Reviving Troubled Businesses: Effective Rescue and Restructuring Strategies

Effective business rescue and restructuring strategies require collaborative efforts from all involved parties, whether willing or not.
Our aim is to identify and implement sustainable, long-term solutions that will revitalize distressed businesses.

Liquidation or dissolution is a term which is used when a company decides to dissolve and materialize all its assets.
This usually occurs when the company is deemed insolvent, i.e. cannot pay its debts when they are due.
As a result, it collects and materialises its assets to settle its obligations and eventually comes to an end.

Revitalizing Distressed Businesses
Effective Rescue and Restructuring Strategies

The liquidation method can be either voluntary or compulsory

Voluntary Liquidation

Article 261 of the Companies Law, Cap. 113, outlines the circumstances in which a company may be liquidated voluntarily, namely:

when the period of the company’s duration, if any, (set by the articles of association of a company) expires or
when a particular event occurs, the occurrence of which was set in the articles of association to mean the dissolution of the company
when a company votes by special resolution its voluntary liquidation
when a company votes by extraordinary resolution that, due to its obligations, it may not continue operating and liquidation is advisable

Voluntary liquidation can be made either by the members of the company or by its creditors.
Different requirements apply for each case.

1. Voluntary Liquidation by Members

One or more members of a company may decide to dissolve it voluntarily, considering that they are solvent shareholders. The directors must make a statutory declaration that the company can pay its debts within 12 months from the commencement of the procedure.

Any surplus is returned to the shareholders. In the final general meeting, the liquidator submits to the company members the final liquidation accounts and explains their conduct. The accounts must also be submitted to the Registrar of Companies.

The company is dissolved within 3 months from the filing of the returns.

The directors must prepare the following documents and present them during the meeting:

➤ Audited financial statements which are relevant to the liquidation date
➤ A solvency statement confirming that the company can pay all its debts
➤ A written resolution approving the solvency statement

2. Voluntary Liquidation by Creditors

When a company is insolvent, i.e. cannot pay its liabilities, it can only proceed with a voluntary liquidation by its creditors.

Both the members and the creditors must hold a meeting to decide upon the appointment of one or more liquidators.
The creditors may also appoint an inspection committee if deemed appropriate.
The liquidators shall arrange for the liquidation of the company’s affairs, and then send notices for the final meetings.

Finally, the liquidators submit the Final Liquidation Account which will lead to the dissolution of the company.

The company directors must prepare the following documents prior to the meeting:

➤ A statement of their position on the company’s affairs
➤ A list of the creditors and an estimated amount of their claims
Furthermore, they must send a notice simultaneously to both the creditors and the shareholders. Such notices of the meeting must also be published in the Official Gazette and at least 2 local newspapers

3. Compulsory Liquidation (By Court)

A creditor, a contributor or any other interested party can file an application to the court for the company’s liquidation. Subsequently, the court will issue an order to that effect.

A company may be wound up by Court in the following circumstance:

➤ The company has decided by special resolution for its liquidation by the Court
➤ The company failed to submit the statutory report to the Registrar of Companies or to hold the statutory meeting
➤ The company does not commence its business within a year from its incorporation or suspends its business for a year
➤ In case of a public company, the number of members is reduced below 7 and either it declares inability to increase the number or is unable to increase it within the time given by the Court
➤ The company is unable to pay its debts
➤ The Court believes that it is fair and in accordance with the law of leniency to dissolve the company

Other grounds include a request for the court to exercise its discretionary powers, where it is just and equitable.

The Court appoints a Liquidator, who must act in accordance with a Statement of Affairs, prepared and submitted by the company’s directors.
The liquidator follows the same steps as in a voluntary liquidation. locate the assets to be materialised for the payment of the fees and expenses, preferential debts and secured and unsecured creditors.

4. Strike-Off Companies Register

Strike-Off The Companies’ Registry is an alternative way to dissolve a company.

It applies to dormant companies or those who have ceased to operate and have no assets, nor do they intend to pursue their business activities in the future.

The strike-off is an administrative procedure which takes effect from a notice sent by the Registrar of Companies to the company in question or vice versa. In effect, this method is used when the Registrar of Companies is satisfied that the company in question is no longer active and has no assets.

Our team of Insolvency Practitioners can help you through your options if you need to liquidate your company.
Feel free to contact us at:

When a company is struggling with financial difficulties, ENTER CONSULTING ZONE LTD can provide guidance and expert advice to develop a realistic and effective business rescue plan, in collaboration with you and our specialized consultants.

➤ Business restructuring from planning to execution
➤ Diagnosis and implementation of operational solutions
➤ Preservation of company sustainability
➤ Interim Management
➤ Financial Restructuring