The Simplified Dissolution Procedure in terms of the Maltese Companies Act

A recent amendment to the Maltese Companies Act (Chapter 386 of the laws of Malta) introduced the simplified dissolution procedure, offering a more expedient alternative to the voluntary members winding up. This is a welcome legislative development that enhances the efficiency of the statutory framework, introducing a faster and less onerous mechanism for eligible companies to be struck off the register in a streamlined and cost-effective manner while upholding creditor protection.

Eligibility for the Simplified Dissolution Procedure

The simplified dissolution procedure may be availed of by a company which has been validly registered for a period of six (6) months and which, during the six (6) months immediately preceding the date of the application to undergo such procedure:

1. has not carried out any changes in its name;
2. has not traded or otherwise carried on business;
3. has not employed employees other than any person who is an officer of the company;
4. does not have any outstanding documents or penalties with the Registrar, which remain outstanding as at the date of the application; or
5. did not have pledged any of its shares.

Notwithstanding, the simplified dissolution procedure is not available to public limited companies or to entities regulated under any applicable law in Malta.

Application Process

In order to apply for the simplified dissolution procedure, the shareholders of the company must first resolve to approve it.

Following the adoption of such resolution, the company is required to submit the following filings to the Malta Business Registry:

– Form B1 – notice that an extraordinary resolution has been passed authorising the directors to approve the filing of an application and confirming that the shareholders are fully aware that the company will be put into dissolution upon registration of the application with the Malta Business Registry.

– Form B3 – application for the simplified dissolution procedure, which includes:

• A declaration by all directors confirming that the company satisfies all aforementioned eligibility criteria.

• A declaration by all directors that the company:

1. is not regulated under any other applicable law in Malta;
2. has discharged or written off all creditor liabilities other than outstanding fees due to the company’s current officers, corporate service providers or shareholder loans;
3. has no pending litigation;
4. does not hold assets exceeding five thousand euro (€5,000);
5. has not entered into any deeds or contracts in the previous six (6) months, other than with service providers to the company; and
6. has no outstanding amounts due to government authorities.

• Confirmation from the directors that the company’s beneficial ownership information and financial records shall be retained or that a named designated person is to retain such information.

– Form B4 – Director’s declaration confirming that:

1. a shareholders’ resolution has been duly adopted;
2. all bank accounts have been closed (or none existed);
3. VAT de-registration has been effected (where applicable); and
4. the company has no employees other than officers of the company.

Post-Application for Dissolution

Where the Malta Business Registry is satisfied that all conditions have been duly complied with, a notice in the Gazette or the Malta Business Registry website as well as in  a daily newspaper is published. Upon the expiration of a three (3) month period from the date of publication of said notice, the company’s name shall be struck off from the register.

The directors and the company secretary shall retain all their powers and duties, until the company’s name is struck off the register. That said, the striking off of a company’s name shall not affect the liability, if any, of the company’s directors, officers, or members. Such liability shall continue to subsist and may be enforced as if the company had not been struck off the register. Furthermore, any director who makes a false declaration in connection with the simplified dissolution procedure shall be guilty of an offence and, upon conviction, shall be liable to a fine, imprisonment, or both.

Concluding Remarks

The simplified dissolution procedure, therefore, offers a more streamlined, straightforward and cost-effective process to apply for the dissolution and striking off of an eligible company when compared to the voluntary members winding up procedure. In creating a more expedient process, the procedure dispenses with certain creditor safeguards ordinarily present in a voluntary members winding up, most notably the appointment of a liquidator. To counterbalance, the simplified procedure places heightened responsibility on directors to ensure full compliance with the applicable requirements, including mandatory declarations and the imposition of criminal sanctions in cases of false statements, thereby safeguarding the integrity of the dissolution process.