The First Hall of the Civil Court, presided over by Mr Justice Joseph McKeon, on January 15, 2015, in the case ‘Architect Mariello Spiteri v the Registrar of Companies’, held, among other things, that a director was in solidum responsible to pay any administrative penalties. It was not acceptable for a director to plead that he was not responsible for his statutory duties of filing the annual accounts and the annual return with the Registry of Companies.

Architect Mariello Spiteri received from the Registrar of Companies a claim dated June 9, 2006, in connection with the company CSI General Contracting Ltd, (C21115) to the amount of €2,343 in penalties for not filing accounts and annual returns for a number of years.

Architect Spiteri filed legal proceedings in terms of article 401(5) of the Companies Act to contest this claim.

Spiteri contended that, even though he was a director of the company, he had no control, influence nor any information on the management of this company.

He said the company was managed by the other two directors, Mario Camilleri and Randolph Camilleri.

Allegedly he was not responsible for the accounts, the annual return and their filings and should not be held liable for the penalties.

Architect Spiteri, faced with this situation, filed legal proceedings, requesting the court to declare that he was not obliged to pay this amount and that the claim of the Registry as far as he was concerned was null.

The Registrar of Companies, in reply, disputed Spiteri’s legal action. He requested the court to dismiss Spiteri’s requests and to confirm his responsibility as a director subject to the conditions which it deemed appropriate. He submitted the following:

• The company CSI General Contracting Ltd was registered on February 26, 1997, and was still in existence.

• Architect Spiteri was a director of this company together with Mario Camilleri and Joseph R. Camilleri in the period between January 23, 2001, to July 8, 2008, when he resigned as director. The other two directors had resigned some time before, on June 2, 2008.

• During this period the company failed on a number of occasions to file the annual accounts and the annual returns at the Registry.

• The Companies Act clearly stated what were the rights and duties of every director of the company, and what were the obligations of the company.

Article 183 obliged a director of the company to deliver each year at the Registry a copy of the company’s annual accounts for registration. Article 184 required a company to file an annual return. In addition, every official of the company who failed to file these documents was liable to a penalty.

Article 2 of the Companies Act defined ‘official’ to include directors, managers and the company secretary, but did not include the auditor.

It was clearly argued by the Registrar of Companies that Spiteri was under an obligation as a director and as official of the company and was, therefore, liable for these failures when he was director.

The Companies Act does not distinguish between executive and non-executive directors. All directors are equally liable under the Companies Act. In fact, as soon as a person was appointed director, such person assumed all obligations of the post according to law.

The directors of a company under the Companies Act were expected to act collectively as a board. There were in fact in solidum liable for any breach under the Companies Act.

Article 150 provides that the duties expected to be done by the company were deemed to be required to be done by an official of the company.

Article 427, which deals with administrative penalties, states that the company was responsible in solidum with its officials for the payment of administrative penalty imposed under the Companies Act.

The director of the company, as official of the company, was responsible in solidum with other directors and with the company for payment of administrative penalties.

If there was an internal arrangement within the company, or any distribution of responsibility between the directors, this in no way reduced or cancelled the statutory obligation and responsibility of directors, as the law imposed duties or directors as a whole, collectively.

Nor was it credible that architect Spiteri had no control, influence or information on the management of the company, argued the Registrar of Companies.

As a minimum it was expected that a director carried out the statutory duties.

It was not acceptable for a director to say he was not responsible for the accounts and annual returns. It was also noted that for the financial years ending December 31, 2001, and December 31, 2002, Spiteri in fact had signed the accounts on behalf of the board at least for two years.

It was contradictory to say that he acted with prudence and that he had no control or influence. A director who acted with prudence surely would not accept under any circumstances to continue to assume the responsibility in these circumstances.

Reference was made to provisions of the Companies Act which placed duties on directors:

• Article 163 – to keep accounts;

• Article 167 – to prepare accounts for each financial year;

• Article 136A(2) – to promote the best interests of the company;

• Article 176(1) – that the accounts had to be approved by the board and the balance sheet to be signed by at least two directors.

By declaring that he was not responsible for the accounts and management of the company, Spiteri was admitting that he did not observe his obligations and duties under the Companies Act.

The Registrar said that the court should not give favour to directors who failed to take an interest and not participate in the board of directors as expected under the Companies Act.

Mario and Randolph Camilleri, the other two directors who were called into the suit, pleaded that they should be freed from the proceedings. They said they could not act alone and any resolution needed the signature of three directors.

The Companies Act does not distinguish between executive and non-executive directors. All directors are equally liable under the Companies Act. In fact, as soon as a person was appointed director, such person assumed all obligations of the post according to law

There was a deadlock as Architect Spiteri refused to sign and as a result, they claimed to have no other alternative but to resign. Penalties by the Registrar of Companies were in fact imposed owing to Spiteri’s lack of cooperation, they said.

The court made reference to another case decided in ‘Architect Mariello Spiteri v Registrar of Companies et (Application No. 650/08JZM)’ and adopted all the reasons and decision in this other case.

The court considered that in this case, Architect Spiteri wished to contest the Registrar’s claim under article 401(4) and (5) of the Companies Act. Spiteri resigned on July 8, 2008, and the other two directors on June 2, 2008.

The court agreed with the Registrar that Maltese law made no distinction between directors. All directors share equal responsibility and it was not possible for architect Spiteri to say he was not responsible for the accounts.

It was noted that he had signed the accounts for the years ending December 31, 2001, and December 31, 2002, and in this respect, was involved in the accounts.

Under article 176, the board of directors was responsible for the accounts and each director was liable for any discrepancies or for not filing the accounts.

Article 150 of the Companies Act provides that anything required to be done by a company under any provision of the Act shall be deemed also to be required to be done by the officers of the company.

Article 427(4) stipulates that a company shall be jointly and severally liable with its officers for the payment of any administrative penalties imposed under the Act.

As a result, the responsibility of directors was joint and several between them and with the company for administrative penalties. If it was true that the other directors created obstacles for him, he should have resigned as director.

Attached to the post of director there were statutory duties which he could not avoid, pointed out the court.

The court held that it could not accept architect Spiteri’s requests.

It said that Mario and Randolph Camilleri were third parties as far as the Registry’s claim was concerned, and they could not be condemned.

In this respect, the court said that they should be freed from the proceedings, even though architect Spiteri had a right to sue them to recover their share of the penalty.

The court, for these reasons, gave judgment on January 15, 2015, by accepting the Registrar’s pleas of defence.

It freed Randoph and Mario Camilleri and rejected all of architect Spiteri’s requests. It, however, left unprejudiced his rights to sue the company CSI General Contracting Ltd and the other two directors.

Dr Karl Grech Orr is apartner at Ganado Advocates.