It did not herald a legislative revolution, but the Appeals Court ruling a fortnight ago confirming Price Club directors were personally liable for over €20 million in debts made one thing abundantly clear: directors can be sued personally in some circumstances.

"In legal terms, the position has not really changed much, in that the matter of liability of directors was always as was decided in the Price Club case," a lawyer with a commercial practice who preferred not to be named told The Times Business.

"Perhaps what has changed is the perception that lawyers have of the legal position: it is now ultra-clear that directors can be sued personally in certain circumstances.

"In terms of business practice, lawyers in this field have to be even more careful to ensure that they advise their clients - who may still be under the impression that they are immune from action if they trade as a company - that they have to trade as prudent directors and ensure that they take into account all that they can be deemed by the court, with the benefit of hindsight, to know. Obviously, all concerned have to steer clear of structuring their enterprises with a view to avoiding having to pay out to creditors, as the court found that the Price Club directors had done, because this could be seen as fraud."

The Malta Chamber told The Times Business it was "encouraged" by the Appeals Court judgment, saying it "reiterated the clear message of the First Hall of the Civil Court that company directors are personally and unlimitedly responsible for any fraudulent actions and that no one can hide behind a corporate veil and manage a company in such a way which unfairly endangers the livelihood of other persons or businesses."

The Malta Chamber said it believed the authorities must uphold the reputation of business, and avoid situations that can tarnish confidence, within the business community as well as with consumers.

"We must also ensure that everyone is accountable for their actions, in the long-term interest of business," the Chamber insisted.

Admittedly, it is not the first time directors have been found to be personally liable in Malta, but the lawyer confirmed the scale of the amounts involved in the supermarket chain case was unprecedented. "It would be interesting to compare the amount on a per capita basis with, say, the Enron scandal in the US," the lawyer pointed out.

On May 14, the Court of Appeal confirmed a Civil Court judgment finding Victor Zammit, Christopher Gauci and Wallace Fino guilty of wrongful trading when they continued to do business in full knowledge the business was going under. The company that operated the chain had no assets but paid the debts on the property of other companies within the Price Club group. Creditors only had a relationship with the first company which foundered with no assets to its name. Directors asked for more credit from suppliers knowing they would never be repaid.

The original firm was established by respected family business owner Frans Gauci who operated the Save On supermarket in Paola and the Price Club stores in Swatar and Burmarrad. He was bought out by Mr Zammit, Mr Gauci and Mr Fino in 1998.

Price Club once employed hundreds of employees, boasted over €51 million (Lm22 million) in annual turnover (one of the largest Malta had ever seen) and made failed attempts to buy the now defunct Dolphin Supermarkets in Paceville and Balzan. Among other plans it announced in 2000, was an €8 million (Lm3.5 million) investment in the Save On store at Marsa, and ambitions to open eight supermarkets in Libya, all the while rubbishing rumours the group was in trouble.

The lawyer explained that if the floodgates were to be opened to creditors of bankrupt companies if they can prove wrongdoing, they would have opened when the Price Club cases started - all lawyers with a commercial practice knew what was going on: "It's not an easy case to prove, as a careful reading of the judgments will show. It would not be fair, either, if it became easy to sue directors, because at the end of the day, risk is inherent in business. The law seeks to protect against fraud or serious negligence, not risk."

Asked what happened next as far as the Price Club creditors were concerned, the lawyer explained the appointed liquidator would likely seek to recover as much as possible from the directors personally. In practice, that would not prove easy. All the amounts recovered - if any - would be pooled and paid out according to the law of ranking of creditors. As the debts are not contested by the company, there is nothing more for creditors to do.

What message did the ruling send out to entrepreneurs?

"Very simple," the lawyer replied. "Be very careful to act honestly and diligently."