An appraisal of the Maltese Courts’ interpretation of the company recovery procedure

Abstract

Under Maltese corporate law, an ailing company unable to pay its debts and settle its financial obligations is, broadly speaking, faced with two paths: dissolution and winding-up, or in certain cases, recovery and rescue. Both routes depart from the same point, but goad the company to two polar destinations. The corporate rescue culture has long been in existence away from Malta’s shores, namely in the United Kingdom, where it has undergone significant and extensive legislative amendment and judicial interpretation. Malta’s experience is somewhat less colourful and rich: the company recovery procedure in Article 329B was inserted into the Maltese Companies Act in 2003, and to date, has only been judicially invoked five times. Can one deem that the corporate rescue culture has taken root in Malta? Primarily, this thesis seeks to analyse Article 329B in light of the courts’ interpretation thereof. The legal provision itself is scrutinised and dissected in an attempt to establish whether the courts abided by the law word-for-word or whether there emerge any other criteria or ‘tests’ which the judiciary applied in the five applications for company recovery which have been presented before them over the last eleven years. On a secondary and purely legislative level, a comparative analysis is made with the United Kingdom and to a lesser extent, Australia and Hong Kong to highlight any similarities and differences which may exist between these foreign jurisdictions and Malta. The judiciary’s interpretation of a particular legal provision sheds invaluable light on its true meaning and implementation. Through the appraisal herein of the courts’ analysis of Article 329B it is hoped that clarification is bestowed on the practical implementation and utilisation of this seldom used provision which may, if invoked, contribute towards the rescue and recovery of an insolvent company, having significant financial repercussions on interested parties.