The Court has given approval for the first Malta-registered company to enter the company recovery procedure (CPR) in terms of Section 329B of the Companies Act.
In a judgment in the First Hall of the Civil Court, dated October 29, Mr Justice Joseph Micallef allowed an application filed by DI Ltd to enter into the CPR.
Its chairman, legal and judicial representative is an Italian, Carlo Babini, of Santa Marija Estate, Mellieha. Apart from Mr Babini, the other registered director is DII International Ltd of the British Virgin Islands, which is also the majority shareholder, with a nominal share owned by Leamington (BVI) Ltd, also of the British Virgin Islands.
The application, filed on October 1, also requested the First Hall of the Civil Court to appoint a Special Controller to administer and manage the company during the CPR. Mr Justice Micallef appointed Andrew Borg Cardona as the Special Controller.
The Special Controller's duties include being responsible for all the assets of the company, starting a procedure to examine the actual state of the company, presenting an initial report to the court by December 20 and other reports periodically in accordance with the law, and appointing such person or persons who can help him to fulfil his responsibilities.
Mr Justice Micallef gave Dr Borg Cardona 10 months to carry out his task and ordered DI Ltd to deposit Lm25,000 in court or provide a bank guarantee for this amount within 12 days of the decision to cover the Special Controller's remuneration and any expenses he would need to fulfil his responsibilities.
DI Ltd was registered in Malta in December, 1996. It produces point of sale credit machines for both magnetic strip and chip card applications. It was unable to honour its financial obligations after it received complaints from clients last year about machinery it had supplied.
DI claimed that components sent from China were faulty, noting that it had to change all the defective terminals and not just the defective components. The chain of events led to the liquidation in Italy of DI Ltd's parent company, Dionica Italia, which distributed the machines produced by DI Ltd. All this happened at a time when the point of sales machines were coming up for upgrade and sales of the old models produced by DI Ltd had fallen drastically.
DI Ltd currently has debts of Lm2.5 million; its assets surpass its liabilities but the company is currently negotiating with one of its creditors, Bellagio Investments Inc., who is prepared to pump in Lm1 million to enable the company to recover and be in a position to pay off its debts.
DI Ltd has prepared a business plan to enable it to turn the company around and enable it to safeguard the jobs of its 120 employees who have not been paid for a considerable number of weeks. Work at the factory in the Mosta Technopark has all but ceased and is currently limited to maintenance of the machinery and repairs.
The business plan includes the safeguarding of all 120 jobs and the payment of all arrears and wages, including social security contributions.
Among the company's debtors are MCL Components Ltd, GRF Ltd, Malta University Services Ltd, Bellagio Investments Inc., Wurth Ltd, S & R (Handaq) Ltd and Ruesch International Inc.
In the last set of accounts, filed at the Malta Financial Services Authority, relating to the year ending December 31, 2004, the company declared a profit of €208,206 before consolidating the results of its South American subsidiaries. In view of the lack of financial information on the group's results, the auditors did not express an opinion on these accounts.
What is CRP?
The Company Recovery Procedure is similar to Chapter 11 in the US. It involves temporary protection that stops proceedings going on in court and gives the company time, after showing the court that prima facie there is the possibility that it can recover.
Companies undergoing CRP are, generally speaking, in a position where, if this measure fails, it would be impossible to avoid liquidation.
CPR was introduced in amendments to the Companies Act in 2003 as an alternative to liquidation. This gives the company "controlled breathing space", freezes creditors' claims while a Special Controller is appointed to manage the company. The company must be "recoverable" and it must have a recovery plan.
The role of the Special Controller is to:
• Make sure the company's assets and any income are not being misappropriated by the company's directors and shareholders; and
• Manage the company, including the appointment of experts and consultants to get it going again.
Speaking to The Times Business, DI Ltd Special Controller Andrew Borg Cardona said: "This is a learning curve. The banks are not sure what they have to do; from a logistics basis, the Courts Registrar is asked not to allow any more warrants of seizure to be filed and creditors do not necessarily know what they need to do next. From my point of view, they need do nothing for the moment - while the CRP is in place, the responsibility is mine to seek to ensure protection of all interested parties."
It is unsecured creditors and the staff who have most to gain from a successful recovery, since in a liquidation, secured creditors will come first and others will have little chance of seeing any money.
"My responsibility is not just to creditors but to all the stakeholders including the workers," Dr Borg Cardona added.
Workers' plight
DI Ltd's employees have not been paid for the past 12 weeks, according to Andrew Mizzi, secretary of the General Workers' Union technology, electronics and communications section, with some workers last receiving a wage five months ago.
The workers, who were not unionised, joined the GWU six weeks ago and a claim was made to the Director of Labour.
The union is prepared to wait it out to see developments but the more time passes, the less the chances of success, it feels.
It is currently waiting for DI Ltd to deposit money in court so that the union can negotiate a repayment procedure with the company and, apart from securing the wages, also pay the arrears. Mr Mizzi agreed that there was a learning curve to go through but expressed concern at the amount of debts, which are practically equal to the company's turnover and said that the longer the company takes to restart the harder it will be for it to find workers prepared to return.
