Author: Dr Ramona Galea
Published: 06th March 2024
Litigation Unit
On the 24th of January 2024, the Commercial Court presided by the Hon. Judge Ian Spiteri Bailey decided the above quoted case, by appointing a liquidator in terms of Article 292(1) of the Companies Act (Chapter 386 of the Laws of Malta) to finalise the voluntary dissolution of the company ‘Pegion Operations Limited’, being the subsidiary company of Omnidea AB.
The director of the Applicant company explained in his testimony that the defendant company had been encountering liquidity issues as the bank was not allowing it to furnish payments to its creditors from its accounts. It was therefore agreed that any payments due will be paid by the Applicant company, particularly for the benefit of the patent. However, despite having been called upon on numerous occasions to settle the amounts due, the defendant company remained in default, leaving the applicant company with no choice but to pass an extraordinary resolution decreeing the dissolution and volontary winding up of defendant company, and appointing a liquidator in terms of law.
The liquidator subsequently resigned mainly citing the fact that the severe disagreement between the shareholders made it difficult for him to fulfil his duties. The severe disagreement between the shareholders actually prevented them from appointing another liquidator in terms of Article 271(1) of the Companies Act1Article 271(1) Chapter 386 of the laws of Malta provides that “If a vacancy occurs by death, resignation or removal in the office of liquidator appointed by the company, the company shall by extraordinary resolution fill the vacancy”. thus leading to a complete standstill. Therefore applicant company was left with no choice but to request the Honourable Civil Court (Commercial Section) to appoint a liquidator in terms of law.
In reaching its decision, the Court considered the requirements necessary under the pertinent Article 292 of the Companies Act and noted that the Applicant company had based its application on the fact that it was a creditor of the defendant company. Although the applicant’s claim for credit was not confirmed by the Court, the Court stated that the creditor had a right to file such an application, referring amongst others to Article 1011 of the UK Companies Act which defines “creditors” as “contingent or prospective creditors”.
In addition, it acknowledged that the same article provides that an application to the court can be made “to determine any question arising in the course of winding up the company” and that therefore the liquidator’s resignation together with the failure to appoint another liquidator was sufficient enough to fulfil such requisite.
The Court in quoting Profs. Andrew Muscat’s explanation of Article 271 of the Companies Act, took cognisance of the fact that the defendant company had failed to take any steps in re-appointing a liquidator to substitue the original liquidator, despite having been obliged to do so.
In view of the above, the Court considered this issue to fall within the ambits of Article 292 of the Companies Act and decided that it was necessary for the Court to intervene to allow the process of dissolution and voluntary winding up of the defendant company to be concluded and therefore proceeded to appoint a liquidator for the dissolution and winding up process of the Company to continue as required.
The information provided in this Insight does not, and is not intended to, constitute legal advice. All information, content, and materials available are for general informational purposes only. This Insight may not constitute the most up-to-date legal information and you are advised to seek updated advice.