If your company paid a supplier a deposit and the supplier has collapsed, first find out what has happened to it: still registered but unresponsive, being struck off, in liquidation or in judicial management. The answer decides your next move. In a liquidation, a cash deposit is usually just an unsecured debt, so you lodge a proof of debt and wait for whatever dividend the liquidator can pay. You may do better if ownership of identified goods had already passed to you, if you owe the supplier money you can set off, if you paid by card, or if someone guaranteed the supplier’s performance. Directors are personally liable only in limited cases.
What has actually happened to the supplier?
“The supplier has gone bust” can mean several different things legally, and each one changes what you are allowed to do. Start with the supplier’s Bizfile business profile, which shows its status, and check for notices of winding up applications. Our guide on checking whether a Singapore company is being wound up or has been sued explains where to look.
| Supplier’s status | What it means for you | Your first move |
|---|---|---|
| Live, but not answering or delivering | You can still sue it like any other debtor | Send a written demand for delivery or refund, then consider a court claim or statutory demand |
| Striking off in progress | The company may be dissolved and its assets lost to creditors | Object to the striking off with ACRA within the stated period |
| In liquidation | Court proceedings against it are stayed after a winding up order unless the court permits | Lodge a proof of debt with the liquidator |
| In judicial management | A moratorium stops most claims and enforcement | Contact the judicial manager and register your claim |
If the company is about to be struck off, acting quickly matters. See our guide on how to object to a striking off in Singapore.
Is your deposit just an unsecured debt?
Usually, yes. A deposit paid into the supplier’s ordinary bank account becomes the supplier’s money, and what you have is a claim to be repaid or to receive the goods. In a liquidation that makes you an ordinary unsecured creditor. The Ministry of Law’s Insolvency Office explains that recovered money goes first to the costs and expenses of the liquidation, then to preferential creditors such as employees, the CPF Board and the Comptroller of Income Tax, and only then to ordinary creditors, under section 203 of the Insolvency, Restructuring and Dissolution Act 2018 (IRDA). Ordinary creditors often recover only part of what they are owed.
That is the default. The rest of this guide is about the exceptions that can put you in a better position.
Did ownership of the goods already pass to you?
If property in the goods had already passed to your company, they are your goods, not the supplier’s assets, and you can ask the liquidator to release them instead of proving for a refund. Under the Sale of Goods Act 1979, ownership passes when the parties intend it to pass (section 17). Where the contract does not say, section 18 sets out default rules:
- Specific goods in a deliverable state. Under an unconditional contract for specific, identified goods, such as one particular machine, property generally passes when the contract is made, even if payment or delivery is postponed (section 18, rule 1).
- Goods sold by description. Where you ordered goods by description, such as 500 units of a product, no property passes until the goods are ascertained (section 16). Under section 18, rule 5, it passes when goods of that description are unconditionally appropriated to your contract, for example set aside, labelled with your order and accepted by you.
Many supplier terms say ownership stays with the supplier until full payment, which works against a buyer who has paid only a deposit. Read your contract, purchase order and the supplier’s terms together. Evidence that specific goods were labelled or set aside for you, such as photographs, packing lists or warehouse records, can make the difference.
Was the money held on trust?
Occasionally money paid for a specific purpose is held on trust for the payer, so it never belongs to the recipient’s creditors. This is often called a Quistclose trust. Singapore courts apply it narrowly. An ordinary trade deposit paid into a supplier’s general account, with no agreement that it be kept separate and used only for your order, will rarely qualify. The position is stronger if the money was paid into an escrow or client account under written terms. Our guide on Quistclose trusts in Singapore insolvency explains when the argument works.
Other ways to recover the money
| Option | When it may help | What to check |
|---|---|---|
| Insolvency set-off | You also owe the supplier money, for example unpaid invoices for earlier deliveries | Section 219 IRDA nets off mutual debts in a liquidation or judicial management, so you prove only for the balance |
| Card chargeback | The deposit was paid with a company credit or debit card | Contact the card issuer quickly; dispute windows and eligibility are set by the issuer and card scheme rules |
| Advance payment guarantee or bank guarantee | The supplier’s bank or a third party guaranteed repayment of the deposit | Read the call conditions and expiry date and make the demand exactly as the guarantee requires |
| Personal guarantee from a director | A director signed a guarantee in your favour | A guarantor’s liability survives the company’s liquidation; demand payment from the guarantor directly |
| Insurance | You hold trade credit or similar cover | Notify the insurer within the policy’s time limits |
For how mutual debts are netted, see our guide to insolvency set-off in Singapore. Set-off does not apply to debts incurred after you had notice of a pending winding up or judicial management application, so do not create new liabilities to the supplier hoping to net them off.
How do you lodge a proof of debt?
- Identify the liquidator. The liquidator may be the Official Receiver or a private insolvency practitioner. The Bizfile profile and the liquidator’s notice to creditors will tell you who.
- Prepare the proof. State the amount of the deposit and any other sums owed, net of anything you owe the supplier.
- Attach supporting documents. The Insolvency Office warns that proofs without supporting documents may be rejected.
