Faster corporate closure process may aid restructuring

It will benefit multinational companies reorganising for commercial or tax reasons.

Singapore’s plan to speed up the closure of dormant companies, which comes in the wake of a $3-billion money laundering case that highlighted the misuse of shell firms, could both deter unlawful activities and help companies cut compliance costs during restructuring, legal experts said.

“A faster strike-off process—removing a company’s name from the Accounting and Corporate Regulatory Authority’s (ACRA) official register—would benefit multinational companies reorganising for operational synergies or commercial reason”, said Catherine Lim, a partner at CorpServe.

“Some subsidiary companies need to be dissolved for such restructuring to take place,” she told Singapore Business Review. “A longer strike-off process will unnecessarily impede the corporation from completing this restructuring efficiently within their desired timeline.”

Corporate restructuring is among several reasons companies seek a voluntary striking, said Steven Lo, managing director of corporate and finance at Drew & Napier LLC. Others include winding down  non-profitable firms or closing noncompliant entities before enforcement action is taken.

“In all of these business scenarios, a faster striking-off process would allow businesses to efficiently streamline their corporate structure and reduce audit and compliance burdens,” Lo said in an emailed reply to questions.

Singapore’s strike-off process takes four to six months, compared with one day for incorporation. While faster than in several regional peers, it’s still slower than in Australia and the UK, Lim said.

“Speeding up this process would boost business efficiency by supporting faster closure of dormant companies,” she said in an emailed response. “This reduces compliance costs and administrative burdens, making Singapore more attractive to startups and investors seeking agility.”

Jayne Lee, a corporate governance partner at law firm WongPartnership LLP, said a drawn-out process raises administrative charges, logistics, service provider, and insurance costs. “Such resources could be more efficiently allocated elsewhere,” she said in an email.

Kevin Ho, corporate governance co-head at WongPartnership LLP, said the ACRA itself would also free up administrative resources under a shorter process. 

Changes to the Companies Act 1967 will reduce objection periods from the company for both voluntary and regulator-initiated strike-offs, while preserving the existing 60-day public objection period. 

For voluntary strike-offs, ACRA can issue a notice immediately after notifying the company and its officers, instead of waiting 30 days. 

The process can now be completed in 60 days instead of 90. In regulator-initiated cases, companies will have 15 days rather than 30 to lodge an objection, trimming the process from 90 to 75 days.

“This does not deprive the registrar from taking the time it may need to assess the application,” Lee said.

The reforms target shell companies, which the Monetary Authority of Singapore has flagged as a common tool for hiding identities and moving illicit funds.

“By ensuring that dormant and inactive companies are removed from the register promptly, Singapore reduces opportunities for such entities to be exploited for illicit purposes, including money laundering,” Lo said.

Seraphina Ho, director of Corporate & Finance at Drew & Napier LLC, added that the city-state’s 2023 money laundering case, in which foreign nationals laundered billions of dollars through Singapore, had heightened scrutiny of shell activity. “This would strengthen investor confidence and support the country’s overall anti-money laundering objectives," she said.

She said that in 2020, more than 3,000 shell firms were uncovered following investigations by the Singapore authorities pursuant to an increase in business email compromise scams. Illicit funds were funneled into local accounts of some of these shell companies before being shifted overseas in one or two days. 

“This illustrates how inactive shell companies can serve as effective conduits for money-laundering.”

A shorter ACRA-initiated process, he added, would allow authorities to shut down shell companies faster, reducing the risk of misuse.

WongPartnership's Ho said financial institutions would also benefit from more up-to-date company registers, improving Know Your Customer, anti-money laundering, and credit checks.

Lim said shortening the “live but inactive” stage—the period most vulnerable to exploitation—would bolster Singapore’s standing as a trusted hub. 

“Making the strike-off process equally as efficient encourages more entrepreneurs to explore new business opportunities with an option to exit the market swiftly,” she added.