The interview with Registrar of Companies Joe Caruana and the opinion piece by Josef Busuttil, the director-general of the Malta Association of Credit Management, raise very important points which could have far-reaching consequences.

At first glance, the routine filing of new company registrations and chasing them to file their annual accounts on time seem far removed from controversy. However, the two articles in this issue of The Business Observer show how much more can and should be done to prevent the tainting of the local economy by abusive company directors.

To start with, it is alarming that no company directors have ever been disqualified under Article 320 of the Companies Act. It has never been invoked, in spite of many high-profile cases over the past years, cases which left many creditors high and dry.

There are cowboys in every economy, but the fact that these can leave a trail of destruction behind them and set up a new company without setting off any alarm bells is terrifying.

It is also worrying that there are some 13,000 companies – out of 33,000 eligible ones – which did not file their annual accounts. Even if you take into account that many of these are probably inactive and simply cannot be bothered – or cannot afford – to dissolve, that is still flagrant disregard of the law and means those doing business with them are not taking informed decisions.

When so many companies are flouting their obligations, it is no wonder that proper credit risk assessments are near impossible. And it is no wonder that so many deals go spectacularly wrong.

Unfortunately, those bitten by deals gone wrong all too often put it down to bad luck – or worse, as just a business hazard to be expected – and do not take it any further.

We must stop accepting this lackadaisical way of doing things. In the past, there were many more filters, from the guilds that kept tight control over their membership to the dormant register of traders (still in the Commercial Code, requiring a Chamber of Commerce, Enterprise and Industry certificate of good conduct).

Directors that infringe the clauses of the Companies Act should be disqualified – and as publicly as possibly – to prevent them from cheating others. Companies which do not file accounts for a set number of years should be declared defunct.

At the moment, the deterrents are hardly working. Only 1.0 per cent of the actual fine for late reporting is being applied – and only 3,600 companies have been declared defunct since the Companies Act came into force in 1996.

Mr Caruana pleads for a more lenient approach, such as having specific periods of disqualification linked to the severity of the infringement or crime. He also argues that the fines for late filing mount up quickly and are quite substantial even at 1.0 per cent of what could be charged. His humane approach is all well and good – but only if there is enough enforcement. Carrots only work when there is a stick in the other hand.

The Registrar of Companies is well aware of this and is tackling it on a number of fronts. He is no longer relying on manual checks to identify which companies are in default – and is setting up an automated system for notifications and the issue of fines. He is also checking to see which companies should be declared defunct.

He has an important suggestion on simplifying the procedures required for dissolution, while Mr Busuttil has equally-valid suggestions on ways to ensure that directors fully appreciate their roles and responsibilities.

Trust is a cornerstone of business. But should trust be blind?