In the case of a company who is in the likeliness of Insolvency or is Insolvent but undergoing some form of restructuring, a number of persons may be appointed.
In the case of a company which is in the likeliness of Insolvency or is Insolvent but undergoing some form of restructuring, a number of persons may be appointed depending on the form of restructuring. There are three main types of Restructuring under Maltese Law:
Compromise or Arrangement between a Company and its Creditors
This involves a procedure whereby the court orders a first meeting between the debtor and its Creditor/s (Art 327(1)(a) of the Companies Act). The Court does not appoint an individual in this regard but only a meeting.
Mediator in Out-of-Court Voluntary Mediation
A compromise or arrangement between the Company and its Creditors may be facilitated through informal and out of court procedures in certain cases. Therefore, the parties may choose any person to act as a mediator for the abovementioned purpose. No qualifications would be required for persons to act as mediators in this case.
Special Controller in Company Recovery Procedure (CRP)
The last formal type of restructuring is a Court procedure known as the CRP (Art. 329B of the Companies Act). This is a Court procedure which requires the appointment by the Court of a person known as the Special Controller (SC). Regulation 192 of 2020 specifies that a SC may either be a professional, or a person with experience in the administration of companies. Also Act XXX of 2020 introduced an amendment so that a SC are appointed from a list held by the Official Receiver. This list should be made up of individuals who are competent and experienced in the management of business enterprise, are qualified and willing to accept the appointment, and have no conflict of interest in relation to their appointment (Art 329B (5) (b) of the Companies Act). In order to be eligible to be included in the list of SC, the applicant must possess either a minimum of 5 years proven experience in the administration of companies or else a minimum of 2 years proven experience in the administration of companies if he holds a bachelor’s degree.
Dissolution and Winding Up
Whenever a company is Dissolved, a liquidator is appointed irrespective of the mode of Dissolution and Winding Up. A liquidator must be a qualified person, and a warranted professional who is either a lawyer or certified public accountant or an auditor. An exception to this rule is that a person may be registered with the Registrar of Companies as a fit and proper person to act as liquidator (Art 305 (1) of the Companies Act). It is of utmost importance that the person appointed to act as liquidator has not held the office of Director or company secretary or any appointment with the company at any time during four years prior to company’s Dissolution (Art 305 (2) of the Companies Act). A liquidator once he accepts his appointment must notify the Registrar of Companies of his appointment within 14 days using Form L or Form L1 depending on whether it is a Voluntary or Compulsory Winding Up procedure. This gives publicity to the appointment.
The person holding the office of a liquidator holds a position of trust and is obliged to carry out his duties faithfully and the Court will be strict in the review of their conduct.
The Provisional Administrator
According to Article 228 of the Companies Act, in the case of a Winding Up by the Court, until the Court decides if the company should be dissolved, it may appoint a Provisional Administrator and specify his powers. The Provisional Administrator would take over the administration of the company’s business and is intended to oversee and preserve the assets of the company and also prevent anybody from getting any unfair priority or advantage. The law does not specify any requisites for persons to be appointed a Provisional Administrator.
How are insolvency practitioners appointed?
Mediators in Company Restructuring
The Parties are free to choose any person to act as a mediator for the abovementioned purpose, and there are no specific procedures for such appointment.
Special Controllers in Company Recovery Procedures
In order to be appointed as a SC, a person needs to apply and be approved by the Official Receiver to form part of a pool of persons with certain qualifications and/or experience. The list is made up of individuals who are competent and experienced in the management of business enterprise, are qualified and willing to accept the appointment, and have no conflict of interest in relation to their appointment (Art 329B (5) (b) of the Companies Act). In order to be eligible to be included in the list of SC, the applicant must possess either a minimum of 5 years proven experience in the administration of companies or else a minimum of 2 years proven experience in the administration of companies if he holds a bachelor’s degree. The following persons shall not be eligible for inclusion in the list:
- he is interdicted or incapacitated or is an undischarged bankrupt;
- he has been convicted of any of the crimes affecting public trust or of theft or of fraud or of knowingly receiving property obtained by theft or fraud;
- he is subject to a disqualification order under article 320 of the Act;
- during the time he has been a director or a secretary of a company, he has breached the provisions of this Act for the third consecutive time in a period of two (2) years to be reckoned from the first breach;
- he has been convicted of any of the offences under the Prevention of Money Laundering Act;
It is up to the Court to select a SC from the above mentioned list, considerations being made to the experience of the SC, the complexity of the case, and whether or not there are cross border relations involved.
Provisional Administrators in Dissolution and Winding Up
The Provisional Administrator is appointed by the Court in procedures for the Winding Up by the Court. It is a temporary appointment, and is initiate through a request by the plaintiff during such procedures. The law does not specify any additional requisites for persons to be appointed as Provisional Administrator.
Liquidators in Dissolution and Winding Up
Liquidators are appointed for the purpose of Winding Up the affairs and distributing the assets, if any, of the company. In the case of a Voluntary Winding Up, the liquidator is appointed by the company itself through an extraordinary resolution (Art 270 (1) of the Companies Act). If a liquidator is not appointed through an extraordinary resolution of the General Meeting, then any Director may request the Civil Court (Commercial Section) within 14 days and request that it appoints a liquidator (Art 270 (3) of the Companies Act).
With regards to a Creditors’ Voluntary Winding Up, according to Article 279 of the Companies Act, it is the Creditors or the company who appoint the liquidator during a meeting organised by the Company for this purpose. During such a meeting, if the Creditors nominate an individual to act as liquidator through a resolution of the Creditors, such person shall be the liquidator of the Company. The company however has the right to nominate a liquidator through an extraordinary resolution of the company. If the Creditors and the company nominate different persons, the person nominated by the Creditors shall be the liquidator, and if no person is nominated by the Creditors then the person, if any, nominated by the company shall be liquidator.
In the case of a Winding Up by the Court, the liquidator is appointed by the Civil Court (Commercial Section). The Court may consider suggestions made by the Creditors for the appointment of such a person.
To what extent and under what conditions may insolvency practitioners from another Member State be appointed?
There is no restriction for persons from foreign Member States to be appointed as Mediators, Special Controllers, or Provisional Administrators. In the case of Special Controllers who apply for approval in view of an academic qualification they obtain in a foreign Member State, recognition of the qualification from the Malta Qualifications Recognition Information Centre may be necessary.
Liquidators, on the other hand need to be warranted lawyers or accountants and auditors by the Maltese Authorities. They may also be persons from other Member State, as long as they are certified as fit and proper to act as such by the Registrar of Companies.
This document does not purport to give legal, financial or any other advice. Please be directed to seek appropriate advice from warranted professionals. Do not hesitate to contact the Office of the Official Receiver for further information if necessary or for any clarification.