Time limit for liquidation is public order requirement

The First Hall Civil Court, presided over by Mr Justice Joseph Zammit McKeon, on July 14, 2011, in the liquidation acts of GRT Company Limited held, among other things, that the court would not exercise its discretion to reinstate a company under article 275 of the Companies Act unless an applicant established that he had taken necessary action within the period required by law. This period was a public order requirement and peremptory in nature.

The facts in this case were as follows.

On July 23, 2010, Giovanni Taverna filed an application before the First Hall Civil Court, requesting the courts to order the suspension of the liquidation process and a deferment of the striking off of GRT Co. Ltd for such period and under such conditions which the court would deem to be opportune, according to article 275(2) of Cap 386.

In case the court decided to give this order, it should order that a copy of its decision be notified to the Registry of Companies, in terms of article 275 (3) of the Companies Act. This section provides that:

“(1) The Registrar, on receiving the account and the scheme of distribution, if any, together with the auditors’ report and either of the returns mentioned in article 274(2), shall forthwith register them, and on the expiration of three months from the publication of the notice referred to in article 401(1)(e), the Registrar shall strike the name of the company off the register:

“Provided that the court may, on the application filed within the said period of three months by the liquidator or by any other person who appears to the court to have an interest, make an order deferring the date at which the name of the company shall be struck off the register for such time and subject to such conditions as the court may provide.

“(2) When an order by the court is made under the proviso to sub-article (1), the Registrar of Courts shall forthwith forward a copy of it to the registrar for registration and the registrar shall defer applying the provisions of sub-article (1) in accordance with the order given by the court referred to in that sub-article.’’

GRT Co. Ltd was a holding company, registered under the old offshore regime in 1994. The company was obliged to pay a licence fee of Lm500 per year to the Malta authorities. Mr Taverna was the beneficial owner of the company.

It so happened that as Mr Taverna lost contact with the local administrator of the company, the local administrator had put the company into dissolution, and initiated procedures to wind up the company.

GRT Co. Ltd however held a 90 per cent holding in an Italian company, Progress SRL, and a problem arose because these shares had not been transferred, even though the company was liquidated.

Mr Taverna informed the court that it was now necessary for these shares in the Italian company to be transferred, and for the position to be regularised.

In his testimony, Mr Taverna said that he wished to transfer his shares, and that the Italian authorities were requesting a document to authorise such transfer from GRT Co. Ltd.

Mr Taverna claimed to have taken action as soon as he had discovered that GRT Co. Ltd had been placed into dissolution.

The court noted the testimony of a representative from the Registry of Companies.

The official from the Registry of Companies informed the court that GRT Co. Ltd operated under the ‘‘old’’ offshore regime (now abolished) and that it had ceased to exist on February 20, 2006, under the Commercial Partnerships Ordinance and the MIBA Act.

It was evident that the three-month period wherein an interested person could request the postponement of the liquidation had long lapsed. The company had also been struck off the Companies Register.

The Registry of Companies had not been notified of these court proceedings and only became aware of this lawsuit incidentally when an official from the Registry of Companies was called to testify.

The official said that in this case, the court could exercise its discretion, as it had done in the past, for shipping companies which were established under the Commercial Partnerships Ordinance. The court could order the reinstatement of the company limitedly in order to deal with the share transfer, and after this was done, the company would be struck off again.

The liquidator of the company would have to confirm that the affairs of the company had been wound up, and the company would be finally cancelled. The following reasons were given for the court’s decision.

The court was not satisfied with the evidence. It said it was expected to exercise its discretion under the proviso to sub-para (1) of article 275 of Chapter 386.

Mr Taverna had failed however to produce sufficient evidence to substantiate his claim.

It was important for applicant Taverna to produce documentary evidence to justify the reinstatement of the company, after it had already been struck off the Companies Register. There was no proof of what “rights” had not been dealt with in its winding up.

The court said that in our legal systems it had to act on the basis of the best proof, and the best proof consisted of documents and not simply verbal statements, which in this case were also confusing and short of detail.

There was no evidence to prove the publication of notice in accordance with article 401 (1) (e) of Chapter 386.

This was a serious failure, the court pointed out. The court had to ensure that the requirements mentioned in the law had been observed. The application had to be made by the liquidator or some other interested person within three months from the publication of notice under article 401 (1) (e) of Chapter 386.

In the circumstances, the company had been struck off more than five years before.

Mr Taverna expected the court not to consider the company as struck off, but failed to produce evidence that he satisfied the requirements necessary for the court to exercise its discretion under article 275(1). The period imposed by article 275 was of public order. It was therefore peremptory and of strict compliance.

This court could only exercise its discretion if an applicant had established that his claims were made within the aforesaid period.

The court had no proof that Mr Taverna satisfied this requirement. It was true that the Registry of Companies did not oppose the reinstatement of GRT Co. Ltd, but this was not possible under Maltese law, which imposed a strict time limit within which period an applicant had to act in terms of article 275.

In this case Mr Taverna had to prove that he had acted within the time limit allowed by law.

If this had been done, the court would have taken on board the suggestion of the representative from the Registry of Companies and permit reinstatement for a limited period.

Dr Grech Orr is a partner at Ganado & Associates.