What Happens To Directors And Shareholders After A Winding Up Order Is Issued?

This article is part of a series exploring court actions available under the Companies Act (Chapter 386 of the Laws of Malta). Each article gives a practical overview of a specific legal remedy or procedure involving court supervision; outlining when it applies, the steps required, and the purpose behind it. It is intended as a useful reference point rather than an in-depth academic analysis.

Once a court issues a winding up order, the company enters into official liquidation, and control of the company is transferred away from its directors and shareholders.

The court will appoint a liquidator, usually the Official Receiver unless otherwise directed. From that point onward:

• The directors lose all powers to manage or represent the company.
• The liquidator assumes full control, including over company assets, records, and communications.
• Shareholders no longer have decision-making powers, although they may be entitled to any remaining surplus (if any) after all debts are settled.
• Directors and company officers may still be required to assist the liquidator, including providing information, submitting records and appearing before the court when summoned.

While the liquidation process is court supervised, directors and shareholders should also be aware of their potential exposure under Articles 216 and 217, which regulate post-dissolution liabilities of certain pre-liquidation payments, even if these are not court-triggered actions themselves. If the liquidator identifies misconduct, wrongful trading or irregularities, directors could face personal liability, disqualification, or even criminal charges in serious cases. Shareholders, in limited circumstances, may also be required to contribute to the company’s debts, particularly where current members cannot satisfy the necessary contributions.

To put it simply, a winding up order strips the company’s directors and shareholders of control. The company is placed in the hands of a court-appointed liquidator, and former officers must cooperate with the liquidation process.

Explore further:

• Can A Legal Action Be Paused Once a Company Is Being Wound Up?
• Is court involvement needed to wind up a company? If so, when and why?