The European Commission launched its proposals for changes to insolvency law a few weeks ago, noting that Malta ranked last out of all the member states when it came to the efficiency of its procedures. The Finance Minister Edward Scicluna said the government had pre-empted the work of the Commission and decided to bolster the island’s insolvency legislative framework.

What is Malta proposing as a timetable for these changes?

We have been working on the concept of introduction of a second chance and on the improvement of our insolvency legislation since late last year. During this year, a working group was set up to come up with a draft Bill to introduce amendments to the existing legislation. Following consultation with representatives of all the stakeholders involved, a Bill was presented in Parliament this October. The debate on this Bill is scheduled for next month and it is envisaged that Parliament will enact the Bill by the first quarter of next year.

As part of a company recovery procedure, the refinancing of the company could be part of the solution to make it a viable going concern

What impact will these changes have and how long will it take for them to be felt?

The amendments to the existing Companies Act will give such companies what is being termed as a “second chance” for them to continue as a viable going concern, and endeavour to avoid such companies having to proceed with the winding up procedure.

The benefits of these amendments are:

• Business which would otherwise have collapsed might have a successful second chance;

• Jobs could be saved;

• Complicated winding-up/liquidation court procedures may be avoided;

• Creditors could obtain better and/or quicker recovery terms;

• Banks could avoid accumulation of non-performing-loans on their balance sheet.

It is hoped that the positive impact of these changes will be felt in the short term period after their introduction.

Does Malta have the resources to administer these changes, in terms of IT, qualified insolvency practitioners etc.?

The Malta Financial Services Authority’s Official Receiver will be drawing up a list of experienced persons to act as special controllers. The list will be made available to the Registrar of Courts for the courts to appoint the appropriate special controller depending on the business sector of the company to undergo the recovery procedure.

There are courses covering topics related to the role of insolvency practitioners. The special controllers accepted by the Malta Financial Services Authority will be given all the necessary training to make sure that they will have the required skills to perform their new role.

The proposals suggest that new financing will be protected for rescued companies. How would this be done? Will it be imposed on banks?

As part of a company recovery procedure, the refinancing of the company could be part of the solution to make it a viable going concern. In such a situation, the courts could rank any such new financing as a priority in case of an eventual winding up of the company.