Today we look at three recently decided cases. The first involves the MFSA while the other two involve the Registrar of Companies. There are several interesting applications requesting the restitution or revival of companies which had been struck off. Here we review just two of them.

MFSA wins a case on Article 11, but the game may not be over

In July 2023, the Financial Services Tribunal had found against the MFSA for not having followed the mandatory procedure set out in the very law that established the Authority and set out its procedures and decision-making powers.

David Fabri

It quashed a financial penalty it had imposed on a licence holder because the relative enforcement decision had been taken by the wrong organ and was therefore procedurally unsound and invalid. 

The Enforcement Decisions Committee (EDC) that the MFSA was required to set up by Article 11 of the MFSA Act had not been established, and to date, it seems it still has not been established.

The MFSA appealed that award and on April 3, 2024, the Court of Appeal (Judge Dr L Mintoff) issued its decision ruling that the Financial Services Tribunal should not have gone into the matter because it did not have the specific statutory competence to deal with that issue in terms of the provisions in the MFSA Act that establish and regulate the same Tribunal.   

This is a controversial ruling and the MFSA can count itself lucky. The objective of Article 11 was to enable the MFSA to deliver a higher assurance of procedural fair hearing by avoiding the same internal MFSA organs to continue acting as the proverbial “prosecutor, judge and jury”.  In other words, the EDC was to serve as the new fair hearing mechanism.

Although set up by the MFSA Act, the EDC is an autonomous entity comprising independent members appointed by the Board of Governors from outside the Authority. I had reported on the FST award on the 26th November of 2023.

Two recent cases involving the Companies Act and the Registrar of Companies 

In the case Michael Bugeja v Registrar of Companies (Rik. Nru. 46/2023/ISB) decided on 22 April 2024, the Commercial Section of the Civil Court presided by Judge Dr Ian Spiteri Bailey rejected a request to restore a dissolved company to the Company Register. The company had been voluntarily dissolved and placed into liquidation by the Company’s shareholders in December 2020.

Its affairs had been regularly wound up and concluded by the appointed liquidator as a result of which the company’s name had been duly struck off the Registry.

This is a controversial ruling and the MFSA can count itself lucky

The plaintiff was a shareholder in the company and he was now requesting the restoration of the dissolved company because it had pending legal proceedings for the recovery of a substantial sum of money owed to it. 

The Court explained that in dealing with such applications, it was obliged to examine the facts and merits of the claim and found that the plaintiff had not provided any evidence whatsoever to substantiate his request: “no documentation, no affidavits, and the liquidator had not been brought to testify why he closed the liquidation without taking into consideration the pending legal proceedings, the applicant himself failed to testify…”.  On this basis of lack of evidence, the court rejected the request.

In the case Thomas Pinter v Registrar of Companies decided on April 22, 2024 (Rik Nru. 50/2023/ISB), the same Court similarly constituted upheld a request for the restoration to the Company Register of a company which had been struck off by the Registrar for non-compliance with the beneficial ownership regulations and other administrative failures. 

The company owed over €19,000 by way of administrative fines to the Registrar. Plaintiff was a company employee who was still owed money by the company for unpaid salary. The Court found that the employee’s claims could be met only if the company’s name is restored to the Register, a measure that could allow him to be paid by a foreign insolvency fund. 

The Court explained that in these circumstances, whereas the Registrar had a very wide discretion to cancel a company’s name from the Register, the law also empowered the Court to order such restoration “if satisfied that it is proper” to do so. The Court explained that for this purpose it was bound to examine all the circumstances of the case. 

Despite the irregular compliance position of the company, the Court felt it should not deprive an employee of an opportunity to be paid salary arrears still due to him. 

Accordingly, the Court ordered the Registrar to revert its decision to strike off the company “as if it had never been struck off” and ordered its revival for a maximum period of two years within which the plaintiff was to seek to successfully enforce his claims.

David Fabri LL.D., Ph.D. (Melit) is a regular contributor on corporate and regulatory matters. He has lectured at the University of Malta since 1994.

This article was first published in the April issue of The Corporate Times.