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Malta Companies Act

MALTA

CHAPTER 386

COMPANIES ACT

Short title.

1. The short title of this Act is Companies Act.

PART I - PRELIMINARY PROVISIONS

Interpretation.

2. (1) In this Act, unless the context otherwise requires, the following expressions have the meaning hereby assigned to them -

"annual accounts" means the individual accounts required by article 167 and, where applicable, also the consolidated accounts required by article 170;

"appointed day" means the date appointed by the Minister for the coming into force of this Act;

"auditor" means a person who is an individual who holds a warrant to act as auditor issued under the Accountancy Profession Act or is a partnership of auditors duly registered under the said Act;

"body corporate" means any entity having a legal personality distinct from that of its members, and includes a foreign corporation;

"certificate of registration" when used in relation to a company means a certificate of registration issued under this Act or under the Ordinance and the words "registration", "registered" and their derivatives shall be construed accordingly;

"commercial partnership" means a company or other commercial partnership formed and registered under this Act or formed and registered under the Ordinance where applicable;

"company" means a company formed and registered under Part V of this Act or the Ordinance;

"company secretary" means a person being an individual who holds the office of a company secretary in terms of article 138;

"consolidated accounts" means the accounts required by article 170;

"contributory" shall, unless otherwise stated, have the meaning assigned to it by articles 215 to 217;

"court" means the Civil Court, First Hall;

"debenture" includes debenture stock, bonds and any other debt securities of a company;

"director" includes any person occupying the position of director of a company by whatever name he may be called carrying out substantially the same functions in relation to the direction of the company as those carried out by a director;

"directors’ report" in relation to a company, means the directors’ report required by article 177;

"euro" refers to the currency unit of the participating states in the European Monetary Union;

"exempt company" means a company satisfying the conditions laid down in subarticle (2) of article 211;

"expert", except where otherwise specifically defined in this Act, means an auditor whether or not assisted by a specialist valuer;

"extraordinary resolution" has the meaning given to it by article 135;

"financial holding company" shall mean a company the sole purpose of which is to acquire holdings in other undertakings, and to manage such holdings and turn them to profits, without involving itself directly or indirectly in the management of those undertakings, and this without prejudice to its rights as shareholder;

"group company", in relation to any company, means any body corporate which is that company’s subsidiary or parent company, or a subsidiary of that company’s parent company, and the term "group" shall be construed accordingly;

"individual accounts" means the accounts required by article 167;

"investment company with fixed share capital" means a public company falling within the terms of article 194;

"investment company with variable share capital" means a company falling within the terms of article 84;

"liri" means Maltese liri;

"recognised stock exchange" means a recognised stock exchange established under the Financial Markets Act;

"member", except where otherwise specifically defined, means a shareholder of a company and a partner in any other commercial partnership;

"Minister" means, unless otherwise stated, the Minister responsible for the registration of commercial partnerships;

"name" in relation to an individual means that individual’s first name or names and surname;

"notice" shall mean a notice in writing of any kind;

"officer" in relation to a company, includes a director, manager or company secretary, but does not include an auditor;

"the Ordinance" means the Commercial Partnerships Ordinance*; "ordinary resolution" has the meaning given to it by article 135;

"oversea company" means a body corporate constituted or incorporated outside Malta;

"participating interest" shall mean rights in the capital of other undertakings, whether or not represented by certificates, which, by creating a durable link with those undertakings, are intended to contribute to those undertakings’ activities. The holding of twenty per cent of the capital of another undertaking shall be presumed to constitute a participating interest unless the contrary is shown. An interest in shares includes an interest which is convertible into an

interest in shares and an option to acquire an interest in shares. Interests in shares held by subsidiary undertakings or held by third parties on behalf of the company or its subsidiary undertakings shall be deemed to be held by the company;

"prescribed" means prescribed by regulations made or deemed to have been made under this Act, and where no regulation is in force in respect of a matter which may or is to be prescribed, means determined, approved or allowed by the Minister;

"principal office" means, in relation to an undertaking not having a registered office, the office which, for the purposes of that undertaking serves the same or a similar purpose as the registered office of a commercial partnership under this Act;

"private company" means a private company as defined in article 209;

" p r o s p e c t u s " m e a n s a n y p r o s p e c t u s , n o t i c e , c i r c u l a r, advertisement or other invitation, offering to the public for subscription any shares or debentures of a company or other commercial partnership;

"public company" means a company which is not a private company;

"recognised investment exchange" means a recognised Cap. 345.

investment exchange within the provisions of the Financial Markets Act;

"Registrar" means the person appointed by the Minister pursuant to article 400;

"resident", for the purposes of this Act, means -

(a) any natural person regardless of nationality who is ordinarily resident in Malta;

(b) any body corporate established under the law of Malta;

"security" includes a share, debenture or any other similar instrument issued by a company or other commercial partnership;

"share" includes stock except where a distinction between stock and shares is expressed or implied;

"shareholder" means a person entered in the register of members of a company pursuant to article 123 or the bona fide holder of a share warrant referred to in article 121;

"true and fair view" refers -

(a) in the case of individual accounts, to the requirements of article 167, and

(b) in the case of consolidated accounts, to the requirements of article 171;

"undertaking" means a body corporate or unincorporate which carries on a trade or business.

