The Malta Independent 14 February 2025, Friday
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Law report: Struck-off but still standing: The legal lifeline for companies

Ganado Advocates Wednesday, 29 January 2025, 12:05 Last update: about 15 days ago

On 27 May 2024, the First Hall Civil Court (Commercial Section) delivered its judgement in the names of "Usta Holdings Inc. vs. Ir-Reġistratur tal-Kumpaniji" whereby the plaintiff, as the sole shareholder of Usta Maritime Co. Ltd (C 43902) (the 'Company'), requested the Malta Business Registry (the 'Registrar') to have the name of the Company restored and placed back on the register after it was previously struck off for failure to abide by its obligations.

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Facts of the Case

The Company was struck off the register on 10 December 2020, by order of the Registrar by virtue of regulation 9(3) of Subsidiary Legislation 386.19, namely the Companies Act (Register of Beneficial Owners) Regulations (the 'Regulations'). Said Regulations dictate that if a company fails to provide information on its beneficial ownership, the Registrar has the right to inform a company of its default by means of a letter as indicated under regulation 9(2).

If said information is not provided to the Registrar within one month from said letter, the Registrar may inform the company and publish a notice in the Government Gazette that upon the expiration of three months from the date of the last publication of said notice, the company's name shall, unless cause is shown to the contrary or the Registrar is satisfied that there are sufficient grounds not to proceed with the striking off, be struck off the register. Following the striking off of a company as described under regulation 9(3) of the Regulations, all assets held by the company will eventually devolve onto the Government of Malta.

The main asset of the Company was a pleasure yacht named the 'm.y. BEY' (holder of official number 11767), valued at around €820,000. In order not to lose their main asset, the plaintiff lodged an application in Court to have the Company reinstated onto the register. The plaintiff admitted that the Company was not in complaince with the Regulations and that the Company had also been in defualt for a number of years, thus understanding the Registrar's decision to have the Company struck off as defunct. Additionally, the plaintiff also held that these actions were not done in bad faith nor were they done in an attempt to deceive the Registrar, but these were merely a result of alienation by the corporate services provider as a result of miscommunication with the Company.

By means of the plaintiff's application, it was made clear that they had every interest to have the Company restored, to the point that it had already reached out to the defendant Registrar, its corporate services provider and other affected competent authorities to make the necessary amends. Naturally, the plaintiff wanted to retain the Company's ownership of the yacht with the goal of having the latter managing it, rather than having it devolve onto the government.

As a remedy to Company's wrongdoing, the plaintiff requested the Court to restore the Company onto the register and that it continues its existence by virtue of regulation 9(4) of the Regulations. The plaintiff also requested the Court to order the Registrar to take all of the necessary actions as required by virtue of the laws linked with the reinstating of a company on the register.

Regulation 9(4) of the Regulations, as referenced by the plaintiff in their application, states that if a shareholder or a creditor of a company (or any other interested third-party) feels 'aggrieved' by the striking off of the company in question, said shareholder, creditor or interested third-party may submit an application within five years from the date of publication of the striking-off notice. A successful action under regulation 9(4) would result in the company being restored onto the register as if it were never struck off in the first place. This would also apply to the officers of the company, in that they would be reappointed back in office as a result of this regulation.

Upon the Court's order, the Registrar shall then proceed to publish a notice in the Government Gazette or on the website maintained by the Registrar (i.e. the Malta Business Registry's online portal) and in a daily newspaper circulating wholly or mainly in Malta that the name of the company has been restored to the register.

In their reply, the Registrar informed the Court that the Company had never submitted information concerning its beneficial ownership throughout its entire lifetime. The Registrar's first attempt at making amends vis-a-vis the Company, was in the form of a letter dated 27 July 2020.

On 10 September 2020, the Company was one of several companies mentioned in a publication on a local newspaper that were to be struck off the register, subject to no objections being made within three months from said date. The Registrar also reminded the Court of the fact that over the years, the Company had accumulated considerable penalties amounting to €7,013.50 and were left outstanding as at the time of striking off on 10 December 2020.

In its reply, the Registrar stated that if the Company was to be restored back onto the register, it requested that all of the outstanding information and documents concerning beneficial ownership and annual returns, for the benefit of third parties.

 

Considerations of the Court

Prior to proceeding to pass its judgement, the Court was informed that the Company had already settled all its outstanding dues, both in terms of penalties and in terms of missing documents/information, as a sign of its good faith and in an attempt to rectify the situation as swiftly as possible. As a result of this, the Court ordered:

1.     the Registrar to reinsert the Company's name back onto the register within 15 days from judgement, on the basis that all of the requirements of regulation 9(4) of the Regulations were satisfied;

2.     the Registrar to effect all the publications that need to be made in order to have the Company placed back onto the register;

3.     the Registrar to restore the Company back onto the register; and

4.     the Company to be held responsible to cover the expenses incurred by the Registrar in reinstating the Company back onto the register.

The Court outlined that the adherence to the presciption period mentioned within regulation 9(4) of the Regulations and the plaintiff's willingness to rectify the situation were the main drivers of its decision.

 

Concluding Remarks

The ability for a company to be revived following its striking off by virtue of regulation 9(4) as discussed above, provides an execption to the widespread understanding that the striking off of a company is considered to be the 'death' of a company, with no other form of recourse available. Whereas a company which liquidates itself voluntarily and is eventually struck off is considered to be final due to a lack of an 'aggravation' by the Regsitrar, a company which encounters a situation as described in the case above is given 'one last chance' to rectify its failure to abide by its obligations and reverse its striking off.

 

Ganado Advocates is responsible for contributing this law report but was not in any way involved as legal advisor for the parties in the judgment being covered in this law report.

 

Gabriel DeBono is an Advocate within Ganado Advocates, currently working within the firm's Corporate department. Gabriel assists clients with various corporate and commercial law related matters, including company incorporations, corporate restructuring as well as other general corporate governance queries.

 


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