An early warning system for businesses going bust is among a raft of new rules on insolvency tabled in parliament on Wednesday.
Economy Minister Silvio Schembri presented a series of legislative reforms in acts to be debated in the house.
The rules include a system that aims to identify businesses on the brink of insolvency and introduce effective and efficient restructuring mechanisms.
It also lays out new regulations for professionals working in the sector and procedures to facilitate the sale and transfer of property owned by bankrupt entities.
Schembri said the reform was aimed at transposing EU laws into Malta’s legislative framework by adopting Directive (EU) 2019/1023, bringing the island in line with international standards.
“All in all, the scope of the acts put forward is to encourage an entrepreneurial spirit by means of instilling a mindset that everyone deserves a second chance,” Schembri said.
Creditors will be able to maximise recovery of their debts in a timely manner, the minister added.
Reacting to the proposed reform, opposition spokesperson Ivan Bartolo said they were “music to my ears”.
What do the reforms introduce?
A Pre-Restructuring Bill proposes an early warning system for insolvency. This would provide early detection of negative financial developments for businesses based on performance indicators.
Schembri said early intervention in these cases increases the chances of survival.
The proposed Act facilitates, through a network of professionals, the use of new procedures aimed at restoring or maintaining the viability of businesses once the possibility of insolvency has been flagged.
A proposed Insolvency Practitioners Act in turn establishes a regulatory framework for practitioners in the insolvency field.
Schembri said these professionals have a pivotal role in insolvency procedures and the acts seek to attract and retain talent in this sector.
Finally, a third draft law seeks to amend the Commercial Code, tweaking Malta’s bankruptcy framework.
Schembri said the bill proposes the “modernisation” of the current procedure, setting time frames within which involved parties need to act.
It also provides for the discharge of debts of “honest entrepreneurs” within three years.
According to the new rules, bankrupt entities’ estates would be transferred to a trustee.
This, he said, was meant to avoid bottlenecks when it comes to selling the property of the bankrupt person.
The reform also proposes the introduction of a system for income payment obligations of the bankrupt person.
“In a nutshell, this new procedure should create the necessary legal certainty to be successfully availed of by the creditors, or by the bankrupt,” he said, adding that the current procedure has hardly ever been used.