Employees of a bankrupt company top the ranking list of competent creditors in a Bill amending the Code of Organisation and Civil Procedure, the Civil Code and various laws relating to the lease of immovable property.

Introducing the second reading of the Bill on Wednesday, Justice Minister Carmelo Mifsud Bonnici said that next in line to the employees came the National Insurance, the Inland Revenue and VAT departments. Other creditors would follow.

He said that the Bill would clarify and further reform the lease of immovable property. Some amendments arrived at after discussions with the Chamber of Lawyers referred to the recently-approved Rent Reform Bill.

An amendment was moved to avoid difficulties in the sale of shares or securities on the Stock Exchange in the case of seizure of assets. The amendment had been proposed by the Stock Exchange authorities.

The third amendment related to the forfeitable deposit in cases of promise of sale on immovable property as the sale of property had been negatively affected after the court delivered a sentence last October on a case of forfeitable deposit.

The amendment stipulated that where the deposit had been forfeited, the party claiming payment had to notify the other party for the payment.

Last year there had been four applications of judicial sale by auction of ships under warrant of seizure. A further 27 applications had been filed this year after Parliament had approved relevant amendments.

These amendments, said Minister Mifsud Bonnici, aimed at strengthening the commercial sector. He was to meet Chamber of Commerce and GRTU officials to inform them of these changes.

Judicial sales were speedier than before, and prices for judicial sales of immovable property were fairer.

The other amendments referred to the rate of rent as of the first payment due after January 1, 2010.

Labour spokesman on Justice José Herrera said that a credible legal system was one of the ways in which important foreign investment could be attracted to a country.

One legal loophole that could undo such an attraction was the fact that Malta did not have legislation on personal bankruptcy, which would be carried onto survivors long after the bankrupt person passed on. What should happen was that once the bankrupt person was divested of all their assets they should be allowed to make a new start in life.

In Malta's limited liability legal system, once a company went bankrupt the liabilities would fall on the directors and shareholders as personally responsible. This effectively scared away foreign and local investment.

Dr Herrera criticised the format of the Bill, saying that Parliament had historically legislated piecemeal on various codes of procedure.

A creditor of a director of a company without any goodwill or assets, but with a good business, found it difficult to do anything about the director's shareholding by way of repayment. Such uncertainty had not existed in the 1950s and 1960s, when seizing share certificates owned by the debtor had a value.

Malta now needed to go further because up to 90 per cent of Maltese shareholding was in foreign assets. The Central Depository of the Malta Stock Exchange should include the brokers, which included the banks.

He disagreed that administrative penalties and interest on tax and VAT should rank higher than hypothecs and privileges. The government should caution before any other parties, so long as up to 30 per cent of the assets continued to be in favour of the hypothecs and privileges. Company employees ranked first among creditors, but with a ceiling.

In this time of recession and negative growth, the government must be careful to attract investment.

Dr Herrera said that forfeitable deposit was a new scenario which the Bill did not waste much time on. It was neither an earnest nor a deposit. This made it a tricky situation at the best of times.

Speaking on rent reform, he said the government must brace itself for the payment of huge sums of money in compensation to the owners of requisitioned residences, as per repeated decisions of the European Court of Human Rights, which was now privately accessible to any individual.