(2) (a) For the purposes of this Act "parent company" is a company which -

(i) has a majority of the members’ voting rights in another undertaking (a subsidiary undertaking); or

(ii) has the right to appoint or remove a majority of the members of the board of directors or persons entrusted with the administration of another undertaking (a subsidiary undertaking) and is at the same time a member of that undertaking; or

(iii) has the right to exercise a dominant influence over an undertaking (a subsidiary undertaking) of which it is a member, pursuant to a contract entered into with that undertaking or to a provision in that undertaking’s memorandum or articles of association; or

(iv) is a member of an undertaking and controls alone, pursuant to an agreement with other members of that undertaking (a subsidiary undertaking), a majority of members’ voting rights in that undertaking; or

(v) holds a participating interest in another undertaking and actually exercises a dominant influence over that undertaking (a subsidiary undertaking) or it manages the subsidiary undertaking on a unified basis together with it; and "parent undertaking" shall be construed accordingly.

(b) For the purposes of the definition in paragraph (a), the provisions of the Ninth Schedule shall apply.

(c) The term "subsidiary undertakings" shall be construed in accordance with paragraph (a) and shall include a subsidiary undertaking or undertakings of a subsidiary undertaking.

(d) References to shares of undertakings in this Act shall include references to beneficial interests in undertakings where the capital of such undertakings is not divided into shares; and references to "relevant shares", "the issue of equity shares", "the issued share capital" and "the nominal value of the equity shares" shall be construed accordingly.

(e) Other terms appropriate to companies shall be construed, in relation to an undertaking which is not a company, as references to the corresponding persons, officers, documents or organs, as the case may be, appropriate to undertakings of that description.

(3) (a) For the purposes of this Act, the following shall constitute offers made to the public:

(i) an offer made to the public generally;

(ii) an offer made to offerees exceeding fifty in number, subject to the provisions of paragraph (b).

(b) The following shall not constitute offers made to the public notwithstanding that the number of offerees may exceed fifty in number:

(i) an offer where the shares are offered as fully paid up shares for no consideration; or (ii) an offer where the total consideration payable for the shares being offered does not exceed ten thousand liri and the maximum consideration payable by an individual offeree does not exceed one hundred liri; or

(iii) an offer where the minimum consideration which may be paid by any person for shares acquired pursuant to the offer is at least fifty thousand liri; or

(iv) an offer made exclusively to existing members or debenture holders of the company; or (v) an offer made to an underwriter; or

(vi) an offer made in connection with or pursuant to a proposed merger of the offering company with another company; or

(vii) an offer made in connection with a take-over bid; or

(viii) an offer made exclusively to a restricted circle of persons, the number of which is below two hundred and fifty, acting for their own account in the context of their trade or profession; or

(ix) an offer made exclusively to a select and clearly identifiable section of the community or group of persons known to the offeror and acting for their own account, not exceeding in aggregate two hundred and fifty in number, sharing with the offeror some clear common interest, goal or objective, including members of the same family and membership of a club or association:

Provided that in respect of offers made by virtue of sub-paragraphs (ii), (viii) and (ix) and where the number of offerees exceeds fifty, the prior approval in writing of the Registrar shall be required for such offers not to constitute an offer to the public;

(c) In the event of any reasonable doubt arising as to whether or not a particular offer of shares amounts to an offer made to the public, the matter shall be determined by the Registrar whose decision shall be final.

(d) In this article, the term "shares" includes other securities that may be issued by a company.

(e) Where the offer is made by a commercial partnership, not being a company and whether formed or registered under this Act or any other Act, the provisions of this article shall apply to such offer mutatis mutandis.

(f) The Minister may by Order published in the Gazette revise or amend any of the figures or amounts referred to in this article.

(4) For the purposes of this Act, compliance with "generally accepted accounting principles and practice" shall require adherence to International Accounting Standards as may be issued from time to time by the International Accounting Standards Board, or any other body succeeding it by whatever name it may be known, and to any accounting standards as may be made applicable from time to time in terms of the Accountancy Profession Act.

In this subarticle, the International Accounting Standards Board refers to the Board, established by deed of constitution on the 28th June, 1973 which comprises the professional accountancy bodies which are members of the International Federation of Accountants, established at the International Congress of Accountants in Munich in 1977.

(5) For the purposes of this Act, where a document required to be delivered to the Registrar for registration is required to state the name and residence or address of a person, it shall be deemed to require further the official identification, by number or otherwise of such person, as may be applicable.

(6) For the purposes of this Act, where any document, which is required to be delivered or given to or served on the Registrar, is to be signed by an expert and such expert is a company, partnership or other body corporate, such document shall carry the signature of an individual who is a director, partner or equivalent officer, as the case may be, duly authorised to sign on its behalf.

(7) In this Act and in any regulations made thereunder, if there is any conflict between the English and Maltese texts, the English text shall prevail.

References in other Acts.

3. (1) References in any other law to the Ordinance shall be construed as a reference to this Act and references in any other law to a provision of the Ordinance shall be construed, insofar as applicable, as a reference to the corresponding provision of this Act; and references in any other law to a partnership formed and registered under the Ordinance shall be construed as a reference, or as including a reference, to a commercial partnership formed and registered under this Act.

