LIQUIDATION

Liquidation or dissolution is a term which is used when a company decides to dissolve and materialize all its assets. This usually occurs when the company is deemed insolvent, i.e. cannot pay its debts when they are due. As a result, it collects and materialises its assets to settle its obligations and eventually comes to an end.

Voluntary liquidation can be made either by the members of the company or by its creditors. Different requirements apply for each case.

Voluntary Liquidation by Members

One or more members of a company may decide to dissolve it voluntarily, considering that they are solvent shareholders. The directors must make a statutory declaration that the company can pay its debts within 12 months from the commencement of the procedure.

The Solvency Declaration must be accompanied by a Statement of Assets and Liabilities up to the date of the declaration. The company members arrange a general meeting to pass a special resolution declaring the voluntary liquidation and appointing a liquidator. The appointed liquidator must check and collect the company’s assets to be realized and paid to the creditors.

Any surplus is returned to the shareholders. In the final general meeting, the liquidator submits to the company members the final liquidation accounts and explains their conduct.

The company is dissolved within 6 months from the filing of the relevant documents to Registrar of Companies.

Voluntary Liquidation by Creditors

When a company is insolvent, i.e. cannot pay its liabilities, it can only proceed with a voluntary liquidation by its creditors.

Both the members and the creditors must hold a meeting to decide upon the appointment of one or more liquidators. The creditors may also appoint an inspection committee if deemed appropriate. The liquidator shall arrange for the liquidation of the company’s affairs, and then send notices for the final meetings.

Finally, the liquidators submit the Final Liquidation Account which will lead to the dissolution of the company.

The company directors must prepare the following documents prior to the meeting:

A statement of their position on the company’s affairs;

A list of the creditors and an estimated amount of their claims;

Furthermore, they must send a notice simultaneously to both the creditors and the shareholders. Such notices of the meeting must also be published in the Official Gazette and at least 2 local newspapers.

Compulsory Liquidation (By Court)

A creditor, a contributor or any other interested party can file an application to the court for the company’s liquidation. Subsequently, the court will issue an order to that effect.

The Court appoints a Liquidator, who must act in accordance with a Statement of Affairs, prepared and submitted by the company’s directors. The document includes the company’s affairs, such as details of its assets and liabilities, creditors’ details, securities and other information.

Strike-Off Companies Register

Strike-Off The Companies’ Registry is an alternative way to dissolve a company.

It applies to dormant companies or those who have ceased to operate and have no assets, nor do they intend to pursue their business activities in the future.

The strike-off is an administrative procedure which takes effect from a notice sent by the Registrar of Companies to the company in question or vice versa. In effect, this method is used when the Registrar of Companies is satisfied that the company in question is no longer active and has no assets.

The company must fulfil all its statutory obligations and settle its affairs:

– close all bank accounts worldwide, de-register from the VAT services, and obtain a Tax Clearance Certificate from the Tax Department.

LIQUIDATION

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