The First Hall of the Civil Court, presided over by Mr Justice Joseph Zammit McKeon, on January 30, 2014, in the case “Edmond Mugliette v Registrar of Companies” ordered that a company which had been declared defunct to be restored on the Register of Companies, once it had complied with its statutory obligations and was still an active company.

The facts in this case were as follows.

Edmond Mugliette on October 7, 2013, filed legal action against the Registrar of Companies in order to revive and restore on the Register of Companies the company Better Homes Ltd, which was declared ‘defunct’ under our Companies Act.

Better Homes Ltd was registered on October 27, 1989, under the Commercial Partnership Ordinance. Mugliette claimed to be a director and shareholder of the company, and that he had acquired all the shares in this company.

Although he submitted all the necessary documents to register the transfer of shares, the transfer of shares was not registered by the registrar. After the lapse of four years, he was informed by a letter from the registry dated March 15, 2006, that the transfer of shares could not be registered as there were outstanding penalties.

He said that he made several attempts to contact the registry to reach a solution but by the notice in the Government Gazette dated April 30, 2012, it was announced that the company would be dissolved in terms of article 325 (2) of the Companies Act which provides:

325 (2) “(2) If the registrar receives an answer to the effect that the company is not carrying on business or is not in operation, or does not within one month of sending the letter receive an answer thereto, he may send to the company by post and publish a notice in the Government Gazette or on a website maintained by the registrar and in a daily newspaper circulating wholly or mainly in Malta that, at the expiration of three months from the date of the last publication of the said notice, the company’s name shall, unless cause is previously shown to the contrary or the registrar is satisfied that there are sufficient grounds not to proceed with the striking off, be struck off the register; and the assets of the company shall devolve upon the government of Malta.”

Mugliette maintained that he had made it amply clear that the company was still trading and that he, on behalf of the company, had an interest that the company continued to operate. Faced with this situation, he asked the court to order that the company Better Homes Ltd be re-registered at the Registry of Companies in terms of article 325 (4) of the Companies Act which provides:

325 (4) “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 subarticles (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; and the court may by its order give such directions and make such provisions as seem fit for placing the company and all other persons in the same position as nearly as may be as if the name of the company had not been struck off. The registrar shall forthwith proceed to publish a notice in the Government Gazette or on a website maintained by the registrar and in a daily newspaper circulating wholly or mainly in Malta that the name of the company has been restored to the register.”

Mugliette, in addition, requested authorisation to register all documents at the Registry of Companies.

The Registrar of Companies, in reply, pleaded that the company did not comply with its statutory obligations. The last document registered by the company was in 1994. It had failed to notify the registry of the change of directors and shareholders, to the prejudice of third parties. The registrar stated that the company Better Homes Ltd was ‘defunct’, owing to non-compliance with its statutory duties, and that to date the company had not yet complied with the Company Act 1995 provisions, even though according to article 9 of the transitory provisions, the company had to comply by February 28, 1998, and bring its statute in line with the Companies Act. Under article 14 of the Companies Act, every company which failed to comply by March 1, 1998, was liable to a penalty.

Under article 15, until a company regularised its position, the registrar had to refrain from registering documents for such company.

The court noted that the company Better Homes Ltd failed to send the compliance documents in time, and nor did it pay the relative penalties. The registry informed the company of its shortcoming. The penalties continued to accumulate, but the company remained in default. The registry refused to process the transfer of shares for Mugliette before the company regularised its position under the Companies Act.

Once the company was in compliance with the Companies Act, the registrar was not contrary for the company to be restored on the register

Subsequently, the compliance documents were filed without payment of the penalties and were returned. The desk officer at the registry also pointed out some errors on the documents which required correction, before the compliance documents could be registered.

At this stage the company should have ceased its operations. The registrar did not feel that he was obliged to keep on pointing out to Mugliette these failures as well as his obligations and rights. Mugliette did not file any annual returns, nor company accounts, and did not pay the penalties due according to law.

The registrar expected Mugliette to take action to send the necessary documentation to regularise the company’s position without delay.

It resulted that during these proceedings, the court was informed that the company had complied and all penalties had been settled. The registrar no longer had objections for Better Homes Ltd to be restored on the Companies Register.

The court maintained that the Registrar of Companies acted properly and that Mugliette was at fault. The principle here was that ‘ignorance of the law was no excuse’. It was up to Mugliette when he took control of the company to comply with the Companies Act provisions.

It was not in dispute that Mugliette had an interest to file this application. He, in fact, took legal action promptly after the publication of the notice by the Registrar of Companies. In this respect the court was satisfied that it was appropriate for the company to be restored on the register, especially since the company was still active and could not be considered as a dead wood.

Once the company was in compliance with the Companies Act, the registrar was not contrary for the company to be restored on the register.

The court added that this did not mean that the directors of Better Homes Ltd were given a carte blanche, that as soon as the company was restored, they could do as they pleased and could ignore their obligations under the law.

If this failure reoccurred without valid reason this court would in future not decide in the same manner and it would use its discretion differently. The company was expected to act in compliance with its legal obligations, so that no action would be taken by the registrar.

For these reasons, on January 30, 2014, the First Hall of the Civil Court gave judgment by accepting Mugliette’s requests. It ordered the company Better Homes Ltd registration number C11070 to be restored to the register.

The registrar of court was ordered within seven days from the date of this decision to deliver to the Registrar of Companies for registration, the official copy of this order and the Registrar of Companies was ordered within seven days from receipt of the order from the registrar of courts to restore the company to the Register of Companies and to give public notice in the Government Gazette or on its website.

Dr Karl Grech Orr is a partner at Ganado Adovates.