A new bill (“the Bill”) has been published outlining various proposed amendments to the Companies Act. The amendments cover new instances in which a company director may be disqualified from appointment, further clarification on the role of the Special Controller and the extension of the required terms for the holding of the Annual General Meeting.
Disqualification from appointment as director
Article 142 of the Companies Act provides for the disqualification from appointment of directors and company secretaries. The reasons for disqualification are:
- Incapacitation or being an undischarged bankrupt;
- Conviction of any of the crimes affecting public trust or of theft or of fraud or of knowingly receiving property obtained by theft or fraud;
- Being a minor who has not been emancipated; or
- Being subject to a disqualification order under article 320 of the Act.
The Bill adds an additional instance to those established above, namely if:
- During the time an individual has been a director or a secretary of a company, he has breached the provisions of the Companies Act for the third consecutive time in a period of two (2) years to be reckoned from the first breach;
With respect to a person who is disqualified from appointment due to conviction of any crime affecting public trust, such disqualification shall remain valid:
- in perpetuity- if the punishment for the crime he has been convicted of is of imprisonment for life;
- for a period of fifteen years- if the punishment for the crime he has been convicted of is of imprisonment of twenty-five to thirty years;
- for a period of ten years- if the punishment for the crime he has been convicted of is of imprisonment between ten to twenty-five years;
- for a period of eight years- if the punishment for the crime he has been convicted of is of imprisonment between five to ten years;
- for a period of five years– if the punishment for the crime he has been convicted of is of imprisonment between four to ten years;
- for a period of three years – if the punishment for the crime he has been convicted of is less than four years.
With respect to the disqualification order under article 320 as mentioned above, the Bill now also proposes that such order may be lodged via an application from the Official Receiver (in addition to the Attorney General). Orders may be against any person who the court is satisfied that:
- such person, during the time he has been a director of a company, has been in breach of the provisions of the Companies Act for the third consecutive time in a period of two years to be reckoned from the first breach;
- such person is or has been a director of a company which at any time has become insolvent, whether while he was a director or subsequently, and that his conduct as a director of that company, either taken alone or taken together with his conduct as a director of any other company or companies, makes him unfit to be involved in the management of a company;
New Criteria for Appointing a Special Controller
Further to the publication of the Company Reconstructions Fund Regulations, the Malta Business Registry has notified that the Official Receiver is receiving applications from individuals interested in being appointed as Special Controllers in terms of Article 329B of the Companies Act to assist companies facing financial difficulties. The Bill also adds additional criteria to consider for such appointment with regard being given to the nature of the company to be restructured and the special controller’s experience and expertise in the management of business enterprises. The Court shall also ascertain that there is no conflict of interest in relation to his/her appointment.
Extension of annual general meeting holding term
The ongoing COVID pandemic has presented unprecedented challenges and uncertainty for companies and their directors who find themselves in the midst of AGM season. In this aspect, the proposed Bill provides that the Minister may by regulations on the holding of annual general meetings, extend the term for the holding of the annual general meeting and for the laying and approval of accounts. This measure is intended to provide flexibility to companies that are facing difficulties in holding their AGM in light of social distancing measures currently in place.
This article was written by Dr Cherise Abela Grech and Dr Luke Mizzi.
For more information on Company Law matters, please contact Dr Ian Gauci on firstname.lastname@example.org, Dr Cherise Abela Grech on email@example.com, and Dr Luke Mizzi on firstname.lastname@example.org
Disclaimer: This article is not intended to impart legal advice and readers are asked to seek verification of statements made before acting on them.