Malta: Time To Repeal The Suspension Of Filing For Dissolution And Winding Up Regulations

WHY IS SUBSIDIARY LEGISLATION 386.24 COMPANIES ACT (SUSPENSION OF FILING FOR DISSOLUTION AND WINDING UP) REGULATIONS (THE "REGULATIONS") STILL IN FORCE?

Almost four years down the line, practitioners cannot help but question exactly why the Regulations are still in force now that most (if not all) pandemic measures have been totally lifted.

Although it is likely that the failure to repeal the Regulations is simply not high priority at the moment, the fact that the Regulations remain unnecessarily in force may have severe repercussions on the business community as the initial "legroom" given to debtor companies and their directors during the pandemic, has seemingly been prolonged without reason.

Originally, the Regulations sought to temporarily relax Maltese insolvency law and its consequences in an attempt to prevent aggressive debt-recovery actions by creditors and offer relief to companies struggling to keep afloat due to the crisis the COVID-19 pandemic left in its wake. But that was almost four years ago now and the Regulations continue to linger.

The Maltese Commercial Court has in a number of judgments including Avv. Cedric Mifsud noe vs HI FLY Limited delivered on the 9^th May 2022 (76/2020 ISB) and most recently in the judgment in the names Cle de Voute Limited et vs. DQR-Group Limited delivered on the 22^nd of January 2024, raised this point. In the latter case, the applicants made reference to the Regulations stipulating that the suspension on creditor action to file winding up applications as specified in the Regulations, was inapplicable to their case as the circumstances claimed in their application for winding up arose prior to the 16^th of March 2020.

In this case and with reference to the Regulations, the Court held that every day that the Regulations remain in force is creating obstacles to the proper carrying out of business. The Court also remarked that it has specifically sent this judgment (and other similar judgments on the same point) to the Ministries concerned in the hope that our legislator will repeal the Regulations which no longer serve us (in the same way that most of the pandemic related urgent legislation which was promulgated at the time has now been repealed).

As discussed here, it has been felt that retaining these Regulations in force has unfairly favoured debtor companies (which is not commensurate with the purpose of the Regulations) since creditors (unless they successfully prove that their claims have arisen prior to the 16^th of March 2020 as required in the Regulations) could be denied important rights at law, including the right to file winding up applications or obtain a successful winding up order against their debtor, with the result that their chances of repayment are either further diminished or delayed and therefore prejudiced.

From a practical point of view, depending on who the practitioner is assisting, the fact that the Regulations have remained in force might be a blessing or a curse. If the practitioner is assisting a creditor to wind up its debtor company, highlighting the inapplicability of the Regulations when advising and assisting their clients might be necessary. On the other hand, when assisting debtor companies, practitioners may choose to rely on the applicability of the Regulations in an attempt to protect the debtor companies from facing the music, on the basis of the letter of the law.

All in all, it is surmised that the retention of the Regulations is not striking a fair balance between creditor and debtor protection and is causing confusion among practitioners who although conscious of the fact that the Regulations should have probably been repealed by now, need to respect the letter of the law – which when it comes down to it, must also be applied by our Courts.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.