The Companies Act is more than 20 years old and needs a revamp
– particularly when it comes to insolvency, Louis Cassar
Pullicino, the managing partner of Ganado Advocates, believes.
The number of insolvency cases is on the increase and they cut
across commercial activity, he explained.
"The moment that a company faces financial difficulties, it
inevitably has implications for employees, suppliers, creditors and
banks, for example. So the impact is quite widespread," he
stressed, adding that as Malta has been attracting more companies
with international shareholders, there is also an impact on foreign
Dr Cassar Pullicino noted that insolvency should be the last
resort for companies in trouble but lamented that the section of
the Companies Act related to company reconstruction and company
recovery procedure had, for some reason, rarely been picked up by
practitioners and corporate entities
"It could well be a cultural problem but it is more likely
that the particular requirements to qualify for this rescue
procedure are too onerous as they require agreement between the
creditors who hold more than half of the claims against the
company. The possibility of actually engineering a corporate rescue
becomes quite a tall order," he said
Another provision which does not ever seem to have been applied
is that which enables the disqualification of directors.
"It is a pity as I am sure there are cases where directors
should have been disqualified... Clearly in this scenario, there is
no disincentive for directors to act appropriately and to cultivate
the levels of corporate governance that Malta wants to achieve as a
serious jurisdiction," he said.
Another aspect worrying the law firm is to deal with the complex
cross-border disputes that arise more often as Malta's economy
becomes more international.
There is a specialised division within the Civil Court presided
over by two judges which has been working very well for insolvency
and maritime cases, and Ganado Advocates would like to see this
extended to other economic sectors: "The idea is working very
well as it gives them the opportunity to get familiar with the
precedents set by case law in these disputes. We need to have more
specialised division at both the level of the Court of First
Instance and the Court of Appeal to give incentices to judges
already on the bench to specialise in particular fields."
Apart from specialisation, the attitude of the court towards
these cases has also been improved: "Only this summer, we were
involved in a dispute which involved foreign maritime parties. We
applied to the court to hear the case with urgency since a number
of containers with cargo were 'trapped' here by the
dispute. The court was very receptive and I am very pleased to
report that the court heard the case over 10 days with a judgment
five days later."
The Merchant Shipping Act has been revised periodically to keep
Malta competitive and to keep legislation relevant to the players
in the sector. In aviation, the firm was also at the forefront of
the 2010 Aircraft Registration Act, for which amendments are
already in the pipeline. But he is concerned about other
legislative innovation and called for the setting up of a permanent
law reform commission to promote or recommend new laws and review
existing ones – adding that the financial services sector
deserves a commission of its own.
"A similar commission some years ago was instrumental in
dealing with procedural amendments. Too much of our attention is
being taken up by transposing European legislation and, as a
result, we have lost momentum. We used to be much more dynamic and
innovative as we had to compete. We are losing our cutting
Previously published in the Business Observer (6 October
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