Liquidation is the process of winding up a company by selling its assets and revenue is distributed amongst creditors and/or shareholders on a priority basis. Liquidation could happen for a number of reasons. It may be that one no longer requires their company, or that the purpose of the company has been fulfilled. It may also be the case that the company is not profitable and the most sensible thing to do is to retire the company.
Liquidation is a formal procedure following the rules presiding over the successful closure of a company in Malta. When a company goes into liquidation, it cannot trade any longer, unless it is in the interest of the liquidation, such as the selling of inventory. This implies that staff will be made redundant, and the company will no longer be considered as a legal entity.
The Liquidation Process
- A liquidator is appointed. A liquidator may be a warranted accountant and/or auditor or lawyer.
- The liquidator has absolute power over the company to manage its’ affairs. The company authorization of the directors and company secretary ceases.
- The company assets are evaluation and liquidated.
- Creditors are paid on a highest priority basis.
- Any surplus funds are distributed amongst shareholders.
- The company is dissolved and removed from the Registry of Companies.
Liquidation can happen in two ways, members’ voluntary winding up or creditors’ voluntary winding up.
In a members’ voluntary winding up there must be a declaration of solvency and a statement of affairs submitted to the Registry of Companies. If no declaration of solvency is submitted, then the liquidation is a creditors’ voluntary winding up.
Prior to the distribution of company assets, the liquidator must settle known and expected tax payments in full. By default, the liquidator is liable personally, and jointly and severally with other persons responsible for the payment to tax due. The liquidator should also consider the closure of any bank accounts and tax number before the company is struck of the Registry.
Disclaimer: This article is only a summary of the guidelines for liquidating a company in Malta. This article is purely informational and does not replace the formal guidelines enforced by the authorities.