Company liquidation in Malta envisages the procedure a company adopts when terminating its business activities or when a company has become insolvent. Loosely defined, Company dissolution is the assessment of the Maltese company’s assets, liabilities and the distribution of any remaining surplus between the shareholders. The Maltese Companies Act, Chapter 386 of the Laws of Malta provides three methods of winding up a company, namely:
The winding up of a Maltese company by Court order is referred to as a compulsory winding up of a Maltese company. Such Court order is usually issued following an application for dissolution made by a company after an extraordinary resolution has been reached for the said company to be dissolved and consequently wound up either voluntarily or by the court. There are several reasons which can lead to a company’s liquidation issued by a court order in Malta. These are:
Following the application, the court seized is to decide whether to reject or accede to the request. The proceedings – meaning from the moment the application is filed to the moment the court actually decides whether to accede to the request or not – take a considerably long amount of time. As a result, pending the proceedings, a number of provisional measures or orders are imposed.
Member’s voluntary winding up starts once the Maltese company’s shareholders pass a resolution and appoint a liquidator. Such winding up presumes that a declaration of solvency has been made, which in turn presumes that there is the ability of payment of debts which shall not accede the 12 months from the date of dissolution. This is the difference between a Creditors’ winding up and a Members’ winding up, whereby the legislator gives more power to the creditor to control the winding up when no declaration of solvency has been filed.
Moreover, once the liquidator is appointed, the distribution of assets starts – the first thing to be done is to pay the creditors and any access will go to the members. The distribution shall be equal, unless there are privileged rankings. Therefore, the liquidator shall bring in all the assets, and pay the debts.
There is no guide line specifying the duration of the process of a liquidation, however the statute notes that in the case the liquidator takes more than twelve months to liquidate the company, he shall call a general meeting for the members. As soon as the affairs of the company are wound up, the liquidator is required –
Once the said accounts and the scheme of distribution are approved by the shareholders, the documents are to be lodged with the company registrar and he shall publish a statement of this effect within the government gazette.
In case a Maltese company is no longer able to pay its creditors and the directors are not able to make a declaration of solvency, the creditors may ask for the winding up of the company. This procedure commences at the shareholders’ meetings which creditors will also attend. In a Creditor’s winding up, the term ‘creditors’ suggests that it is the body of creditors which initiates this type of winding up, but in actual fact the name stems from the fact that creditors are heavily involved in the process – they do not however have anything to do with the initiation itself. A creditors’ voluntary winding up can in fact:
The term is also misleading because this type of winding up is not actually voluntary at all. Members are often constrained to take this action because the company is in a state of insolvency. In turn, this type of winding up process has a lot of creditor-control mechanisms.
One of such creditor-control mechanism is the appointment of the Liquidator by the creditors, whereby in the case of divergence between the nomination of the liquidator by the creditors and that of the members, it is the creditors’ nomination which prevails. The liquidator should not act until his appointment is confirmed at the creditors’ meeting; otherwise he may incur personal liability.
Moreover, creditors have various remedies if they are not content with the way the company is being wound up, and removal of the liquidator by resolution is the ultimate sanction. If a particular creditor is not supported by votes to remove the liquidator, he can apply to the court for such removal.
There is also the formation of a Creditors’ Committee in such winding up, whereby its functions are:
The creditors also have the power to appoint an auditor to audit the liquidation accounts. Another form of creditor control is the liquidator’s reporting requirements, since the liquidator must at certain intervals convene the creditors in order to update them on the status of the winding up.The law also provides that the voluntary winding up of a company shall not bar the right of any creditor to ask for a court winding up.
