After decades of discussion, criticism and ineffective legal procedures rendering the field of insolvency a nightmare for insolvency practitioners, legislators have finally moved forward with proposed reforms to this field. Reforms which should bring local legislation in line with EU legislation. In the coming months, IURIS Malta Advocates, will analyze the reforms as they unfold and whether they will lead to a seamless and expedient process of winding up. These reforms include the pre-restructuring act, the insolvency act, and an act to amend the commercial code. The bills were drafted after consideration of the legal position in several prominent European jurisdictions, notably the United Kingdom, Ireland, Italy, Belgium and the Netherlands.

Amendments in this area of corporate law were long overdue and although a large stride in the right direction, practitioners in the field believe they do not address several expectations and have been given to understand that more amendments are envisaged. Practitioners have long felt that they operated in an unregulated field with too much discretion left to their responsibilities, with too many companies not having the financial muscle to address and finance the process of insolvency leading to the abandonment of the company.

The Maltese Business Register has large numbers of defaulting companies, largely non-trading, which in the last 36 months led the Registrar of Companies to strike off several them as defunct. The latter process necessitates a legal procedure to be initiated within five years from such striking off, for the revival of the company, which must be preceded by the conformity of all the company’s statutory obligations. Few companies have sought to have their legal personality revived, majority of which were applications filed by third parties having an interest in keeping the particular company alive as a result of on-going obligations, such as pending commercial debts.

The issues revolving around insolvency are various from director abandonment to lack of financial resources, from lack of information (Directors and officers jumping ship) to the lack of awareness of responsibilities and the seriousness of letting a company fall into such a state. Will these amendments set in motion a ratification process?

For more information on this subject or any matter related to Company Law, please contact Dr Peter Fenech at IURIS Malta