- Lodge it. Where the Official Receiver is liquidator, proofs can be filed online with a filing fee of S$5. For a private liquidator, follow their instructions.
- Watch for notices. When the Official Receiver has enough funds to declare a dividend, creditors who have not filed and who do not lodge within 14 days of a notice to file are excluded from that dividend. If your proof is rejected, an appeal must be raised within 21 days of the rejection notice.
Our guide to proof of debt in a Singapore liquidation explains the process in more detail.
Can you still sue the supplier or its directors?
Once a winding up order is made, no action may be started or continued against the company without the court’s permission (section 133 IRDA). In judicial management, section 96 IRDA imposes a moratorium on proceedings and enforcement, which can be lifted only with the judicial manager’s consent or the court’s permission. Suing the company itself is therefore rarely worthwhile once a formal process has begun.
Directors are not liable for company debts just because the company failed. The main exceptions are:
- Fraudulent trading (section 238 IRDA). If the business was carried on with intent to defraud creditors, the court may declare a person who knowingly took part personally liable for company debts. A liquidator, judicial manager, creditor or contributory may apply.
- Wrongful trading (section 239 IRDA). This covers incurring debts while insolvent with no reasonable prospect of paying them. A creditor needs permission from the liquidator, judicial manager or the court before applying.
- A personal guarantee or personal misrepresentation. For example, a director who personally guaranteed delivery, or who knowingly lied to obtain your deposit.
If the supplier took deposits it knew it could never fulfil, you can also make a police report. A criminal investigation is separate from recovering your money, and a report should state facts, not speculation.
How should the lost deposit be treated in your accounts?
Keep the deposit on the balance sheet as a receivable until recovery becomes unlikely, then provide for or write off the irrecoverable part, keeping the liquidator’s reports as evidence. Whether the write-off is tax deductible depends on the nature of the payment, so discuss it with your tax agent. If your company is GST-registered and claimed input tax on a tax invoice issued for the deposit, review the GST position with your accountant, particularly if any part is later refunded.
Documents checklist
- The contract, purchase order, quotation and the supplier’s terms and conditions
- Proof of payment: bank transfer records, card statements or receipts
- The supplier’s invoice or tax invoice for the deposit
- Correspondence about delivery dates, delays and promises
- Evidence identifying your goods, such as packing lists, serial numbers or photographs
- Any guarantee, bond or insurance policy
- Statements of account showing anything you owe the supplier
Example: a deposit for kitchen equipment
Example: A restaurant group pays a 40 percent deposit by bank transfer for a custom-built kitchen line. Three weeks later the supplier stops answering calls, and its Bizfile profile shows it is in creditors’ voluntary liquidation. The liquidator’s notice lists the restaurant group as an unsecured creditor.
The restaurant’s finance manager checks the contract, which says ownership passes on full payment, so the half-built equipment in the supplier’s workshop is not the restaurant’s. There was no escrow and no guarantee. However, the restaurant still owes the supplier for an earlier maintenance invoice, so that amount is set off against the deposit and the restaurant proves for the balance. It writes down the receivable in its accounts and, for the next fit-out, asks the new supplier for an advance payment guarantee before paying any deposit.
How can you protect deposits in future?
- Check the supplier’s Bizfile status and litigation history before paying a large deposit.
- Keep deposits small and tie stage payments to delivery or inspection milestones.
- For large orders, ask for an advance payment guarantee from a bank, or use an escrow arrangement.
- Agree in writing that property in specific goods passes to you as they are identified or paid for.
- Pay by company card where the amount and card terms allow chargeback protection.
Frequently asked questions
Can we collect our goods from the supplier’s warehouse ourselves?
No. Even if you believe the goods are yours, taking them without the liquidator’s or judicial manager’s agreement can expose you to claims. Put your ownership claim to the liquidator in writing with your evidence and let them verify it.
The liquidator wants us to pay the balance to receive the goods. Should we?
Possibly, if the goods are worth more to you than the balance and the liquidator can genuinely deliver. Get the terms in writing, confirm title will pass to you, and take advice before paying more money into an insolvent estate.
How long until we receive a dividend?
There is no fixed timeline. The liquidator declares a dividend only once there are sufficient funds after costs and preferential claims, which can take many months, and in some liquidations ordinary creditors receive nothing.
The supplier has stopped trading but is not in liquidation. What can we do?
You can still demand repayment and, if necessary, start a court claim or serve a statutory demand. If the debt is undisputed and unpaid, a winding up application is possible, but it benefits all creditors, not just you, so weigh the cost.
Need help recovering a deposit from an insolvent supplier?
If your company, or you as a director or shareholder, is dealing with a supplier that has collapsed after taking your deposit, contact the Raffles Corporate Services team at [email protected] or on WhatsApp at +65 8501 7133 or +65 9018 0072. We will help you understand the documents and deadlines. Where your matter needs a lawyer, we will refer you to a firm on our panel of Singapore law firms that regularly handles insolvency and commercial debt recovery. Raffles Corporate Services is a corporate services provider, not a law firm, and this article is general information, not legal advice.
The Raffles Corporate Services Editorial Team, Raffles Corporate Services