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Title: Procedures for the adjudication of company insolvency : selected issues
Authors: Farrugia, David (2013)
Keywords: Procedure (Law)
Cash flow
Issue Date: 2013
Abstract: Legal systems throughout history have always catered for the phenomenon of insolvency through the inclusion of provisions for the safeguarding against the perpetual danger of financial and economic failure in society. Insolvency has become accepted as a fact of life. No matter how minute the risks involved, or how overly prudent one‟s affairs are, financial disaster is a reality that must always be considered in an ever changing economic society. Whereas bankruptcy proceedings in Malta regulate the management of a situation of financial distress with individuals and partnerships, insolvency proceedings in terms of the Companies Act address such circumstances in the context of limited liability companies, and therefore demand a different set of rules altogether. The first step towards tackling insolvency matters is the need for a system of laws which allow for the adjudication of the insolvent state of a company when it becomes unable to pay its debts, so that the future of the company and a solution regarding payment of debts may be decided upon. This first step may be defined as the procedure for the adjudication on company insolvency, which involves the act of a court pronouncing a judgment based on the evidence presented according to the requirements of the insolvency tests found in the law. This procedure has been implemented through the application of the cash flow and balance sheet tests in the Maltese Companies Act which have been influenced largely by UK legislation. The application of the tests at law, together with the court‟s authority, combine to form the procedure for diagnosing a company‟s insolvency, which at times, may prove to be a highly demanding task due to the complexities cases of insolvency can entail. Such a legal procedure attempts at creating a balance between providing a creditor with remedies where debts cannot be paid as a result of insolvency, and, protecting companies from unnecessary liquidations and windingup procedures or other consequential actions, where there is potential for recovery.
Description: LL.D.
Appears in Collections:Dissertations - FacLaw - 2013

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