Transcription
Welcome back. A growing wave of businesses are going belly up in Singapore, with more being forced by the courts to shut. Now, so far this year, 187 companies have been liquidated. A jump from 146 in the same period last year and just 95 the year before. It's been keeping debt collectors busier than ever. They tell us that about 30% more companies are having trouble paying debts.
Now, for more on this, we have our reporter Shellin Sia here with us in the studio. Sherin, thank you so much for joining us tonight. So, tell us more about the situation and what these numbers reflect about our economy.
>> So, basically, what we're seeing is a growing trend of creditors taking it to court to basically close down companies that have been owing them money and haven't been able to pay them back. And then, when that happens, the struggling company is then placed into what we call compulsory liquidation. That means that all of its assets are basically sold off. They're being cleared just to be able to raise back as much money to pay off the debts as possible. And we already know from the latest statistics this year that there have already been 187 companies that have been forced to close. And that amount, in just that six-month period, is already the highest we've seen, um, compared to the previous five years in that same time period as well. It's even comparable to the whole year amount for 2021. And also, if you look on a yearly basis, actually, just last year, we saw Singapore hit a 15-year record high in the number of compulsory liquidations that year. So, clearly, you can see that if that trend continues this year, of course, it's still uncertain, but if it does continue this year, then that could mean hitting another record high in the number of companies that are being forced, uh, to wind up.
Now, basically, it signals the kind of pressure that businesses are under in this kind of tough operating environment, and it has persisted for a couple of years because it does take time for a company to go through the entire process of liquidation. There is a certain lag effect. It could take months, years as well. So, and I spoke to some liquidators and some analysts to find out the reasons why, and they tell me that one key reason is because of cash flow problems. Basically, these companies, they don't have enough money coming in to cover all these money that they owe other people, even though they may have a lot of assets, um, uh, on paper. And we've also seen a period of rising interest rates in recent years, 2022 to 2024, and even though, um, earlier this year, it did ease, by then, many businesses had already been hit hard, for example, with the withdrawal of COVID support and also, um, a weak economy back then.
Now, let's listen to a liquidator expert on what he had to say.
>> The numbers, compulsory liquidation, uh, statistic that we see in 2025 reflects actually companies that were distressed potentially as early as Q1 of 2024, right? Um, this could be due to a weak economy in 2023 and in 2025. Now, again, it appears that we are facing the same challenge where the economy, uh, appears to be slowing down, zero to 2% of growth, uh, forecasted this year. So, it is not a very consistent growth. So, companies that have, uh, that were struggling in 2023, they may not have the opportunity to get out of that cycle as of, uh, this point in time yet. And this is, uh, particularly true for SMEs, where, uh, financing options are fairly, uh, limited.
>> Now, and Sha, for more context as well, before creditors take such drastic actions to liquidate a company, it's very likely that they had already exhausted many other means of trying to recover that debt, and would have, that would have taken, uh, maybe over a very long, months period as well. So, when a company does reach that point of liquidation, it means that the financial trouble likely already began, you know, eight, nine months earlier.
>> So, I'm assuming this is where debt collectors would come into the picture, Shellen.
>> Yes, exactly. So, this is where debt recovery firms are sometimes brought in before liquidation happens. And what I'm talking about are debt enforcement officers that, you know, they're hired to basically chase down, to to hound these people that owe these clients money. And, um, all through all these are through legal means. Of course, these are licensed debt collectors, and, um, although that could sometimes turn a bit dramatic, as you would soon see, but basically, um, what these firms tell me is that they've also seen a real surge in cases, you know, as much as 20 to 30%. And the rise has been very noticeable, especially with F&B, um, sectors, even interior design and tech startups, for example. And it's not just about the number of debt, the number of cases they've seen, but it's actually, um, piling up the number of debts, the the amount that's being owed, and it's also being, uh, taking a longer time to get that money back as well. Let's have a watch.
>> It's time to pay up. And this company owner owes more than $16,000. You are looking at body cam footage of debt collectors turning up at his workplace after he failed to cough up the money despite a letter of demand and multiple calls.
>> Licensed asset recovery firms have been exceptionally busy this year as a tide of firms buckle under the weight of debt and can no longer pay their lenders and clients.
>> For Assured Debt Recovery, it's already seen a 30% year-on-year increase in companies that owe debt and are closing down.
>> One of the main reasons I hear is, um, for once is that, um, due to COVID heat. Another is rental issue because, um, the rental is too high, um, the the product, the product value is too high, and their costs cannot be that high. So, in terms of this, they find it like it's very hard for them to flip it around. Yeah. So, eventually, they choose to close. Some tried even borrowing money outside to to fund their business, but at the end of the day, you know, they failed.
