The Maltese Commercial Partnerships Ordinance, 1962 and the private company

Abstract

The Maltese Commercial Partnerships Ordinance 1962 enables "persons associated for the exercise of one or more acts of trade" to choose one of the three forms of partnership contemplated by the Ordinance. Several advantages induce the vast majority to adopt the partnership “anonyme", or limited liability company. The limited liability company, may in its turn, take one of two forms, i.e. the public or the private form. The private form may be adopted if certain provisions of the Ordinance are complied with, and is generally chosen as the legal vehicle for the small, tightly-controlled enterprise, frequently for the family concern. It is a form of partnership where, by definition, the right to transfer shares is restricted, the number of members is limited to fifty, and invitations to the public to subscribe for shares or debentures is prohibited. On the other hand, the public company is not restricted in this manner. Its capital may, broadly speaking, be considered as an investment by those of the general public who wish to participate in the fortunes of the company. Clearly, these two forms of companies are on different rungs of the economic and financial ladder, though not necessarily poles apart. Yet, in spite of this difference in economic and commercial value, the law chooses to treat both the public and the private company on the same footing. So much so, the only real advantage which some private companies enjoy under the Ordinance is exemption from producing a balance sheet and auditors' report with the annual return, but only if certain conditions are complied with. Consequently, the legal regime which regulates the vast public company and the small private one emanate from the same concept, with minor differences of detail. In Malta this is a direct result of the fact that our provisions on the partnership "anonyme11 find their main source in the English Companies Act 1948. But, would it not be legitimate to query whether it is correct to treat a vast commercial giant such as Imperial Chemical Industries in England on the same legal footing as one would treat a small private company in Malta? At this stage, one may be tempted to ask why the small entrepreneur should not adopt one of the other two types of partnershi1:i contemplated in the Ordinance, namely the partnership "en nom collectif" or “en commandité”. However, the benefits of incorporation as a limited liability company by far exceed those of incorporation as a partnership "en nom collectif” or "en commandité” , in spite of the undoubted inadequacies with which the regime of the partnership “anonyme" is laden. On the other hand, a partnership need not be incorporated under the 1962 Ordinance. Many firms in Malta have remained unincorporated, and the rules which regulate this type of association emerge mainly from the Civil Code, supplemented in certain respects by the Commercial Code. What are the inadequacies which prevail under the present system? Does our system of partnership need to be overhauled, or should a hybrid be sought from the various systems which already prevail? Does the legal necessity exist for what has been termed in England a "new form of incorporation"? Do the small private companies in Malta warrant legal regulation more suitable for our size than the vast commercial enterprises in the United Kingdom? These and other queries it will be sought to answer, mainly by bringing to light the inadequacies which prevail in our system of partnerships, and by suggesting new provisions which may seem more adequate for our economic reality.