Steering through Corporate Governance: The Company Defunct Procedure and its implications Author: Saman Bugeja Published on April 12, 2024 In its judgement delivered on the 1 March 2024 in the names of Dr. Cedric Mifsud (for and on behalf of Rene Edwin Bultena, the “Plaintiff”) vs The Registrar of Companies (the “Respondent”), the First Hall Civil Court, Commercial Section (the “Court”), presided over by Hon. Justice Ian Spiteri Bailey, delved into the Company Defunct Procedure and a request by the Plaintiff for the reinstatement of Sursum Velum Limited (C39088)(the “Company”) on the Maltese company register maintained by the Malta Business Registry (the “MBR”). The Company was registered with the Malta Business Registry on the 10 July 2006 and was equally owned by two shareholders namely, Merlene Jacoba van der Pols and Jusoma Holding B.V which in turn was ultimately owned by the Plaintiff. The Company was set up as a shipping company in terms of Article 84Z of the Merchant Shipping Act with the sole purpose of owning a vessel. The Company was the registered owner of a pleasure yacht named ‘Alina’. The yacht was mainly used for private purposes and did not generate any income for the Company. Accordingly, the shareholders of the Company were responsible for covering the costs of maintaining the Company and the yacht. The Court noted that in the previous years, the shareholders of the Company experienced financial difficulties and they were not in a position to properly maintain the Company and the yacht. Consequently, the Company failed to comply with its statutory obligations under the Companies Act, Chapter 386 of the laws of Malta (the “Act”) and did not file its annual returns and financial statements since 2014. Moreover, following the coming into force of the Companies Act (Register of Beneficial Owners) Regulations (the “BO Regulations”) in 2018, the Company also failed to notify the Registrar with the details of its ultimate beneficial owners. On the 8 February 2021, the MBR notified the Company that since it was in continuous breach of Regulation 9 of the BO Regulations, the Registrar would initiate the company’s defunct procedure should the Company fail to rectify its position. The Company remained in default and in terms of Article 325(2) of the Act, the MBR published a notice on the Government Gazette on the 17 March 2021 and included the Company as one of the entities to be struck off the Maltese company register within 3 months from the date of publication. The Company failed to make any submissions following the publication of the notice on the 17 March 2021 and the MBR proceeded with striking off the Company off the register on the 17 June 2021. As a consequence of the striking off, all remaining assets of the Company would devolve on the Government of Malta. The Plaintiff, being a director and ultimate beneficial owner of the Company, filed an application in terms of Article 325(4) of the Act for the Company to be restored to the register. Article 325(4) allows “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 by the fact that the name of the company has been struck off the register” to file an application within five years from the date of strike-off, requesting the Court to order that the name of the company be restored and the company shall be deemed to have continued in existence as if it was never struck of. In his application, the Plaintiff argued that he would be ready to take all action necessary to bring the Company back into good standing with the MBR including filing of all pending documents and payment of MBR penalties. In its reply, the Respondent noted that the Company had been struck off the Maltese register of companies owing to a number of irregularities which had not been rectified by it despite a number of opportunities to regularise its position at law. Indeed, the Respondent noted that the Company had not only failed to file its annual returns and annual accounts but had also failed to disclose its beneficial ownership in accordance with its obligations as delineated in the BO Regulations. Curiously, the Respondent also contended that the name of the Company could not be restored pursuant to article 325(4) of the Act (in the manner filed by the Plaintiffs), but that rather, the Company could only be restored to the register in accordance with Regulation 9(4) of the BO Regulations, given that the Company had in actual fact been struck off in accordance with these particular regulations. The Court explained that the remedy under Article 325(4) has two requisite elements: the application is filed by a shareholder, creditor or any other interested party; the application is filed before the lapse of five years from the date of publication of the notice of the striking off. The Court noted that there is no doubt that the Plaintiff had an interest in having the Company restored on the Maltese company register to ensure that the vessel owned by the Company does not devolve in favour of the Government of Malta. Moreover, the application was filed within the five-year prescriptive period and therefore the Court By way of an additional remark, in its decision, the Court did not consider the Respondent’s plea that the Company could only be restored to the register pursuant Regulation 9(4) of the BO Regulations as opposed to Article 325(4) of the Act. Conclusion: In its final deliberations, the Court noted that it is the Plaintiff’s responsibility to ensure that the Company is put in good standing with the MBR. Having regard to the Plaintiff’s disposition to regularise the position of the Company, the Court ordered, inter alia, that the Company be and is re-instated on the Maltese company register pursuant to the Regulation 9(4) of the BO Regulations. Additional Remarks: By way of additional remarks, the judgment should serve as a reminder of the power of the Registrar of Companies regarding delinquent companies. It is critical that, Maltese companies maintain strong corporate governance and that directors are aware of their ongoing statutory obligations to ensure that all filings are made as they fall due. Interestingly enough, in its original judgment, the Court had ordered that the Company be and is reinstated on the Maltese register in terms of Article 325(4) of the Act. By way of a decree delivered on the 25 March 2024, the Court changed the reference to Regulation 9 of the BO Regulations. Although this may seem to be immaterial as the effects of both are identical, it would be wise to clarify this considering that the Respondent originally raised a plea that the Company could only be restored to the register in accordance with Regulation 9(4) of the BO Regulations and not Article 325(4) of the Act. This article was first published on The Malta Independent on 27/12/2023. Go back