(2) The table of concordance set out in the Twelfth Schedule to this Act may be used, insofar as applicable, in determining the corresponding provisions in accordance with subarticle (1).

PART II - GENERAL PROVISIONS

Formation of commercial partnerships and different kinds of commercial partnerships.

4. (1) A commercial partnership may be of the following

kinds:

(a) a partnership en nom collectif; or

(b) a partnership en commandite or limited partnership; or

(2) A commercial partnership other than a company may be formed for the exercise of one or more acts of trade.

(3) A company may be formed for any lawful purpose and shall have the status of -

(a) a public company; or (b) a private company.

(4) A commercial partnership has a legal personality distinct from that of its member or members, and such legal personality shall continue until the name of the commercial partnership is struck off the register, whereupon the commercial partnership shall cease to exist.

Law governing commercial partnerships.

135. A commercial partnership formed and registered under this Act or under the Ordinance shall be governed by this Act irrespective of the place where the management and control of the commercial partnership is exercised.

Indication of particulars in business letters, etc.

136. (1) In all its business letters and order forms a commercial partnership shall mention in legible characters its name, kind of commercial partnership, registered office and registration number.

(2) In all its business letters and order forms a body corporate registered under Part XI of this Act shall mention in legible characters its name, the country of its constitution or incorporation, its registration number and registered office in its country of constitution or incorporation, kind of commercial partnership, the address of the branch or place of business in Malta, its registration number under Part XI of this Act and, where applicable, the fact that the oversea company is being wound up.

(3) In all its business letters and order forms a partnership en nom collectif shall also state in legible characters the names of its partners in addition to the requirements of subarticle (1).

(4) In all its business letters and order forms a partnership en commandite or limited partnership shall also state in legible characters the names of the partners having unlimited liability in addition to the requirements of subarticle (1).

(5) Every commercial partnership and every body corporate registered under Part XI of this Act shall mention its name in legible characters in all its notices and other official publications, bills of exchange, promissory notes, cheques and orders for money or goods purporting to be signed on its behalf and in all its bills of parcels, invoices, receipts and letters of credit.

(6) An officer signing a document on behalf of a commercial partnership or on behalf of a body corporate registered under Part XI of this Act shall state the capacity in which he is signing.

(7) Where a commercial partnership is being wound up, every letter, invoice or other document issued by or on behalf of the commercial partnership, being a document on or in which the name of the commercial partnership appears, shall, in addition to the requirements of the preceding subarticles of this article, contain a statement that the commercial partnership is being wound up and, in respect of a company it shall also contain the names of the liquidators.

(8) If default is made in complying with the provisions of subarticles (1) to (6) every officer of the commercial partnership who is in default shall be liable to a penalty.

(9) If default is made in complying with the provisions of subarticle (7) every liquidator or partner, as the case may be, who is in default shall be liable to a penalty.

PART III - PARTNERSHIP EN NOM COLLECTIF

7. A partnership en nom collectif (referred to as a Definition.

"partnership" in the following provisions of this Part) may be formed by two or more partners and operates under a partnership name and has its obligations guaranteed by the unlimited and joint and several liability of all the partners:

Provided that no action shall lie against the individual partners unless the property of the partnership has first been discussed:

Provided furthermore that at least one of the partners shall be either an individual or a body corporate which has its obligations guaranteed by the unlimited and joint and several liability of one or more of its members.

8. An agreement to pay a share of the profits of a partnership to a person in total or partial remuneration for his services shall not, of itself, make him a partner.

Agreement to pay share of profits.

9. (1) Subject to the provisions of subarticles (2) and (3), a Partnership name. partnership may be designated by any name.

(2) A partnership shall not be registered by a name which -

(a) is the same as the name of another commercial partnership or so nearly similar as in the opinion of the Registrar it could create confusion; or

(b) is in the opinion of the Registrar offensive or otherwise undesirable; or

(c) has been reserved for registration for another commercial partnership by notice in writing to the Registrar given not more than three months before the date of the second request:

Provided that the Registrar shall notify any refusal under this subarticle without delay to the person requesting the registration.

(3) For the purposes of subarticle (2)(b ), the Registrar shall have regard to the names of the partners, the business or proposed business of the partnership and to the protection of the names of individuals who are not connected in any way with the partnership.

Penalties.

10. Any person who knowingly makes use of a name falsely implying the existence of a partnership shall be liable to a penalty.

Contributions deemed to be made in ownership.

11. Unless specifically provided in the deed of partnership, things contributed to the partnership shall be deemed to have been transferred in full ownership:

Provided that, where any of the partners has contributed his own services only, the contributions made by the other partners shall, unless specifically provided in the deed of partnership, be deemed to have been made in usufruct.

Contribution of a debt owing to a partner.

12. Where a partner has contributed to the partnership a debt owing to him, he shall not be discharged until the partnership obtains payment of the amount for which the debt was contributed and, in case of non-payment at the due date, he shall be liable, jointly and severally with the debtor, for the said amount with interest from the date the debt contributed fell due.

