The protection afforded to creditors and shareholders upon the dissolution and winding up of a private limited company

Abstract

The principal aim of this thesis is that of analysing in detail whether the law of corporate insolvency which, in the past few decades, has made considerable headway, which progression ultimately culminated in Malta with the enactment of the 1995 Companies Act, affords adequate protection to creditors and shareholders of an insolvent company. In most countries, European and non, there has been an entire revolution in the field of insolvency law, which may be attributed to the ever increasing number of insolvencies which result annually. In the words of Gower: "Although, ... , one of the advantages of a body corporate is that it can live forever, most companies do not. Indeed at present they are being put to death with increasing and alarming frequency because they are unable to pay their debts." This thesis will be treating briefly the position of shareholders and creditors of a limited liability company in the normal course of business, and will deal with the protection afforded to such persons following dissolution, in more depth. Specific reference will also be made to the position of shareholders and third parties, in particular the creditors of the company, under each of the different types of winding up. The provisions of the Companies Act 1995 concerning the protection of shareholders and of creditors, and the various offences antecedent to dissolution or in the course of winding up, will be examined. Reference will also be made to the provisions of the Civil Code and those of other laws which have a bearing on the ranking of creditors, together with the criminal law provisions relating to fraud and other crimes which may be of relevance in a winding up. A comparative analysis with the relative provisions of foreign legislations shall also be made. In conclusion, an evaluation of the present position of shareholders and third parties upon the dissolution and winding up of a limited liability company will be made, and, if necessary proposals for reform will also be put forward.