Malta · Dissolution, winding up and company recovery

Propose a compromise with creditors or apply for a company recovery order

the Companies Act, Chapter 386 · articles 327, 328 and 329, articles 329A and 329B(2) and (5), and article 329B(6), (7), (11) and (12)

A compromise or arrangement is only as good as the notice that summoned the meeting. Every notice sent to a creditor or member must be accompanied by the statement article 328(2) requires, and a notice given by advertisement must carry what article 328(3) requires. Every director has a personal duty to give notice of his interests under article 328(7).

The second trap is timing on insolvency. Article 329A places the duty on the directors from the moment they become aware that the company is unable to pay its debts, and the application to the court under article 329B(2) has to give the full facts and be accompanied by the documents that provision lists.

The court's order, or a compromise or agreement reached during mediation, is dealt with under article 327(3). With every notice summoning the meeting sent to a creditor or member, the statement required by article 328(2) must be sent. In every notice given by advertisement, the matters required by article 328(3) must appear. Where the compromise or arrangement affects the rights of debenture holders, article 328(4) applies, and where a notice given by advertisement includes a notification that copies are available, article 328(5) applies. It is the duty of any director to give notice as article 328(7) requires. Where an order is made under article 329, every company in relation to which it is made is subject to article 329(5).

Where the directors of a company become aware that the company is unable to pay its debts, article 329A applies. An application must, as far as possible, give the full facts and circumstances required by article 329B(2)(a), and where the application is made by the company the documents listed in article 329B(2)(b) must accompany it, with article 329B(2)(c) applying to the rest. In the order the Court appoints an individual to act and makes the further provisions in article 329B(5)(a)(iii) and article 329B(5)(c).

The special controller must, as soon as possible upon his appointment, do what article 329B(6)(b) requires, must examine the assets, affairs and business of the company under article 329B(6)(c), and the company is subject to article 329B(6)(f) and (h) during the period the order is in force. Within one month from his appointment the special controller must act under article 329B(7)(b), with article 329B(7)(c) and (e) applying to the meeting and the reports.

At the end of the original period of appointment, or at the end of each extension, article 329B(11)(a)(i) applies. If at any time during which the recovery procedure is in force the circumstances in article 329B(12)(a), (b) or (c) arise, those provisions apply. At the end of the period of his appointment the special controller must act under article 329B(12)(d), and where the final report expresses the view described in article 329B(12)(e), that provision applies.

Files 60, 61 and 62 of the MT-COMPANY pack cover the two routes that are not a winding up. File 60 builds the compromise or arrangement, asks what statement accompanied each notice and what each advertisement said, and tests both against article 328(2) and (3), then collects each director's notice of interests under article 328(7). File 61 asks the date on which the directors became aware that the company was unable to pay its debts and builds the application to the court with the documents article 329B(2) requires. File 62 runs the procedure once the order is in force, asking for the date of the special controller's appointment and each report, and applies the one-month point in article 329B(7) and the end-of-period duties in article 329B(11) and (12).

This situation is covered by these files from the pack MT-COMPANY

• File 60 · Compromises and arrangements with creditors and members
• File 61 · Company recovery: the directors' duty on insolvency and the application to the court
• File 62 · Company recovery: the special controller's powers, the meetings and the reports

ComplianceSME tracks the Companies Act and issues update files through the membership, so that you are never working from a superseded version. Membership

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