How a partnership is constituted.

13. A partnership shall not be validly constituted unless a deed of partnership is entered into and signed and a certificate of registration is issued under this Act in respect thereof.

Contents of deed of partnership.

14. (1) The deed of partnership shall state:

(a) the name and residence of each of the partners;

(b) the partnership-name;

(d) the objects of the partnership, that is to say, whether the objects are trade in general or a particular branch of trade, and in the latter case, the nature of the trade;

(e) the contribution of each of the partners, specifying the value of the respective contribution of every partner;

(f) the period if any fixed for the duration of the partnership.

(2) The exclusion or omission of any matter from the objects stated in the deed of partnership may not be set up against third parties.

Registration of deed of partnership.

15. (1) The deed of partnership shall be delivered for registration to the Registrar who, being satisfied that it complies with the requirements of article 14 and of subarticle (2), shall register it.

(2) Where the deed of partnership is a public deed or a private writing enrolled in the records of a notary public, an authentic copy thereof shall be delivered in lieu of the original.

(3) The aforesaid delivery shall be made by any one of the partners or his authorised agent.

Duty of Registrar and effects of registration.

16. (1) On the registration of the deed of partnership the Registrar shall certify under his hand that the partnership is registered and the partnership shall come into existence and shall be authorised to commence business under the partnership name as from the date of the certificate:

Provided that, if registration is obtained before the date fixed in the deed of partnership for the commencement of the partnership, the certificate shall indicate such date, and the partnership shall come into existence and shall be authorised to commence business as from such later date.

(2) A certificate of registration given in respect of a partnership is conclusive evidence that the requirements of this Act in respect of registration and of matters precedent and incidental to it have been complied with and that the partnership is duly registered, under this Act.

(3) The registration of a partnership by the Registrar under this article shall be without prejudice to any other licence or other authorisation as may be required in respect of the activities to be carried on by the partnership under any other law.

Where certificate of registration is not issued.

17. Unless and until a certificate of registration is issued under this Act in respect of a partnership or until the date indicated in a certificate of registration as the date on which a partnership shall come into existence -

(a) any two or more persons carrying on business under a name falsely implying the existence of a partnership shall have, as against one another and limitedly to property acquired from such business, such rights only as are by law conferred on joint owners;

(b) any obligation contracted in favour of third parties in good faith under a name falsely implying the existence of a partnership shall be jointly and severally binding on those persons, who, if a certificate of registration had been issued, would have been partners carrying on business under that name.

Person holding himself out to be a partner.

18. (1) A person who holds himself out as being a partner shall be held liable unlimitedly and jointly and severally with the partners for all the obligations contracted by the partnership.

(2) The inclusion in the partnership-name of the name of a person who is not a partner shall be taken into account by the court in determining whether such person is holding himself out as being partner.

Changes in deed of partnership.

(1) Every change relating to the administration or the representation of a partnership, the dissolution of a partnership before the period, if any, fixed for its duration, any extension of the said period not expressly provided for in the deed of partnership and generally any alteration or addition to the deed of partnership shall be made in writing and duly signed by the partners authorised to make that change and, subject to the provisions of article 21, shall not take effect unless and until the relative instrument or, where such instrument is a public deed or a private writing enrolled in the records of a notary public, an authentic copy thereof is delivered to the Registrar for registration and is registered by him. In the case of a change relating to the administration or the representation of a partnership, the relative instrument shall specify the name and residence of the person or persons entrusted with the said administration or representation.

(2) Where the extension of the period, if any, fixed for the duration of a partnership is expressly provided for in the deed of partnership, the partner or partners having the administration or representation of the partnership shall, notwithstanding that provision in the deed, deliver a notice of extension of the period of duration to the Registrar for registration and such extension shall not take effect unless and until the said notice is delivered to the Registrar and is registered by him.

(3) Where a partner ceases to be a partner or where a person whose name does not appear in the deed of partnership or in any alteration or addition thereto becomes a partner of an already existing partnership, a notice to that effect, specifying the name and residence of any new partner, shall, within one month, be delivered to the Registrar for registration by the partner or partners having the administration or the representation of the partnership:

Provided that any assignment of interest in whole or in part of any partner shall, unless otherwise provided in the deed of partnership, require the prior consent in writing of all the other partners.

(4) If default is made in complying with the provisions of subarticle (3), the partner or partners having the administration or representation of the partnership shall be liable to a penalty, and, for every day during which the default continues, to a further penalty.

Where alteration consists in change of partnership-name.

20. Where the alteration to the deed of partnership consists in a change of the partnership-name, the Registrar shall enter the new name on the register in place of the former name and shall issue a certificate of registration altered to meet the circumstances of the case:

Provided that the provisions of article 9 shall apply to the registration of such new name.

Reduction in contribution of a partner and dissolution of a partnership before period fixed for its duration.

21. (1) Any reduction in the contribution of a partner, other than a contribution consisting in personal services, any dissolution of the partnership on the grounds mentioned in article 35(b) or ( f), any reduction of the term of duration, if any, of the partnership or any assignment by a partner of all his interest in the partnership shall not be operative until three months from the date of publication of the statement in accordance with article 401(1)(e) relating to the instrument effecting such reduction, dissolution or assignment.

