The Difference Between Winding Up and Dissolution

Winding up and dissolution are parts of the process, leading to a company ceasing operations and paying off creditors. Read on to understand more about the difference.

At a fundamental level, winding up is a process whereby a liquidator is appointed to settle and distribute the assets of a company to the people it owes money to and its shareholders before eventual dissolution.

Once the company is wound up, it is dissolved and struck off the Register of Companies by the authorities. The event is announced formally in the Government Gazette. As soon as a liquidator is appointed, all powers of the company, board of directors and secretary are revoked and placed with the said liquidator.

The company or its creditors can nominate the liquidator. If the creditors nominate a different candidate, it will be their choice as to who is appointed. On the flip-side, if the creditors do not nominate a liquidator, the company’s choice is selected.

If the winding-up process takes longer than one year, the liquidator must summon a general meeting of the company, as well as a creditors meeting.

The winding-up process includes a summary of all assets and the intended distribution to the creditors along with an auditor’s report.

The company’s liabilities will be settled by distributing company property and assets, adhering to the pari passu (equal footing) rule to ensure fairness and transparency.

In addition, the liquidator’s fee will be paid from the assets of the company. When the whole plan is laid out, it is time to move on to dissolution and strike the company off the register.

As soon as the Registrar of Companies receives all the details of the winding-up process, how the distribution will take place and the auditor’s report, they will proceed with the striking off process. Once the documents are registered, the company is formally struck off the list and ceases to exist.

Simply put, winding up and dissolution is accounting for the owners and how the company assets can be liquidated to pay their dues. This process is bolstered by the auditor’s report, which affirms that all has been done fairly and in accordance with the procedure.

The actual dissolution of the company is the final act by the authorities, which strikes the company off the list and declares it to no longer be in existence. Winding up is the process that leads up to the dissolution of a company.

If you are looking to close your current company and start a new business in Malta, we can help you.