In an exercise to combat money laundering, the Malta Business Registry (‘MBR’) is declaring defunct, companies that appear to have stopped operating. It transpires from case law, that decisions to declare companies defunct are largely based on a company’s failure to file with the MBR, documentation requested at law, such as annual returns, financial statements etc. It is expected that the same trend will continue.
The law provides that companies declared defunct may be restored to the register of companies (the ‘Register’)[1]. Thus, a company through its legal representatives can make a request within three months from publication of a notice indicating the striking off of a company as defunct[2]; any interested party, including shareholders and creditors, can make a similar request within a period of five years from the publication of a notice of a company’s striking off[3]. Creditors do not need to hold an executive title to make such an application; interested parties do not need to prove prejudice[4], although the court will need to be satisfied that they will suffer prejudice if their demand is not accepted[5]. Directors are not deemed interested parties and forfeit any right of action unless taken within the aforementioned three month period[6].
It is not a foregone conclusion that the courts will always accept to restore a company to the Register. The court considers this remedy extraordinary and special, and consequently the reasons for allowing such a drastic remedy should likewise be special and particular
[7]. In deciding the matter, the court will balance the common public interest against the interest of those seeking to restore a company to the Register. The court has thus allowed the restoration of a defunct company to enable a creditor to enforce his rights against it
[8]; to allow the otherwise defunct company to continue pleading pending court proceedings as plaintiff
[9]; to allow a promise of sale agreement to which the defunct company was a party to run its course
[10]. On the other hand, the court is reluctant to restore a company when it is convinced that the company would, once restored, continue to default in its regulatory obligations, and will thus not restore a company to the Register where the interests of the requesting party can be successfully addressed differently
[11], or where the company’s restoration to the
Register would not procure any benefit to the requesting party[1], as in such cases the public interest outweighs the private one.
In other cases, where the individual’s and the public’s interest are both deserving of protection[2], the court balances both interests by allowing a company to be restored for a short period of time, until the purpose for its restoration can be fulfilled. In such cases, following the time period established by the court, the company is again struck off without further formality. Where the court does not impose a time period, the Court does warn interested parties that it would not necessarily be amendable to re-allowing a company’s restoration a second time round, should the company, through its behaviour, be once again declared defunct [3].
An interested party seeking to restore a company to the Register should assume that it will be paying all costs relating to the court case, including the MBR’s, since in most cases the company is declared defunct as a result of the company’s own failings. The court has so far made one exception – where the striking off was the result of the MBR’s negligence, based on a company’s alleged failure to file documents, which the company had in fact filed, but which the MBR had misplaced[4].