(2) Any creditor of the partnership whose debt existed prior to the publication referred to in subarticle (1) may object thereto by writ of summons, within the period of three months as aforesaid and, if he shows good cause why it should not take effect, the court shall either uphold the objection or allow the reduction of the contribution or the dissolution of the partnership or a reduction of the term of duration, if any, or the assignment of the interest of the partner, as the case may be, on sufficient security being given by the partnership.

Right of creditors of a partner to oppose extension of duration of a partnership.

22. (1) Where the duration of a partnership is extended beyond the period, if any, in the deed of partnership, the separate creditor of a partner may object to such extension by writ of summons filed within three months from the date of the publication of the statement in accordance with article 401(1)(e) relating to the instrument effecting such extension and, upon good cause being shown, the court shall direct the partnership to liquidate such partner’s interest in the partnership within three months of the judgment.

(2) The provisions of subarticle (1) shall apply whether any extension of the period fixed for the duration of the partnership is or is not expressly provided for in the deed of partnership.

(3) A separate creditor of a partner may only object in pursuance of this article if his debt existed prior to the publication of the statement referred to in subarticle (1).

Duties of Registrar of Courts.

23. The Registrar of Courts shall, without delay, cause a copy of any writ of summons filed under articles 21 and 22 and of any judgment given thereon to be served on the Registrar for registration.

How deed of partnership may be altered.

24. Unless otherwise provided in the deed of partnership, any alteration or addition thereto may only be made with the unanimous consent of the partners.

Administration and representation of a partnership and how partnership may be bound.

25. (1) In so far as the deed of partnership does not otherwise provide, the administration and representation of the partnership shall vest in each of the partners severally.

(2) A partnership may not be bound in favour of third parties except by a partner acting under the partnership-name and having the representation of the partnership either by virtue of the deed of partnership or by operation of law.

(3) Where any such partner has acted as aforesaid, the partnership shall be bound even though it derives no benefit.

Keeping of accounting records.

26. (1) Notwithstanding the provisions of article 26 of the Commercial Code, the accounting records of the partnership shall be kept for a period of ten years:

Provided that where the accounting records are kept in a bound or unified form, the ten years shall commence to run from the date of the last entry made therein.

(2) If default is made in complying with the requirements of subarticle (1), every partner who is in default shall be liable to a penalty.

New partners.

27. (1) Where a person becomes a partner of an already existing partnership, he shall thereby become liable for all the obligations of the partnership, even if incurred before the date at which he becomes a partner.

(2) Any agreement to the contrary shall be of no effect with regard to third parties.

Distribution of profits.

28. A partnership shall not distribute profits until it has made good all losses.

Rights of creditors of a partner.

29. The separate creditors of a partner may enforce their rights, during the continuance of the partnership, on the share of the profits if due to their debtor and, on the dissolution of the partnership, on such portion of the assets of the partnership as is due to their debtor on the partnership being wound up.

Partner may not compete with partnership.

30. (1) A partner shall not, in competition with the partnership and without the express consent of the other partners, carry on business on his own account or on account of others or be a partner with unlimited liability in another partnership.

(2) If a partner acts in contravention of the provisions of subarticle (1), the partnership may, at its option, either take action for damages and interest against the offending partner or demand payment of any profit made by him in violation of the aforesaid prohibition.

(3) The exercise of the rights conferred by subarticle (2) shall be barred by the lapse of two years from the date of the contravention.

Death of a partner.

31. (1) Saving any provision to the contrary in the deed of partnership, in the event of death of one of the partners the surviving partners shall liquidate the deceased partner’s interest in the partnership in favour of his heirs, unless the surviving partners unanimously elect either to dissolve the partnership or to continue the partnership with the heirs, if, in the latter case, such heirs accept:

Provided that where not all the heirs are in agreement, the partnership may continue with those who so elect as long as the dissenting heirs’ interest in the partnership is liquidated in their favour.

(2) Where the deceased partner has bequeathed his interest by legacy, the provisions of subarticle (1) shall apply as though references to heirs were references to the legatees of such interest.

Expulsion of a partner.

32. (1) A partner may be expelled from the partnership by a decision of the majority in number of the other partners unless a higher majority is required by the partnership deed -

(a) if he does not make his contribution in accordance with the partnership deed;

(b) if he commits a serious breach of duty as a partner;

(d) if he is interdicted or incapacitated;

(e) in such other cases for which provision is made in the deed of partnership.

(2) Any decision taken as aforesaid shall be notified, together with the reasons therefor, by judicial act served on the expelled partner, and shall not take effect until the lapse of fourteen days from such notification.

(3) The expelled partner may, by writ of summons filed within fourteen days from the notification as aforesaid, object to the decision and the court shall have power to stay the execution of the said decision pending its judgment.

(4) Where the partnership consists of two partners only, the expulsion of a partner may only be ordered by the court at the suit of the other partner.

Discontinuation of membership.

33. A partner shall not be entitled to continue as a partner if -

(a) he is adjudged bankrupt; or

(b) his interest in the partnership has been liquidated under the provisions of article 22.

Rights of persons ceasing to be partners.

