Pressing Pause: Can a Liquidation itself be stayed?

This article is part of a series exploring court actions available under the Companies Act (Chapter 386 of the Laws of Malta). Each article gives a practical overview of a specific legal remedy or procedure involving court supervision, outlining when it applies, the steps required, and the purpose behind it. It is intended as a useful reference point rather than an in-depth academic analysis. 

Once a company has been placed into liquidation by a court order, most assume the process simply runs its course. But what happens if continuing the liquidation no longer makes sense, either because the matter is resolved or the circumstances have changed? Under Article 248 of the Companies Act, a company, creditor, contributory, the liquidator, or the Official Receiver may apply to the court to stay the winding-up process, in whole or in part. The court will only grant the request if it is satisfied that all proceedings relating to the liquidation ought to be stayed for a set period, and subject to any conditions it considers appropriate.

Unlike Article 220, which allows for a stay of judicial proceedings against the company before a winding-up order is made, Article 248 applies after a winding-up order has already been issued.

Why would a Company (or Creditor) seek to Pause Liquidation?

While liquidation is often the last resort, circumstances can change and fast. Here are some common scenarios where staying liquidation proceedings may be justified:

• • Debts or disputes are resolved

If the company settles its liabilities or resolves underlying legal disputes, continuing with the liquidation may no longer be necessary or in the best interest of stakeholders.

• • Mistaken or premature liquidation

A winding-up order based on erroneous assumptions, such as overstated debts or miscommunication, might justify halting the process.

• • Potential sale or restructuring

If a buyer expresses interest in acquiring the company or rescuing its operations, staying liquidation allows time to negotiate, potentially maximising returns to creditors.

The court may, before deciding, request a report from the liquidator or the Official Receiver detailing any relevant facts. If granted, the stay does not affect the validity of the existing winding-up order. It merely halts the continuation of the process.

A Safeguard, not a Loophole

Courts will only exercise this power where it is clearly warranted and in the interests of justice. It is not a tool to delay the inevitable or escape responsibilities, but a flexible mechanism that recognises that not all liquidation paths are linear.

Ultimately, Article 248 strikes a balance between procedural integrity and commercial reality, allowing for winding-up orders to be paused if circumstances justify a rethink.

This article forms part of our ongoing series on court actions under the Maltese Companies Act. You can explore other related topics like:

• Can a Legal Action be Paused once a Company is Being Wound Up?
• What happens to Court Cases once a Company is ordered into Liquidation?
• Can Creditors Request a Change in Liquidator? Understanding your Rights During Liquidation