Financial difficulties - Malta

Updated 07/2012

Legal requirements

Companies facing financial problems should consult the Companies Act to find out which legal options are open to them. The act sets out the various compromise arrangements available. It also outlines the Company Recovery Procedure and when this should be initiated. Considerations are also made as to whether the company should be dissolved or submit a company recovery application.

Companies Act
Malta Enterprise Act - Overview [1 MB]

Access to different sources of finance can help overcome financial difficulties.

Access to finance — Malta

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Bankruptcy — Malta

Administrative procedures

Order for payment procedures

A company recovery application to the Court may be made by the following:

the company following an extraordinary resolution;
the board of directors following a decision thereof;
the creditors of the company representing more than half in value of the company's creditors.

Any application made by the company must be accompanied by a statement of the company's assets and liabilities and a list of the details of the creditors as well as the amount due.

The initial fees related to the application filed in Court amount to €720. The final legal and judicial expenses relating to the case are determined once the case is terminated.

After a company recovery application has been filed, the Court appoints a special controller for a period which must not exceed twelve months.

Reorganisation

When a company finds itself in financial difficulty, the court may upon application by the company or any creditor, order a meeting of the creditors or members of the company.

If the majority of the creditors or members of the company agree to a compromise or arrangement, sanctioned by the court, it becomes binding.

A copy of this court order must be delivered to the Registrar of Companies for Registration. The term 'arrangement' should be understood as a reorganisation of the company's share capital by the consolidation of shares of different classes or by the division of shares into different classes, or by both.

The Directors of a company should always be guided by professional advice prior to deciding to implement a company reconstruction.

Company Recovery Procedure

Should you become aware that your company is unable to pay its debts, you should convene a general meeting of shareholders to review your position within 30 days from when the fact became known.

You should determine what steps should be taken to deal with the situation, including whether the company should be dissolved or whether it should file a company recovery application.

A company recovery application requests that the company be placed under the company recovery procedure. A special controller is appointed to take over, manage and administer the business for a period specified by the court. The period should not exceed twelve months. This application can be made:

by the company shareholders following an extraordinary resolution;
by the directors following a decision of the board of directors;
by the creditors of the company representing more than half the value of the creditors.

The recovery application should contain a statement by the applicants as to how the financial and economic situation can be improved in the interests of its creditors, employees and of the company itself as a viable concern.

On hearing an application, the Court may either dismiss it or issue a company recovery order. The court will accept the application and place the company under a company recovery procedure if:

it is shown that the company is likely to become unable to pay its debts; and

if it considers that the order would be likely to achieve one of the following purposes:

the survival of the company as a viable concern in part or in whole; or
the sanctioning of a compromise or arrangement between the company and any of its creditors or members.

Resources

Of particular relevance to finance and financial difficulties is the 'access to finance' incentive, which includes help and advice on various types of financial support and advice.