The Government of Malta is cognisant of the impact that COVID 19 has had on businesses and had previously hinted towards amendments to the laws regulating insolvency, with the aim of safeguarding companies on the brink of bankruptcy.
Concern as to the adequacy of insolvency laws in Europe has also been expressed by the Conference on European Restructuring and Insolvency Law (CERIL), an independent non-profit, non-partisan, self-supporting organisation of approximately 75 lawyers and other restructuring and insolvency practitioners, law professors and (insolvency) judges. The Executive of CERIL exclaimed its deep concern “with the ability of existing insolvency legislation in Europe to provide adequate responses to the extremely difficult situation in which many companies may find themselves in the COVID-19 (corona) crisis”. CERIL urged “legislators to take immediate action and adapt insolvency legislations where necessary in light of the current extraordinary economic situation and to prevent unnecessary bankruptcies of entrepreneurs”.
In light of this, the Maltese regulator published new regulations on 12 May 2020, entitled Companies Act (Company Reconstructions Fund) Regulations. Their aim is of creating and regulating the administration of a fund intended to facilitate company recovery procedures instituted in accordance with article 329B of the Companies Act. The fund is to be known as the Company Recovery Fund, out of which payments shall be made to ‘special controllers’ appointed in accordance with the CRP provisions. The Fund shall be financed by the Malta Business Registry (MBR) to the tune of an annual budget of €500,000. Unless recommended otherwise by the Court, claims from the Fund cannot exceed €10,000 in respect of each recovery procedure.
Under the existing Maltese legal framework, the Company Recovery Procedure (“CRP”) is the best tool for a struggling enterprise. The CRP is aimed at helping companies recover from temporary financial predicaments whilst at the same time safeguarding the interests of all their stakeholders. That being said, the practical advantages of the CRP have been rare. Therefore, easing the cost of proceedings as executed through the above-mentioned fund, as well as facilitating the ease of access to this remedy is encouraged.
Under the existing Maltese legal framework, the Company Recovery Procedure (“CRP”) is the best tool for a struggling enterprise.
The necessity for a robust insolvency and company recovery regime, as well as an updated view on company officer obligations during these unprecedented times has never been more relevant.
Should you require any assistance in sifting through the company assistance measures and reforms to the insolvency and company recovery procedures please contact Juanita Brockdorff or Francesca Ferrando.
John Ellul Sullivan
Partner, Tax Services
KPMG in Malta