The First Hall of the Civil Court, on November 29, 2012, in the case ‘Joseph Aquilina and Marianne Aquilina vs Dr Edward Woods as liquidator of Stivala (Wines & Spirits), the Registrar of Companies, and others’, held, among other things, that the fact that the sole shareholder of Stivala (Wines & Spirits) Ltd was struck off the Register on December 19, 2008, was not prejudicial to Joseph Aquilina’s legal action under article 300B of the Companies Act. In these proceedings, action was taken to reinstate Stivala (Wines & Spirits) Ltd after it had already been struck off the Register of Companies.
The facts in this case were as follows:
An applicant had to show that he was legally interested
Joseph Aquilina and Marianne Aquilina filed legal proceedings under article 300B of the Companies Act whereby they stated that they had every interest for the name of the Company Stivala (Wines & Spirits) Ltd to be reinstated on the Register of Companies and that the liquidation process be reopened.
Article 300B of the Companies Act provides:
“1. Where a company has been struck off the register, any interested person may, by an application, request the court to order that the name of the company be restored to the register and the winding up be reopened.
2. Where, on an application made in terms of subarticle (1), the court is satisfied that the winding up and striking off of the company has been vitiated by fraud or illegality of a material nature, the court may order that the name of the company be restored to the register and the winding up be reopened for such purposes and such period as the court shall specify in its decision, and the court shall give such directives and impose such conditions as it may consider appropriate.
3. The court shall only accede to the application where it is satisfied that this is the only remedy available.
4. In its decision the court shall also determine whether its orders and directives shall be effective in favour of all persons or shall apply limitedly to specified persons indicated in the decision.
5. No application may be made under this article after the expiration of five years from the date on which the name of the company has been struck off the register.”
Joseph and Marianne Aquilina claimed that this was their only remedy which they had in the circumstances, as allegedly the liquidation process of the company was vitiated by serious defects.
It was stated that there were serious shortcomings in the winding up accounts and this was why these legal proceedings were instituted.
It resulted that the company Stivala (Wines & Spirits) Ltd which had been dissolved and struck off the Companies Register, had given a guarantee to pay a debt of the company Stivala Distributors Ltd (which was also struck off). Later, Alfred Stivala and Alex Borg Cardona (directors) declared that they paid part of the debt due by Stivala Distributors Ltd, which debt was certain, liquid and due in terms of a contract published in the acts of Notary Mark Coppini. They subrogated the rights of the creditor of Stivala Distributors Ltd.
Joseph and Marianne Aquilina said that the winding up accounts of Stivala (Wines & Spirits) did not take this into consideration, and nor that its directors had renounced the directors’ loans to it. Despite that the winding accounts did not mention the guarantee and that the directors waived the loans, Borg Cardona and Stivala sued Joseph and Marianne Aquilina on the basis of the amounts due under the deed of the constitution of debt.
The Registrar of Companies in reply, raised objections to the revival of the Company under article 300B Companies Act. It was submitted that:
• Joseph and Marianne Aquilina had to show that they were interested persons under article 300B. They had to prove their interest, otherwise the court had to declare this lawsuit to be unlawful.
• The court had to be satisfied the requisites under article 300B had been met.
• It had to be proven that the liquidation of the company had been done fraudulently or that it was vitiated by an illegality of a material nature.
Although plaintiffs claimed that there were certain omissions in the liquidation procedure, no indication was given as what were these shortcomings.
The Registrar requested the court to: (a) to dismiss their requests to reinstate the company unless the requisites under article 300B were proven and (b) order applicants to pay the costs.
In addition the other defendants, Edward Woods in his capacity as liquidator of Stivala (Wines & Spirits) Ltd, Stivala and Borg Cardona also contested the request of the Aquilina couple. The court limited this decision to decide their fifth and seventh pleas.
Fifth plea: They contended that Joseph and Marianne Aquilina’s request to reinstate the company Stivala (Wines & Spirit) Ltd could not be accepted, since its sole shareholder, Stivala Distributors Ltd, was also struck off. If therefore the court were to accept their request, the company Stivala (Wines & Spirits) would have no shareholders. Plaintiffs should have made a similar request as regards Stivala Distributors Ltd.
By their seventh plea, it was argued that Joseph Aquilina’s request to reinstate the company should not be accepted as he was well aware of the company’s affairs from the date when its board of directors decided to place the company into voluntary dissolution.
Joseph Aquilina had been officially notified to attend a company meeting. The notice, dated May 2, 2002, was sent by registered mail and duly notified. It was stated that Aquilina chose, however, not to attend the meeting.
Nonetheless, now by these proceedings, after nearly five years from when the name of the company Stivala (Wines & Spirits) was cancelled from the Companies Register, this court was requested to order the name of the company to be reinstated on the Register.
Joseph Aquilina was the managing director of Stivala Distributors Ltd, the shareholder of Stivala (Wines & Spirits) Ltd and there was no doubt that he was aware of the financial position of the company. Defendants maintained that he was in fact to blame for the company’s financial position, and when Borg Cardona and Stivala offered to transfer to him their shares, without any consideration, he did not accept.
The court considered article 300B of the Companies Act. It noted that a company enjoyed legal personality until its name was struck off the Companies Register. Upon its striking off the register, it legally ceased to exist, and it could only be revived for serious reasons. The court had to be satisfied that:
• The applicant was not an interested person. An applicant had to show that he was legally interested, and if this element had been proven, the court would consider whether the liquidation was vitiated by fraud and an illegality of a material nature. The procedure under article 300B was not intended to rectify errors, which were committed during the dissolution of a company.
If the court was satisfied that there was no fraud or a material illegality, it could order the name of the company to be reinstated on the Register, and for the liquidation to be reopened. Under article 300B, the court had to be satisfied that it was the only remedy of the applicant. In addition, action under article 300B had to be taken within five years from the date when the company was struck off the Register.
As regards defendants’ fifth plea, the court said that the fact that the sole shareholder of Stivala (Wines & Spirits) was struck off the Register on December 19, 2008, was not prejudicial to Joseph Aquilina’s legal action under article 300B of the Companies Act. The court further said that it will abstain from considering defendants’ seventh plea, before all evidence was produced on the merits.
For these reasons, on November 29, 2012, the First Hall of the Civil Court gave judgment by dismissing defendants’ fifth plea as it was possible to request a reinstatement of a company, even where its sole corporate shareholder was also struck off.
The court in addition, refrained from considering defendant’s seventh plea but reserved to decide this plea at a later stage in the proceedings.
Dr Karl Grech Orr is a partner at Ganado Advocates.