Dr Ria Micallef
The Civil Court (Commercial Section) presided over by Hon. Judge Joseph Zammit McKeon, on 10 December, 2018, in the case "Fenech vs. Registry of Companies," ordered, among other things, that a company which was previously struck off the companies' register, be reinstated.
An Article 325(4) Action
A shareholder of a company that was struck off the companies' register (the "Company") instituted an action based on Article 325(4) of the Companies Act (Chapter 386 of the Laws of Malta, hereinafter referred to as the "Companies Act" or the "Act"). This article provides that:
"If any member or creditor of the company, or any other person who appears to the Court to have an interest feels aggrieved by the fact that the name of the company has been struck off the register by virtue of this article, the Court on an application made by the member or creditor or such other person before the expiration of five years from the publication of the notice of the striking off provided for in sub-articles (2) and (3) may, if satisfied that it is proper that the name of the company be restored to the register, order that such name be restored to the register, and upon an official copy of the order being delivered by the Registrar of the Courts to the Registrar for registration, the company shall be deemed to have continued in existence as if its name had not been struck off…"
Facts of the Case
The Registrar of Companies struck off the Company's name off the companies' register on 22 September 2012, as he felt that he had a reasonable cause to believe that the Company was not carrying on any business or was not in operation. The plaintiff, one of the shareholders of the Company, felt aggrieved by this strike-off and held that if the Company is not reinstated to the companies' register, he will suffer irreparable damages because the Company's assets will be transferred to the Government of Malta. The plaintiff said that he is willing to take whatever action is necessary to regulate the Company's position and requested that the court orders the reinstatement of the Company name to the companies' register for it to continue to operate as though its name was never struck off and to order the publication of those acts which are required under the applicable law.
The Company which formed the subject of this court case was registered under the Commercial Partnership Ordinance (the predecessor to the Companies Act) on 1 September 1988. On 27 February 1998, a certificate of compliance was issued in the Company's favour certifying that it complied with the provisions of the Companies Act and could therefore be regulated by the said Act.
The documents which were submitted in order to obtain the above-mentioned certificate of compliance were the last documents that were filed with the Registry of Companies (the "Registry"). The Company failed to satisfy its statutory obligations for a number of years. It failed to settle outstanding penalties with the Registry and to file annual returns, among other things. The above-mentioned certificate of compliance was not even collected from the Registry to be maintained with the company's records.
The above-mentioned severe and continuous shortcomings led the Registrar to conclude that the Company was not in operation or was not carrying on any business in terms of Article 325(1) of the Act. Therefore, the Registrar, applying this article, sent two letters by post (the first one on 25 April 2012 and the second one on 25 May 2012), inquiring whether the Company was dormant or otherwise.
The Registrar received an email from one or more of the Company's representatives confirming that the company was still in operation and asking the Registry to amend its records accordingly. Despite this objection being sent, the Company and its officials did not take any steps to prove to the Registrar that they had a real and genuine interest in rectifying the situation for the Company to be in line with the provisions of the Act. In fact, no documents were filed with the Registry and no amounts were paid to settle the outstanding penalties and administrative tariffs.
The Registrar held that whilst it is true that Article 325 allows any interested person to object to the striking off of a company name off the companies' register, a simple email, sent after four years, saying that the company is still in operation and ending with "please amend your records accordingly" is not enough. It does not allow the Registrar to have a reasonable cause to believe that the company is in effect carrying out some sort of business. The Registrar felt that this behaviour did not satisfy the "good cause being shown to the contrary" required under Article 325, for it to take the Company's objection into consideration. Had the Company wanted to cooperate, it was given an adequate amount of time for it to do so.
The Court's Considerations and Decree
The Civil Court (Commercial Section) presided over by Hon. Judge J. Zammit McKeon noted the following:
(i) that the plaintiff had locus standi to institute this Article 325(4) action given that he was a shareholder of the Company;
(ii) that the plaintiff showed a genuine interest and was open to rectifying any deficiencies;
(iii) that the plaintiff had finalised and settled all pending items with the Registry in the course of the court proceedings and that this effort shows that he had every intention to make a fresh start;
(iv) that the Registrar of Companies was willing to reinstate the Company's name to the companies' register;
(v) that it was clear that it was the plaintiff's negligence which led to the strike off;
(vi) that the action was instituted in a timely manner in accordance with Article 325(4).
The Court wanted to emphasise one point before it gave out its decree. It held that the fact that it was going to order the reinstatement of the Company name to the Register did not mean that it is giving a carte blanche to the Company, its officials and its shareholders for the story to repeat itself. The Court wanted to make sure that post-reinstatement; the Company would take the route of satisfying its legal obligations without the Registrar having to take any action because of any deficiencies on the part of the persons responsible within the Company.
For these reasons, the Civil Court (Commercial Section) accepted the plaintiff's requests and applied Article 325(4) of the Companies Act to order inter alia:
(i) the reinstatement of the Company's name to the Register;
(ii) that the Registrar of the Courts submits an official copy of the court order to the Registry of Companies within seven (7) days from the date of this judgment;
(iii) that the Registrar of Companies reinstates the Company name to the companies' register within seven (7) days from when it received the official copy of the court order and publishes a notice in the Government Gazette or on its website or in a daily newspaper circulating wholly or mainly in Malta indicating that the Company has been restored to the Register.
Dr Ria Micallef is an Advocate at GANADO Advocates
from The Malta Independent https://ift.tt/2Xnlee6
via IFTTT
No comments:
Post a Comment