34. (1) A partner who is expelled or who by virtue of the immediately preceding article is not entitled to continue as partner shall have the right to have his interest in the partnership liquidated.

(2) There shall be included in the liquidation of the interest of a partner who is expelled, or who by virtue of the immediately preceding article is not entitled to continue as a partner, a pro rata share of the profits or losses on all work in progress up to the date of the expulsion.

Dissolution of partnerships en nom collectif.

35. A partnership en nom collectif is dissolved -

(a) where the period, if any, fixed for its duration expires;

(b) if, subject to the provisions of article 21, all the partners so agree;

(d) if in the opinion of the Court there exist grounds of sufficient gravity to warrant dissolution;

(e) if the number of partners is reduced below two and remains so reduced for more than six months;

(f) subject to the provisions of article 21, in such other cases for which provision is made in the deed of partnership.

Notice of dissolution.

36. (1) On the dissolution of a partnership, and in no case later than fourteen days after such dissolution, the partners having the administration or the representation thereof shall deliver to the

Registrar for registration a notice of the dissolution:

Provided that, where a partnership is adjudged bankrupt or dissolved by order of the court, notice of the dissolution shall be given as aforesaid by the Registrar of Courts.

(2) The following provisions of this Part shall apply to the dissolution of a partnership except where the partnership is adjudged bankrupt, in which case the provisions of the Commercial Code relating to bankruptcy shall apply.

How a partnership en nom collectif may be wound up.

37. (1) Where the manner in which the partnership is to be wound up is not provided for in the deed of partnership or is not determined by agreement between the partners, the partnership shall be wound up by one or more liquidators.

(2) If the partners do not agree as to the person who is to be appointed liquidator, the appointment shall be made by the court, on the application of any partner, creditor of the partnership or the Registrar.

(3) The liquidator shall, within fourteen days after his appointment, deliver to the Registrar for registration a notice of his appointment stating his name and residence.

Power to remove liquidator.

38. (1) A liquidator, whether appointed by the partners or by the court, may be removed from office either by the partners, if they so agree, or by order of the court, on a demand by writ of summons made by any of the partners, if the court is satisfied that there exist sufficient grounds to warrant his removal.

(2) Where the office of a liquidator becomes vacant, the provisions of article 37(2) shall apply.

Remuneration of liquidator.

39. The remuneration of the liquidator may be fixed by agreement between the partners and the liquidator, failing which it shall be fixed by the court.

Costs of winding up payable in priority to all other claims.

40. All costs, charges and expenses properly incurred in the winding up, including the remuneration of the liquidator, shall be payable out of the assets of the partnership in priority to all other claims.

Penalty.

41. If default is made in complying with any of the requirements of article 36 and of article 37(3), every partner or liquidator, as the case may be, who is in default, shall be liable to a penalty and, for every day during which the default continues, to a further penalty.

Powers until provision is made for winding up.

42. Until such time as provision is made for the winding up of the partnership, only such acts as are of ordinary administration may be performed.

Duties of partners vested with administration.

43. (1) Where a liquidator is appointed, the partners vested with the administration of the partnership shall -

(a) deliver to the liquidator all the assets and all the accounting records and other documents of the partnership and shall draw up accounts relating to their administration for the period since the preceding accounts; and

(b) together with the liquidator, draw up a balance sheet showing the state of affairs of the partnership as at the date of the dissolution.

(2) Subject to the provisions of subarticle (1), on the appointment of a liquidator all the powers of administration or representation of the partnership vested in any of the partners shall cease.

Powers of liquidators.

44. (1) The liquidator shall represent the partnership and shall have power to perform all acts conducive and ancillary to the winding up of the affairs of the partnership:

Provided that he shall not refer any matter to arbitration or make any compromise unless so authorised in writing by the partners.

(2) The liquidator shall not undertake any new transaction.

(3) Where more than one liquidator is appointed, they shall act jointly and shall be jointly and severally liable for their acts, unless the partners have otherwise provided.

Liquidator not to distribute assets before paying debts.

45. (1) The liquidator shall not distribute any assets of the partnership among the partners unless either the debts and liabilities of the partnership have been paid or sufficient funds have been set aside for the payment thereof.

(2) Where the assets of the partnership are insufficient to meet its liabilities, the liquidator may demand from the partners payment of the contribution, if any, due by them, irrespective of the date when it falls due, and, if necessary, the sums required for the payment of the aforesaid liabilities in the proportion in which the liabilities of the partnership are to be borne by the partners.

(3) The liquidator may furthermore demand from the partners payment of the contribution, if any, due by them or any part of it, irrespective of the date when it falls due, for the purpose of adjusting the rights of the partners among themselves.

Duty of liquidator to give information, to render account and prepare scheme of distribution.

46. (1) The liquidator shall, at the request of any of the partners, inform the partners as to the state and progress of the liquidation.

(2) As soon as the affairs of the partnership are wound up, the liquidator shall render an account of the winding up and of his receipts and payments and draw up a scheme of distribution.

Rules applicable to distribution of assets.

