Legal action aimed at holding directors personally responsible for their company’s debts can only be filed when the company is in liquidation, a court has ruled.

The ruling was handed down yesterday in the case G. Molton Co. Ltd against Raymond and Silvio Borg, directors of Alufinish Ltd.

G. Molton claimed it was owed €7,607.97 by Alufinish. A sum of €1,500 was paid in the course of litigation. It argued the Borg brothers were personally responsible for payment because they had continued trading when they knew Alufinish could not honour its debts.

The brothers however argued that the “lifting of the corporate veil” could only take place when a company was in liquidation.

Magistrate Gabriella Vella ruled that under the Companies Act, directors could be found personally responsible for a company’s debts only when there was a case of fraudulent or wrongful trading and when the company was in liquidation.

Also, the action could only be filed before the First Hall of the Civil Court and not before the Magistrates Court. The magistrate dismissed the claim noting that Alufinish Ltd was not in liquidation and that G. Molton had filed its action before the Magistrates Court.