The Company Recovery
Procedure (CRP) was introduced into local legislation by means of
Act XIII of 2003, and is detailed in Section 329B of the Companies
Act. CRP is a procedure which gives companies in financial
difficulty an opportunity to recover and rehabilitate their business
rather than proceed to CRP. While CRP is not a panacea that
can solve all of the problems being faced by an entity in financial
difficulties, it is nonetheless a useful tool that can allow
businesses which would otherwise need to be liquidated to survive.
CRP is available to
companies which are presently unable to pay their debts or will
become so unable in the foreseeable future. An application must be
made with the Courts of Malta for the company to be put in such a
procedure. In order to issue the appropriate order the Court must be
satisfied that:
-
The company is
unable to pay its debts or is likely to become so
-
The order will
favour the survival of the company as a viable going
concern, whether in whole or in part.
In order to come to
its conclusion the Court will consider the interests of
creditors and other stakeholders, the costs involved and any
other regulatory issues involved. If the order is issued, a
Special Controller is appointed, whose responsibilities will
include the examination of the financial situation of the
company, the control of the property of the company and the
assumption of the powers of the directors of the company. The
Special Controller must also verify whether there is a
reasonable chance of the company recovering from its situation
and become a viable going concern once more.
CRP gives rise to a
number of mechanisms which safeguard the company until it is
once again in good financial health. These provisions the
staying of:
-
any winding up
application
-
any resolution
for the dissolution and consequential winding up of the
company
-
the execution of
claims of a monetary nature against the company, including
any interest that accrues thereon
Furthermore, none of
the following actions may be taken without leave of the Court:
-
No person to whom
rent is payable may exercise any right of termination of
lease regarding property that was leased to the company
-
No steps may be
taken to enforce security over the property of the company
or to repossess goods in possession on the company under any
hire-purchase agreement
-
No precautionary
or executive act or warrant shall be exercised against the
company or any of its property
-
No judicial
proceedings shall be commenced or continued against the
company
.
.
