demand;

Judgment obtained by a creditor remains unsatisfied in part or in whole; or

It is proven to the Court’s satisfaction that the company debtor is unable to pay its debt, usually when a company debtor is insolvent.

As the application for a creditor’s winding up can be complex, it may be advisable to seek legal advice before proceeding with such application.   

How do you apply for a winding-up against the Company Debtor?  

An application for a winding up of a company debtor can only be made by way of an originating summon application to the Court. The application must be filed together with a supporting affidavit.

You may wish to seek legal assistance to prepare the application of winding up for you. Once the order for winding up has been given, the creditors must then file their proof of debt to the company liquidator to claim their debts.

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Order of Payment

Once the winding-up has commenced and a liquidator/trustee has been appointed, the assets and the properties of the company debtor will be “liquidated” (i.e. converted to cash) before distributing the cash to the creditors. However, not all creditors will be given the same priority when the money is distributed.

Subject to the amount of funds available in the company debtor, the order of the payment of the liquidated sum by the liquidator will be in accordance with the priority as follows:

The secured creditors with fixed charges on the assets/properties of the debtor company;

“Preferential creditors” in accordance with the Companies Act (Cap. 50), and in the following order:

  • The cost and expenses of winding up, including the cost of appointing the liquidator;
  • The salaries of the employees;
  • The retrenchment benefits of the employees;
  • Any work injury compensation claim by the employees of the company;
  • CPF contribution due to the employee;
  • Payment in lieu of the employee’s vacation leave; and
  • The taxes due and owing by the company.
  • The secured creditors with floating charges;
  • The rest of the creditors; and
  • Shareholders of the company.

Why Winding Up and Why Not Winding Up?

In most circumstances, a creditor that is claiming by way of legal action and executing the Judgment against the company debtor is an unsecured creditor. As the payment of the debt will be made in full from the top of the priority list to the bottom of the priority list, debtors, especially unsecured debtors may usually not be able to obtain the full payment of the debt accrued and owing to them.

Consequently, as the company debtor will be dissolved after the winding-up, the debt will be extinguished and can no longer claimable in the due process of law.

You may, therefore, wish to obtain legal advice before pursuing by way of winding up application against the Debtor.

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CONTACT US TODAY

Our specialised lawyers and their team are standing by to assist you. Our first consultation is free.

The information contained within this website contains general information about our lawyers, Law Firm and procedures and is not intended to constitute legal advice.
Any person viewing or receiving information from this Website should not act or refrain from acting, on the basis of any such information without first seeking appropriate legal advice.
Please consult a lawyer for specific review of your case and advise. 

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Joint Managing Partner

Joint Managing Partner

Enquiry from Emerald Law

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Joint Managing Partner

Joint Managing Partner

Enquiry from Emerald Law

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