The First Hall of the Civil Court, presided over by Mr Justice Joseph Zammit Mc Keon, on June 17, in the ‘Application of Francis Mifsud and Anthony Mifsud’ held, among other things, that in absence of any express provision under our Companies Act, it was not possible to revive a commercial partnership en nom collectif, which had been struck off the register. Our Companies Act only envisaged the reinstatement of a limited liability company.
The facts in this case were as follows.
Francis and Anthony Mifsud established a partnership en nom collectif, Chez Francis Hotel on July 7, 1973. On July 9, 1980, the partnership was converted into a limited liability company, called Chez Francis Hotel Co. Ltd, having registration number C5083. Later, it was reconverted to a partnership en nom collectif, under the name Chez Francis Hotel (P573). On May 6, 2002, its name was changed to A. F. Enterprises & Co.
The partnership had acquired certain immovable properties. In 2010, the partners agreed to dissolve the partnership. The immoveable property had to be transferred to the partners and a notary was appointed. It resulted that after the publication of the deed, the partners submitted the relative documents at the Registry of Companies to proceed with its dissolution. The partnership was dissolved with effect from February 2011, and struck off the register.
It so happened that in 2013, when one of the former partners came to sell one of the properties, intended to be assigned to him, he discovered that certain properties were never transferred and remained in the ownership of the partnership, which had now been dissolved.
The partners submitted that it was necessary to transfer such property, and for its liquidation to be rectified according to law. They said that this could not take place unless the partnership en nom collectif, A.F Enterprises & Co. (P573), was restored on the register, and its liquidation reopened, corrected and formalised according to law. This situation did not arise as a consequence of any failure of any one of the partners, who allegedly complied with all their duties under law.
It was argued that although Chapter 386 contemplated only the revival of limited liability companies and not commercial partnerships, this lack of provision in the Companies Act for the revival of a partnership should not be interpreted to their prejudice. They wished to rectify their legal position and formalise the transfer of the properties from the partnership to them, as they had intended in its liquidation. They said that the prejudice which they could suffer was serious if the transfer did not take place, as they would not be recognised as owners.
Faced with this situation, the partners requested the court to order the partnership to be restored on the register for the liquidation to be reopened, corrected and formalised according to law and this under direction of the court.
The Registrar of Companies maintained that the Companies Act did not provide for the revival of commercial partnerships. The Registrar was reluctant to give rise to an abusive precedent, where liquidations of partnerships were handled lightly. This could lead partners to believe that if the need arose, they could apply to the court to rectify errors and ensure that processes were completed correctly, for the dissolution and cancellation of a partnership from the register. If the court felt that it should grant a remedy nonetheless, this should be granted for reasons of justice and insofar as no other remedy was available.
At issue was whether it was permissible to revive a commercial partnership in absence of an express provision in Chapter 386, which only envisaged the reinstatement of a limited liability company on the register
Such remedy was to be considered exceptional and extraordinary and should not be granted lightly. Insofar as this court felt that this remedy should be granted, it was to be given as an extraordinary measure and on parameters and clear terms to avoid any form of abuse and prejudice to third persons, to ensure certainty on the status of a partnership. In this respect, the court had to establish precise ad hoc procedures for the Registrar of Companies to proceed as quickly as possible, in order to cancel the partnership, without unnecessary delay.
The court noted that A. F. Enterprises & Co. was not a limited liability company. It was a partnership en nom collectif, regulated under Chapter 386, articles 7 to 50.
At issue was whether it was permissible to revive a commercial partnership in absence of an express provision in Chapter 386, which only envisaged the reinstatement of a limited liability company on the register.
Applicants contended that it was necessary that the partnership A. F. Enterprises & Co. (P573) be restored on the register, for its liquidation to be re-opened and rectified according to law.
It was clear, however, pointed out the court, that under Chapter 386, our legislator did not provide for the revival of a partnership en nom collectif and en commandite which had already been struck off the register. The function of the court was not to write the law and to replace the legislator, it said. The task of the courts was to interpret the intention of the legislator and to apply the law.
For these reasons, on June 17, the court dismissed the requests to revive the partnership en nom collectif – A. F. Enterprises & Co. Once Chapter 386 did not provide for the reinstatement of this type of commercial partnership, it was precluded ex lege from considering applicants’ requests, in particular as the partnership was cancelled by the Registrar according to law.
Dr Karl Grech Orr is a partner at Ganado Advocates.