The firm says debts are getting bigger, from a majority in the $20 to $60,000 range last year to now being more than a hundred thousand this year. It's a similar situation at this other debt collector firm, GMS Rogers. This year, it's seen a 20 to 30% increase in cases each month. In some cases, clients keep coming back to seek help, frequently being owed money by businesses who fail to pay up. Some cases are more extreme.
>> He is a major supplier, uh, of supplies, food supplies, right, to many restaurants, um, in Singapore. And what happens very simply is that when he approached us, he gave us almost 120 debtors to go after, and the total size of collections was almost 2.5 million, right? And speaking to him, his cash flow was quite badly affected.
>> If debts aren't paid back, JMS Rogers helps clients take the debtor company to court to shut it down and get their money. But it is often not the best solution, since liquidation typically recovers only a fraction of the amount owed, sometimes as low as 10%.
>> Liquidation has always been the last resort that we or our clients want to go for. They're really in their situation because of economic, uh, uh, pressures. They're in the situation because someone else in their partnership made a wrong decision, and they still want to carry on running the business. They still want to run legitimately. They want to honor their debt, but they are in a situation whereby the financial hardship disallows them from doing that.
>> So, Sherin, I can see how bad the situation can get for these companies in debt, and that's when, when nothing more can be recovered, that's when perhaps liquidation is the option, and that basically includes clearing, selling all of these assets to get cash. Sometimes it's done in very drastic, um, methods. For example, these firms and liquidators would typically advertise these items, um, either through the papers, online, through tenders, in auctions, on social media as well. So, I came across this particular warehouse sale that were selling liquidated assets. You know, there were hundreds of, um, stock over there, and the operator tells me that they basically had to liquidate a furniture company that owed them $2 million in debt. That's a very hefty amount. So, but even then, recovering the full amount would be quite impossible because there's so much stock, and they're trying to clear all of that at a very, very steep discount. For example, I walked around, I saw some sofas that would typically sell for maybe $800 being cleared at just $300. Some chairs and tables, you know, typically $200, you see them on sale $50, $80. And even then, there's still some trouble in selling all of that stock because there's so much of that. So, um, and the large space also spans, you know, four basketball courts. You can imagine how much, um, rental profits potential that the operator is losing. So, and there's also the very worst-case scenario for some companies that perhaps if they can't even sell, clear all of this stock, then it would perhaps have to be disposed of. And I understand from some liquidators that then they do have contracts with certain, um, junk disposal, um, people to maybe clear all of that, just to salvage what they can from that situation. But you can imagine that that's so much losses already in that kind of scenarios.
These are these are very unfortunate situations, right? But what do these developments mean for businesses operating in Singapore? Then, what's the outlook for them? Is it as, uh, you know, is it as big as it seems?
>> Right. So, definitely, it's not all gloom. There is still some, um, strong momentum and new business formation. There's still some, uh, business optimism on that front. In fact, if you look at the number of registered companies, new registered companies this year, it's already overtaken last year's amount. But of course, you know, you still have to be wary of certain risks on the horizon. Um, of course, you have local issues like rental costs. This is a very hot topic these days. You have manpower challenges, and also there's a lot of demand uncertainty. Then, of course, you have the external risks on the horizon. We've all seen what's been unfolding in recent times. But let's have a listen to what the liquidator expert had to say.
>> The liquidation numbers, whether it will continue to trend upwards, I think for now, it is still fairly uncertain. But what is certain is that, uh, uh, the market will continue to be challenging. If there is any, uh, external shock, right, like what we are looking in relation to the US tariff that may start to have impact, direct impact on certain sectors, right, the trade, the export sector, and that may also then change the outlook for people looking at starting up new companies.
>> So, things remain uncertain for now, Sherlin, but what options are available for businesses? What can they do?
>> So, what I've been told, um, by these experts is that businesses will need to remain financially cautious, and especially in sectors exposed to high operational costs or global demand shocks, as we've heard. And some tips that the experts give me would be to monitor cash flow closely. You know, be proactive in renegotiating any loans that these businesses might have, and also don't delay asking for any professional help. Perhaps that could be from debt advisers or even restructuring consultants because when legal action starts, it's quite likely that these creditors may not be able to get back as much as the amount that they've been owed.
>> All right, thank you so much for coming in to tell us about this story, Sherin. Uh, that was our reporter, Shalencia.