47. In the distribution of the assets of a partnership the following provisions shall apply, unless otherwise provided in the deed of partnership, that is to say -

(a) where a thing has been contributed in usufruct or enjoyment, it shall be restored to the partner contributing it and the partnership shall be held liable in damages if the thing has perished or deteriorated for any cause attributable to any of the partners, saving the right of the partnership to the reimbursement of any sums so paid against the partner who is at fault;

(b) the assets of the partnership shall first be applied in repayment of the contributions of the partners and any balance shall be distributed among the partners in proportion to their share in the profits of the partnership;

(c) where it has been agreed that the distribution of the assets shall be made in kind, the provisions governing partition of common property shall apply.

Approval of accounts and scheme of distribution.

48. (1) The liquidator shall by judicial act serve on each of the partners a copy of the accounts and of the scheme of distribution mentioned in article 46(2).

(2) The accounts and the scheme of distribution shall be deemed to have been approved by all the partners if no objection thereto is lodged by writ of summons by any of the partners within three months of the service of the judicial act referred to in subarticle (1).

Striking of name of partnership off register.

49. (1) On the approval of the accounts, the liquidator shall deliver to the Registrar for registration a notice of such approval and the Registrar shall thereupon register it and strike the name of the partnership off the register. The Registrar shall forthwith publish a notice of the completion of the winding up and of such striking off.

(2) Where the manner in which the partnership is to be wound up is provided for in the deed of partnership or is determined by agreement between the partners, it shall be the duty of the partners to deliver to the Registrar for registration a notice, signed by all of them, that the winding up has been completed and the Registrar shall thereupon register it and strike the name of the partnership off the register. The Registrar shall forthwith publish a notice of the completion of the winding up and of such striking off.

Preservation of accounting records and documents after dissolution.

50. (1) The accounting records and the documents of the partnership shall be kept by the liquidator, if any, or by the person elected for that purpose by the majority of the partners and shall be so kept for a period of ten years from the date at which the name of the partnership was struck off the register. The election of such person shall take place within fourteen days from the registration of the notice referred to in article 49 and shall not be effected until such person has signified his acceptance in writing to the partners within fourteen days from his election:

Provided that where there is no liquidator and the partners fail to elect such person or where such person refuses to accept his election, the accounting records and documents shall be delivered to the Registrar within fourteen days of the non -acceptance or failure to elect as the case may be, and the Registrar shall keep such records for the said period of ten years.

(2) Where a person has been elected to keep the accounting records and the documents of the partnership, or where the partners have failed to elect such a person, the partners shall inform the Registrar accordingly within fourteen days of the date when the election becomes effective or from the failure to elect within the prescribed period, as the case may be, and in default, the partners shall be liable to a penalty.

(3) If the liquidator or the person elected by the partners to keep the accounting records and documents of the partnership fails to keep them for the period prescribed by subarticle (1), he shall be liable to a penalty.

(4) If the liquidator or the person elected by the partners to keep the accounting records and documents of the partnership dies, his heirs shall be obliged to deliver the said accounting records and documents to the Registrar within six months and the Registrar shall keep them for the remainder of the period prescribed by subarticle (1).

(5) The heirs referred to in subarticle (4) shall be liable to a penalty if they do not comply with the provisions of that subarticle.

PART IV - PARTNERSHIP EN COMMANDITE OR LIMITED PARTNERSHIP

Definition.

51. A partnership en commandite or limited partnership operates under a partnership - name and has its obligations guaranteed by the unlimited and joint and several liability of one or more partners, called general partners, and by the liability, limited to the amount, if any, unpaid on the contribution, of one or more partners, called limited partners:

Provided that at least one of the general partners shall be either an individual or a body corporate which has its obligations guaranteed by the unlimited and joint and several liability of one or more of its members.

Applicability of provisions governing partnerships en nom collectif.

52. The provisions governing partnerships en nom collectif shall apply to partnerships en commandite or limited partnership except insofar as they are inconsistent with the provisions of this Part.

Partnership-name.

53. (1) A person, including a limited partner, who holds himself out as being a general partner shall be held liable unlimitedly and jointly and severally with the general partners for all the obligations contracted by the partnership.

(2) The inclusion in the partnership -name of the name of a person who is not a general partner shall be taken into account by the court in determining whether such person is holding himself out as being a general partner.

Contribution of limited partner not to include personal services.

54. The contribution of a limited partner shall not include personal services.

Contents of deed of partnership.

55. The deed of partnership of a partnership en commandite or limited partnership, in addition to the particulars prescribed by article 14, shall specify which of the partners are general partners and which of them are limited partners, and in default the partnership shall resolve itself into a partnership en nom collectif.

Rights and duties of partners.

56. (1) Unless otherwise provided in the other provisions of this Part the rights and duties of the general partners shall be the same as those of partners in a partnership en nom collectif.

(2) Unless otherwise provided in the deed of partnership but subject to the provisions of this Part, limited partners shall have only the rights and duties provided by this Part.

Administration and representation.

57. The administration and representation of the partnership en commandite or limited partnership shall vest in the general partners, and unless the deed of partnership otherwise provides, such administration and representation shall vest in each of the general partners severally.

Appointment of partners to administer and represent partnerships en commandite or limited partnership.

