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Malta

Bankruptcy

Updated 02/2013

Legal requirements

Entrepreneurs may be able to avoid bankruptcy by anticipating difficulties - if they keep a close eye on the financial situation of their business.

Bankruptcy of a trader other than a company or commercial partnership other than a company is regulated by Malta's Commercial Code (Chapter 13 of the Laws of Malta).

Insolvency of commercial entities is regulated by the Companies Act 1995.

Title VI of the Criminal Code (Chapter 9 of the Laws of Malta) refers to bankrupt traders, and if a person is "declared guilty of fraudulent bankruptcy" he/she can be punished with imprisonment for a term from eighteen months to three years (Article 191) in specific circumstances namely:

  • if this person conceals or falsifies trade books;
  • if this person misapplies, conceals or dissembles any part of his/her assets;
  • if this person simulates fictitious debts;
  • if in the trade books or in any public or private writing he/she fraudulently acknowledges himself/herself debtor of any sum which is not due.

The Criminal Code also provides for circumstances which give rise to simple bankruptcy - if a trader is found guilty, the punishment inflicted is imprisonment for a term from seven months to one year. Finally, complicity in bankruptcy is restricted solely to those persons who collude with the bankrupt to defraud his/her creditors (Article 195).

The Set-off and Netting on Insolvency Act 2003 makes provision for the enforceability of set-off and netting on bankruptcy or insolvency.

Insolvency procedures

The Companies Act provides for the filing of insolvency and winding up proceedings whether members' winding up or creditors' winding up. The provisions relating thereto can be found in the Companies Act.

Responsible bodies

The bodies involved in the handling of these proceedings are the following:

First Hall Civil Court

A request is made to the court for winding up of the company. This request is made either by the company itself following a decision of the general meeting or of the board of directors or by any debenture holder, creditor/s or by any contributory. The court will either dismiss the application or make an order acceding thereto.

Provisional administrator

The court may by order appoint a provisional administrator at any time after the presentation of a winding up application and before the making of a winding up order.

The provisional administrator shall carry out such functions and powers in relation to the administrator of the estate or business of the company as the court may specify in the order appointing him/her.

The provisional administrator holds office until such time as the winding up order is made or the winding up application is dismissed unless he/she resigns or is removed before such time.

Official receiver

Where the court has made a winding up order or appointed a provisional administrator, the official receiver must receive a statement of the affairs of the company in the prescribed form, verified by affidavit, and showing the particulars of its assets, debts and liabilities, the names, residences and occupations of its creditors, the securities held by them respectively, the dates when the securities were issued and such further information which the official receiver may require.

Liquidator

The official receiver, by virtue of his/her office, becomes the liquidator of the company and continues in office until another person is appointed to fulfil this role.

Registry of Companies

The Registry of Companies registers any documents relating to the scheme of distribution of the company and strikes the name of the company off the register.

Coping with bankruptcy

Bankruptcy is regulated by the Commercial Code (Chapter 13 of the Laws of Malta). You are considered to be bankrupt when you suspend payment of your debts.

You can make a voluntary declaration of bankruptcy to the First Hall of the Civil Court. Bankruptcy proceedings may also be commenced by creditors.

The provisions relating to insolvency and winding up of partnerships and companies is available in the Companies Act.

Insolvency proceedings may be started when the company is unable to pay its debts.

Entrepreneurs having experienced bankruptcy should not lose confidence in their ability to embark on a new business.

Administrative procedures

Bankruptcy procedure: a step-by-step guide

For voluntary declaration of bankruptcy, your declaration must contain:

  • your details;
  • the details of your creditors;
  • the nature of the debts due.

You must also file in court all your books and documents.

The extraordinary resolution taken by the members of the business must be accompanied by the form B1 which reflects the dissolution date.

You can also issue a solvency declaration (on the form B2) showing that you will be able to pay your debts within a stated time. It must be accompanied by a statement of assets and liabilities showing the situation as it was during the three months prior to the dissolution date or as it was on dissolution date.

All the provisions related to Bankruptcy procedures are available in the Commercial Code and Companies Act.

Court decision

If the court is satisfied that the company cannot pay its debts, it launches the application and issues a winding up order.

If the court issues a winding up order, then your company will be dissolved as of the date of the filing of the application for winding up.

The court may also appoint a liquidator or a provisional administrator in the winding up order.

Resources

The website of the European Judicial Network (EJN) covering civil and commercial matters, offers access to information on bankruptcy proceedings in Malta and the EU's system for the coordination of insolvency proceedings.

Programmes

Personal Debt Management Plans or Programmes (DMPs) consolidate unsecured debts into a single monthly repayment. They should not be confused with the more formal and conclusive agreements resulting from bankruptcy proceedings. There is no government personal debt programme or plan in Malta, but Malta's financial service providers do offer tailor-made solutions to their clients.

Help & advice

Help & advice

E-mail a business organisation near you

The EU runs a network (Enterprise Europe Network) of local business organisations in most European countries that may be able to help you.

Choose your country and town and enter your enquiry below.

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