The main legislation applicable to Restructuring & Insolvency in Malta is the Companies Act, 1995 (Cap 386 of the Laws of Malta). Companies that own ships or aircraft are, on the other hand, regulated by more specific laws, including the Merchant Shipping Act (Cap 234 of the Laws of Malta) and the Aircraft Registration Act (Cap 503 of the Laws of Malta) respectively. Such Acts contain more detailed insolvency rules addressing those complexities coming out of more particular circumstances. Similarly, regulated entities in the financial services sector, such as banks and insurance companies, also have specific insolvency rules that are to be applied together with the Companies Act.
Insolvency proceedings fall within the jurisdiction of the Civil Court (Commercial Section).
Malta Company Liquidation process
The process of liquidation differs, depending on whether a company is solvent or insolvent.
Company is Solvent: Members’ Voluntary Winding Up
When the company is solvent, shareholders may, by extraordinary resolution, decide that a company is to be dissolved and put into liquidation. A detailed statement of affairs including a list of creditors alongside a declaration of solvency would need to be submitted by the directors of the company. The winding up process would need to be completed within a year.
Company is Insolvent: Creditors’ Voluntary Winding Up
When the company is insolvent, shareholders may, by extraordinary resolution, decide that a company is to be dissolved through a creditors’ voluntary winding up. A creditors’ meeting would need to be convened within fourteen (14) days of the shareholder’s resolution. In this case, the creditors have the priority in nominating a liquidator.
Winding Up by the Court
A company may, in other instances, be wound up by the Court. This usually happens where the creditors wish to initiate the liquidation of a company. The law thus, grants such creditors the opportunity to apply to the court and request for it to issue a winding-up order. One of the grounds in this instance would be that the company is unable to pay its debts. In this regard, if the court is satisfied that the creditor has enforced its executive title by means of an executive act and the debt remains unpaid for twenty-four (24) weeks, then there would exist a presumption of insolvency which would enable the court to proceed with the winding-up order.
Malta company Restructuring procedure
A company may opt for one of three different restructuring and reorganization procedures.
Arrangement with creditors
Firstly, a company may enter into an arrangement with its creditors if all the creditors agree thereto.
Company Reconstruction Procedure
Secondly, one may opt for Company Reconstruction Procedure, which is a process whereby an application to the court would be made for the court to appoint a mediator to assist the company and its creditors in reaching a compromise, which would then need to be submitted to the court for approval. The court could also be asked to sanction a compromise or arrangement that ensures the support of creditors representing two thirds (2/3rds) of the claims in value.
Company Recovery Procedure
Lastly, another option would be the Company Recovery Procedure (CRP), where an application would be made to the court, for it to appoint a special controller to manage the company. This is intended to give respite to the company for a period of four (4) months, during which creditors cannot take action against the company. When considering whether to grant such moratorium, the court would consider whether such moratorium could result in the company reaching a compromise with its creditors.
International Cases
Cooperation between local and other EU courts could be achieved in accordance with the applicable EU Insolvency Regulation Recast and the Brussels Regulation Recast. Foreign judgments can be recognized and enforced locally through the general remedies available under the Code of Organization and Civil Procedure.
The Centre of Main Interests (COMI) test
In accordance with the EU Insolvency Regulation, a Maltese court may exercise its jurisdiction to wind up a foreign company when its Centre of Main Interests (COMI) is in Malta. Malta adopted the COMI test prescribed in terms of the EU insolvency Regulation Recast – COMI is considered to be the place of the debtor’s registered office. However, sufficient evidence may be brought that the COMI is elsewhere.
Maltese Insolvency Register
A Maltese Insolvency Register also exists and may be accessed on https://corporateinsolvency.mt/ . Through this Register, the general public is provided with access to useful information on insolvent companies in Malta, free of charge, following a one-time free registration. This register is also linked to the e-justice portal in order to feed in information to users carrying in global searches in relation to insolvent companies.
Local Updates
It can thus be concluded that Malta’s current legislation is focused on dissolution and liquidation. This might change through the EU Directive 2019/1023 on preventive restructuring framework, the transposition of which into national law is now at an advanced stage.
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