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posted 3 weeks ago
Liquidation may be a step that needs to be considered by a director of a Maltese company when a company is no longer needed or has become insolvent. The process involves placing the company into dissolution, winding up the company’s operations, distributing its assets, and ultimately dissolving it. The result would be that the company is completely closed down, struck off the Malta Business Registry and its legal existence ends.
It is important to understand the distinction between dissolution and liquidation concepts in Malta, as these terms are often used interchangeably and understanding the difference is helpful in navigating the process effectively.
Dissolution refers to the legal process that begins the winding-up of process and it signifies the formal decision to cease the company’s operations. The company is put into dissolution when the shareholders or the courts make a resolution or ruling to dissolve the company. Once put into dissolution, the company is still a legal entity but cannot continue its business except for purposes related to the winding-up process (e.g., selling assets, and settling liabilities). The officers of the company, namely the directors and company secretary, lose all their powers over the company and the duty to administer the winding up of the company is assigned to a liquidator. No share transfer can take place after the date of dissolution without the written consent of the liquidator.
Liquidation is the process that follows dissolution, where the company’s assets are sold off, liabilities are paid, and any remaining assets are distributed to the shareholders. The liquidator, appointed either voluntarily by the company or by the court, oversees this process.
Article 214 of the Companies Act specifies the following circumstances when a company shall be dissolved and consequently wound up:
While liquidation can be complex, adhering to the proper procedures is essential to safeguarding the interests of all stakeholders. In Malta, there are generally three types of liquidations:
Liquidators are crucial in managing the liquidation process, ensuring that assets are distributed properly, and all legal requirements are met. They handle tasks such as settling debts and preparing final accounts, playing a key role in a seamless winding up. One of the main duties of the liquidator is to look into the affairs of the company and to see whether the debts of the company can be paid within the period set out in the declaration of solvency. A liquidator may be an advocate or a certified public accountant. We can help facilitate the appointment of a liquidator for your company.
Winding up voluntarily is the most common form of liquidation. There is no one-size-fits-all when it comes to the timeline for a voluntary winding up as this varies depending on the complexity of the company’s affairs. The following are the main steps involved:
Papilio Services‘s experienced team is committed to handling every detail, ensuring a smooth and precise liquidation process, and giving you peace of mind every step of the way. By relying on expert advice, you can avoid unnecessary complications and focus on your core business. From understanding the liquidation process to ensuring compliance with local laws, we are here to support you every step of the way. Contact us to arrange a consultation for your requirements and address any questions.
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