S’pore-registered companies forced to wind up hit 15-year high in 2024: MinLaw data

The number of Singapore-registered companies forced to wind up hit a record high in 2024.

There were 307 compulsory liquidations over the 12 months, a jump of 53 per cent from the 201 cases in 2023 and ahead of the pre-Covid-19 peak of 287 in 2019.

The 2024 total was also the highest since such data was first collected in 2009, based on Ministry of Law data available on its website.

While the numbers have jumped, they represent less than 0.1 per cent of the total number of business entities here.

“It is still relatively very, very small,” said Mr Bernard Aw, chief economist for the Asia-Pacific region at trade credit insurer Coface. “Perhaps not that concerning yet.”

Furthermore, Mr Tris Xavier, head of the integrated property practice at Yuen Law, noted that there are many reasons why the court may order a company to be wound up, and not merely because of an inability to pay debts.

These include shareholder disputes, or the company’s core business no longer exists due to changes in the business environment.

E-commerce marketplace Qoo10 is one of the latest casualties, as it buckled under a US$54 million (S$73 million) debt pile.

The Singapore High Court ordered Qoo10 to be wound up in November 2024 after it failed to make payments to merchants on its platform.

Mr Aw said the first signs of deterioration in the business climate emerged in 2024 when Coface noticed a rise in the number of claims from policyholders who took up trade credit insurance to insure against non-payment of goods and services that were extended on credit. 

Claim sizes have also gone up, he added, with companies citing cash flow issues and financial difficulties as key reasons for their debtors not being able to pay up.

Affected sectors include construction players, small electronics retailers, distributors of computer peripherals, as well as food and beverage suppliers and distributors, Mr Aw said.

The situation remains manageable. A recent Monetary Authority of Singapore report showed that the corporate non-performing loan ratio, including those for small and medium-sized enterprises (SMEs), fell to 1.8 in the third quarter of 2024.

Non-performing loans (NPL) are bank loans that are due or unlikely to be repaid in full. The NPL ratio measures what percentage of a bank’s total loan portfolio is delinquent.

Mr Xavier noted that the sentiment in the industry did not suggest any great cause for concern, and that “the numbers have not spiked as much as people think”.

“The rate at which the letters of demand – for payments in arrears – are coming in is about the same, maybe slightly more, but not to such a shocking degree that people are wondering whether the economy is tanking.”

In any case, he said the data did not show when the cases were commenced, nor the basis for which such cases were brought, and that an increase in numbers did not necessarily indicate an increase in indebtedness.

A barometer of the business health and performance of SMEs here also showed they remained “generally healthy”.

SMEs make up around 99.5 per cent of firms in the Republic and employ 71 per cent of the workforce.

The OCBC SME Index stayed above 50 in the fourth quarter of 2024, after moving back above 50 in the second quarter. It had dropped below 50 for five quarters before that.

A reading above 50 indicates an improvement, while one below points to a deterioration from the same period a year earlier.

Mr Linus Goh, head of global commercial banking at OCBC Bank, said its poll of nearly 1,000 SMEs also showed a relatively positive business outlook, with 48 per cent of business owners expecting performance to pick up, and 15 per cent anticipating a weaker first half in 2025.

Meanwhile, Maybank Singapore had booked “a healthy 28 per cent” year-on-year growth in loans to SME customers as at December 2024.

Mr Adam Tan, its head of community financial services, said it is inevitable that some business clients will default in a challenging market environment.

Coface’s Mr Aw said the business landscape in 2025 remains difficult because of “uncertainty over trade policy and expectations of increased trade frictions”.

He added: “Even if Singapore is not under (US) President (Donald) Trump’s radar, we could still be impacted by tariffs on our key trading partners, and a broader slowdown in global trade flows.

“Singapore is so plugged into the international global supply chain.”

Furthermore, interest rates remain elevated and there is a risk of inflation picking up again, he said.

Maybank’s Mr Tan said the bank is ready to help SME customers who are facing difficulties with repayments: “Speak with us so we can understand how best to support you.”

OCBC’s Mr Goh said the bank’s loan portfolio “remains healthy and resilient”, noting that there are various options for business clients who face problems with loan repayments. 

One is to extend the loan tenure, which essentially lowers the monthly repayments and eases their current cash crunch. 

The second way is to lengthen the payment terms in trade finance. This enables clients to pay their invoices at a later date, so instead of the typical 30-day payment period, The Straits Times understands that customers can take up to 60, 90 or even 120 days to make payment. The extensions can differ depending on the customers.

Compulsory liquidations tend to have negative connotations but Yuen Law’s Mr Xavier urged caution on drawing the wrong conclusions on liquidation. “Liquidations are really a way for companies to wind up their affairs in an orderly manner while taking care of the people they owe money to,” he said.

An effective liquidation framework, in his view, should be seen as a positive for the economy, as it gives creditors the confidence to lend because they know they have a way of pursuing their debts and getting their money back.

Mr Xavier said: “Liquidation can be seen as a way to keep the economy on track. It means that the system is working.

“Companies that need the money and have a good business plan will continue to be able to borrow, and lenders will have the confidence to lend to them.”

Source: The Straits Times © SPH Media Limited. Permission required for reproduction.

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