Dealing with insolvencies : the ranking of creditors

Abstract

Only recently has the market started to appreciate that insolvency is a subject of great commercial importance, legal complexity and intellectual fascination. This study is one of the fruits of this awakening interest. Today, a sound knowledge of insolvency has become increasingly important for legal practitioners and for accountants and this is due to the fact that in recent years, Malta has witnessed an increase in business failures resulting in an increased number of liquidations of companies. Corporate insolvency is an area of law which concerns various groups of people in today's society. The first group may consist of lawyers and accountants who are more likely than ever to face and deal with questions posed by insolvency and liquidation. Another group would consist of those people in business who are seeking guidance through the manifold problems and issues which arise where their dealings involve an insolvent or potentially insolvent company. Clearly this group refers to the interests of those secured and unsecured creditors of a company which is in a state of failure. Finally, insolvency may also concern bank managers and company directors. Moreover, although the bulk of the Maltese legislation is modelled on continental law, the CA 1995, whilst keeping its roots firmly in the Maltese legislative context, incorporates a number of provisions contained in English and EU laws. Nevertheless, there is still one major area of concern: that relating to the protection of creditors and how they rank in insolvent situations. This study involves several interviews with parties who are affected by insolvency situations. It outlines the main problems encountered when enforcement is sought in court for the claims of those are interested in the pool of assets of the inso