//= do_shortcode('[niu_breadcrumbs single_blog="1"]') ?> Navigating through the process of a Members Voluntary Winding Up Author: Saman Bugeja Published on September 30, 2024 Dissolution and consequential winding up, is a critical process in the life cycle of a company, marking its transition from active business operations into a state of liquidation eventually sealed by complete closure. Under Maltese law, the dissolution of companies is primarily governed by the Companies Act (Chapter 386 of the Laws of Malta, the “Act”), which provides a structured framework to ensure that the process is conducted fairly and efficiently. When preparing for the dissolution and winding up of a company, clients should recognise that simply following the process set out below is not enough. Depending on the company’s trading history and operational complexities, meticulous coordination among all parties involved including legal, tax and financial advisors, the liquidator and the relevant regulatory authorities is critical to ensure that the dissolution process runs its course smoothly until the company is ultimately struck off. Under Maltese law, a company may be wound-up in various ways. In this three-part series, we will consider the two primary modes available under the Act for voluntary[1] closure as well as the power of the Registrar of Companies to strike-off defunct companies. The Members Voluntary Winding Up As the name implies, a members voluntary winding up (the “MVWU”) is a process which is voluntarily initiated by the shareholders of a company who are desirous of wrapping-up the company’s activities. A fundamental element of a MVWU is that the company is in a solvent position prior to dissolution and able to able to pay its debts in full, including any contingent and prospective liabilities[2]. Prior to the initiation of a MVWU, companies should take certain pre-dissolution preparatory steps to facilitate the work of the liquidator when preparing the liquidation accounts and the final scheme of distribution and ensure that the company is able to be wound up. Such steps are essential for ensuring the smooth winding-up of the company. It is important to note that some of these preparatory actions may extend into the post-dissolution period in which case the liquidator’s involvement would be significant. These pre-liquidation steps include: ensuring all annual filings with the Malta Business Registry (“MBR”) including annual returns, annual BO confirmations and annual financial statements are up to date and that no penalties for late filing are outstanding; deactivating VAT number (if the company is VAT registered) and paying any outstanding VAT dues to the Commissioner for Tax and Customs; providing due notice of the company’s expected liquidation to employees and taking appropriate measures to make such employees redundant; checking whether any former employees of the Company are still registered with JobsPlus in the name of the company and if so, filing the necessary termination forms with JobsPlus; terminating existing contracts with clients and vendors and settling and/or collecting of any outstanding dues; closing of any office space including proper termination of lease agreements; closing of the company’s bank accounts; and settling of any intercompany balances which may exist between the company and its shareholders and/or any other company forming part of the same group. The above list is merely indicative and would vary on a case-by-case basis depending on the business activity of the company throughout its existence. The process outlined below is applicable to private limited liability companies under the Act and may differ slightly from that applicable to those companies registered as shipping organisations under the Merchant Shipping (Shipping Organisations – Private Companies) Regulations.[3] Particularly, all names of statutory forms for a MVWU under the Act differ from the statutory forms applicable to a MVWU under the Merchant Shipping (Shipping Organisations – Private Companies) Regulations. Once all pre-liquidation steps are taken, and the Company is ready to be placed into dissolution, the shareholders will resolve by way of extraordinary resolution that the company be dissolved and consequently wound up voluntarily. The date of this extraordinary resolution is the effective date of dissolution unless a later date is specified in the resolution itself and a company is to cease business from the date of dissolution unless the continued business is beneficial for winding up.[4] Within 14 days of the effective date of dissolution, the Company is to file the extraordinary resolution of the company, together with a statutory form B1, at the MBR.[5] The statutory form B1 serves to notify the MBR with the resolution for dissolution and consequential voluntary winding up of a company. The next step would be the filing of the statutory form B2 which serves to inform the MBR that the directors have made a full inquiry into the affairs of the company, and that, they formed the view that the company is solvent, and it would be able to pay its debts in full within twelve months from the date of dissolution.[6] This statutory form B2 is to be made within the month immediately preceding the date of the extraordinary resolution and be accompanied by a statement which describes the company’s assets and liabilities. This statement of affairs may not be dated earlier than 3 months from the date of the statutory form B2.[7] Typically, the same extraordinary resolution as the one approving the MVWU would also approve the appointment of a liquidator in which case, the appointed liquidator would have 14 days to file the statutory form L at the MBR which serves to notify the appointment of the liquidator.[8] If a liquidator is not appointed through the same extraordinary resolution, the directors are to convene a general meeting of the company within 30 days from the date of the extraordinary resolution in order to appoint a liquidator.[9] The effective date of the liquidator’s appointment is critical in the life cycle of the company because at that point all powers and authority of the board of directors will cease and the liquidator will assume control of the company’s affairs. Nevertheless, in terms of the Act, the previous directors of the company would remain responsible for transactions entered into by the company antecedent to the dissolution and winding up of a company. [1] The Companies Act, Chapter 386 of the Laws of Malta also provides for compulsory modes of winding up which require judicial action. [2] Article 214 (5), Companies Act, Chapter 386 of the Laws of Malta: “…a company shall be deemed to be unable to pay its debts – (a) 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 in article 273 of the Code of Organization and Civil Procedure; or (b) 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.” [3] Merchant Shipping (Shipping Organisations – Private Companies) Regulations, Subsidiary Legislation 234.42 [4] Article 267(1), Companies Act. [5] Article 265(1), Companies Act [6] Article 268(1), Companies Act [7] Article 268 (2), Companies Act [8] Article 290 (1), Companies Act [9] Article 270 (2), Companies Act Go back