Causes of dissolution of companies : a comparative analysis

Abstract

Although one of the advantages of a body corporate is that it can live forever, most companies do not. Indeed many, if not most, companies are eventually 'put to death' for a variety of reasons. Dissolution may be brought about by the positive choice of the members motivated by a variety of reasons. The premature termination of a company's existence may have been foreseen in its constitutive acts upon the occurrence of an event or the expiration of a time period. The withdrawal of most of the directors or members coupled with the failure to find suitable replacements may constitute another motivating factor. The members' relationship may have deteriorated. The company's objects may have been achieved or may be impossible to achieve. The company may no longer be profitable, may have incurred losses or, worse still, may be insolvent. Most of these scenarios are also statutorily enumerated as warranting the making of winding up orders by the courts albeit only upon the latter being satisfied that a given scenario is irremediable. The most notable discrepancy between the Maltese, English and Italian legal systems concerns the exercise of judicial discretion. Unlike their Maltese and English counterparts, Italian courts are not permitted to identify other scenarios justifying winding up apart from those expressly contemplated by law. Nevertheless, irrespective of the stance taken by each legal system, winding up is a remedy of last resort which will neither be resorted to nor granted lightly. This fundamental axiom pervades both the legislative and judicial policy of all three legal systems in the field of company dissolution.