DISSOLUTION OF A COMPANY IN MALTA

Over the past years, Mamo TCV has been of assistance, both on a cross-border and on a domestic basis, to various companies faced with the prospect of insolvency. The firm has advised companies on the manner in which the dissolution and winding up processes can be effected in compliance with rules laid down in the Companies Act 1995. We have also advised the directors of such companies on the best manner of conducting business in the context of eventual insolvency proceedings in order to ensure that they will not incur any liability for wrongful or fraudulent trading.  

 

 

The firm works in close collaboration with liquidators of companies, advising especially on the ranking of creditors, the distribution of assets, the collection of amounts due to the company and the distribution of any surplus funds to shareholders. In a number of cases, members of the firm themselves have been appointed as liquidators. Mamo TCV has also acquired extensive experience in the preparation of all the documentation required and in the registration and publicity requirements of the winding up process. 

 

 

Legal Background  

 

 

Under the Companies Act 1995, a company may be dissolved and consequently wound up either voluntarily or by the Court, if the company, so resolves. A voluntary winding up may be either a member's voluntary winding up or a creditor's voluntary winding up. In addition to these, a company may also be wound up by the Court if the company is unable to pay its debts. In such instances, a winding up may be ordered by the Court upon an application made either by the company, or by any shareholder or director, or by any debenture holder, creditor or creditors, or by any contributory. In terms of the Companies Act, a company shall be deemed to be “unable to pay its debts” if a debt due by the company has remained unsatisfied in whole or in part after twenty-four weeks from the enforcement of an executive title against the company by any of the executive acts specified by law, or if it is proved to the satisfaction of the Court that the company is unable to pay its debts, account being taken also of contingent and prospective liabilities of the company. 

 

 

If it transpires that prior to the winding up, the company’s affairs had not been managed in accordance to the law, directors may incur liability for wrongful trading or for fraudulent trading. The notion of wrongful trading is closely linked to the insolvency of a company. Indeed, where a company has been dissolved and is insolvent and it appears that a person who was a director of the company knew, or ought to have known prior to the dissolution of the company that there was no reasonable prospect that the company would avoid being dissolved due to its insolvency, the Court may declare such director or directors personally liable to make a payment towards the company’s assets as the Court thinks fit. The Court will however not impose such liability if the director or directors took every step they ought to have taken with a view to minimising the potential loss to the company’s creditors.