"Half of the workers have already moved on to other jobs," he told The Times Business.
In a judgment in the First Hall of the Civil Court, dated October 29, Mr Justice Joseph Micallef allowed an application filed by DI Ltd to enter into the CPR.
Its chairman, legal and judicial representative is an Italian, Carlo Babini, of Santa Marija Estate, Mellieha. Apart from Mr Babini, the other registered director is DII International Ltd of the British Virgin Islands, which is also the majority shareholder, with a nominal share owned by Leamington (BVI) Ltd, also of the British Virgin Islands.
The application, filed on October 1, also requested the First Hall of the Civil Court to appoint a Special Controller to administer and manage the company during the CPR. Mr Justice Micallef appointed Andrew Borg Cardona as the Special Controller.
The Special Controller's duties include being responsible for all the assets of the company, starting a procedure to examine the actual state of the company, presenting an initial report to the court by December 20 and other reports periodically in accordance with the law, and appointing such person or persons who can help him to fulfil his responsibilities.
Mr Justice Micallef gave Dr Borg Cardona 10 months to carry out his task and ordered DI Ltd to deposit Lm25,000 in court or provide a bank guarantee for this amount within 12 days of the decision to cover the Special Controller's remuneration and any expenses he would need to fulfil his responsibilities.
DI Ltd was registered in Malta in December, 1996. It produces point of sale credit machines for both magnetic strip and chip card applications. It was unable to honour its financial obligations after it received complaints from clients last year about machinery it had supplied.
DI claimed that components sent from China were faulty, noting that it had to change all the defective terminals and not just the defective components. The chain of events led to the liquidation in Italy of DI Ltd's parent company, Dionica Italia, which distributed the machines produced by DI Ltd. All this happened at a time when the point of sales machines were coming up for upgrade and sales of the old models produced by DI Ltd had fallen drastically.
DI Ltd currently has debts of Lm2.5 million; its assets surpass its liabilities but the company is currently negotiating with one of its creditors, Bellagio Investments Inc., who is prepared to pump in Lm1 million to enable the company to recover and be in a position to pay off its debts.
DI Ltd has prepared a business plan to enable it to turn the company around and enable it to safeguard the jobs of its 120 employees who have not been paid for a considerable number of weeks. Work at the factory in the Mosta Technopark has all but ceased and is currently limited to maintenance of the machinery and repairs.
The business plan includes the safeguarding of all 120 jobs and the payment of all arrears and wages, including social security contributions.
Among the company's debtors are MCL Components Ltd, GRF Ltd, Malta University Services Ltd, Bellagio Investments Inc., Wurth Ltd, S & R (Handaq) Ltd and Ruesch International Inc.
In the last set of accounts, filed at the Malta Financial Services Authority, relating to the year ending December 31, 2004, the company declared a profit of €208,206 before consolidating the results of its South American subsidiaries. In view of the lack of financial information on the group's results, the auditors did not express an opinion on these accounts.
What is CRP?
The Company Recovery Procedure is similar to Chapter 11 in the US. It involves temporary protection that stops proceedings going on in court and gives the company time, after showing the court that prima facie there is the possibility that it can recover.
Companies undergoing CRP are, generally speaking, in a position where, if this measure fails, it would be impossible to avoid liquidation.
CPR was introduced in amendments to the Companies Act in 2003 as an alternative to liquidation. This gives the company "controlled breathing space", freezes creditors' claims while a Special Controller is appointed to manage the company. The company must be "recoverable" and it must have a recovery plan.
The role of the Special Controller is to:
• Make sure the company's assets and any income are not being misappropriated by the company's directors and shareholders; and
• Manage the company, including the appointment of experts and consultants to get it going again.
Speaking to The Times Business, DI Ltd Special Controller Andrew Borg Cardona said: "This is a learning curve. The banks are not sure what they have to do; from a logistics basis, the Courts Registrar is asked not to allow any more warrants of seizure to be filed and creditors do not necessarily know what they need to do next. From my point of view, they need do nothing for the moment - while the CRP is in place, the responsibility is mine to seek to ensure protection of all interested parties."
It is unsecured creditors and the staff who have most to gain from a successful recovery, since in a liquidation, secured creditors will come first and others will have little chance of seeing any money.
"My responsibility is not just to creditors but to all the stakeholders including the workers," Dr Borg Cardona added.
Workers' plight
DI Ltd's employees have not been paid for the past 12 weeks, according to Andrew Mizzi, secretary of the General Workers' Union technology, electronics and communications section, with some workers last receiving a wage five months ago.
The workers, who were not unionised, joined the GWU six weeks ago and a claim was made to the Director of Labour.
The union is prepared to wait it out to see developments but the more time passes, the less the chances of success, it feels.
It is currently waiting for DI Ltd to deposit money in court so that the union can negotiate a repayment procedure with the company and, apart from securing the wages, also pay the arrears. Mr Mizzi agreed that there was a learning curve to go through but expressed concern at the amount of debts, which are practically equal to the company's turnover and said that the longer the company takes to restart the harder it will be for it to find workers prepared to return.
"Half of the workers have already moved on to other jobs," he told The Times Business.