58. The general partners shall by unanimous decision have the right to appoint the partners from amongst themselves who are to administer and represent the partnership en commandite or limited partnership and to dismiss from office the partners so appointed:

Provided that the deed of partnership may provide that the limited partners shall have the right to participate in the appointment of general partners to, or the dismissal of general partners from the office of administration and representation of the partnership.

Limited partner cannot take part in management of partnership en commandite or limited partnership.

59. (1) A limited partner shall not perform any act of administration nor transact business on behalf of the partnership en commandite or limited partnership except by virtue of a power of attorney given for specified acts or transactions.

(2) If a limited partner acts in contravention of the aforesaid prohibition, he shall be bound, in regard to third parties, unlimitedly and jointly and severally with the general partners for all the obligations of the partnership en commandite or limited partnership and shall moreover be liable to be expelled from the partnership in accordance with the provisions of article 32:

Provided that a limited partner acting in contravention of the prohibition contained in subarticle (1) shall not be expelled from the partnership if he proves that he had been acting on the instructions of the general partners.

Communication of yearly accounts to limited partners.

60. At the end of each accounting period the balance sheet and profit and loss account of the partnership en commandite or limited partnership shall be communicated to the limited partners, who, for the purpose of ascertaining their correctness, shall have a right of access to the accounting records and other documents of the partnership.

Non-applicability of certain articles to limited partners.

61. The provisions of article 30 and of article 32(1)(c) shall not apply to a limited partner.

Limited partner not bound to restore profits received in good faith.

62. Notwithstanding the provisions of article 28, a limited partner shall in no case be bound to restore profits received in good faith.

Assignment of interest by limited partner and rights of limited partners.

63. (1) Unless the deed of partnership otherwise provides, a limited partner may assign his interest in the partnership en commandite or limited partnership:

Provided that, if the contribution of a limited partner is not fully paid up, any assignment of his interest in the partnership shall not have effect, with regard to the partnership, unless it is made with the consent of all the general partners.

(2) Unless the deed of partnership otherwise provides, any changes in the deed of partnership which deprive limited partners of any of their rights shall require the unanimous consent of all the general partners and of all the limited partners.

Death or expulsion of limited partner.

64. (1) Unless the deed of partnership otherwise provides, in the event of death of a limited partner, the partnership en commandite or limited partnership shall continue with his heirs.

(2) Notwithstanding the provisions of article 32, interdiction or incapacitation shall not be grounds for expulsion of a limited partner.

Dissolution of partnership en commandite or limited partnership.

65. (1) A partnership en commandite or limited partnership, besides being determinable for any of the causes mentioned in article 35, shall be dissolved if no general partner or no limited partner remains, unless, within six months, the partner who has ceased to be a partner shall have been substituted.

(2) Where no general partner remains, the limited partners may, for the said period of six months, appoint one of their number for the performance of acts of ordinary administration.

(3) A limited partner appointed as aforesaid shall not be subject to the provisions of article 59.

Division of capital into shares.

66. (1) Without prejudice to the foregoing provisions of this Part, the capital of a partnership en commandite or limited partnership may be divided into shares.

(2) The provisions of this Act relating to shares in a company other than the provisions of article 72 shall apply to the shares in a partnership en commandite or limited partnership in so far as they are not inconsistent with the foregoing provisions of this Part.

(3) The provisions of Chapters IX and X of Part V of this Act, other than for the provisions of article 184, shall apply to a partnership en commandite or limited partnership, the capital of which is divided into shares.

(4) It shall be the duty of the partner vested with the administration or representation of a partnership en commandite or limited partnership, the capital of which is divided into shares, to deliver to the Registrar for registration the instrument or a copy thereof as required by article 19 altering or adding to the deed of partnership within fourteen days from the date of the said alteration or addition, together with a printed copy of the deed of partnership, as amended; and any previous amended text of the deed of partnership may be discarded by the Registrar when a subsequent amended text is delivered to him for registration:

Provided that in the event of a discrepancy between the text of any amended deed of partnership and the text of the original deed of partnership registered in accordance with the provisions of article 16, the latter text together with any instruments registered in accordance with the provisions of subarticle (4), shall prevail.

(5) The provisions of article 78, of article 137(4), (5) and (6) and of article 142(2) shall apply to a partnership en commandite or limited partnership, the capital of which is divided into shares, with the substitution of references to partners vested with administration or representation for references to directors, officials or the Board of directors; with the substitution of references to partnership en commandite or limited partnership, the capital of which is divided into shares, for references to company; with the substitution of references to deed of partnership for references to memorandum or memorandum and articles; with the substitution of partners for references to shareholders; and, with regard to article 137(5), with the substitution of the term "a decision of the partners" for the term "any resolution of the general meeting or from a decision of the Board of directors".

(6) If default is made in complying with the provisions of subarticle (4), every partner vested with the administration or representation of a partnership en commandite or limited partnership the capital of which is divided into shares who is in default shall be liable to a penalty, and for every day during which the default continues, to a further penalty.

(7) A partnership en commandite or limited partnership, the capital of which is not divided into shares, may change its status to a partnership en commandite or limited partnership, the capital of which is divided into shares, by a decision taken in accordance with the provisions of the deed of partnership, or, in the absence of any such provision, with the consent of all the partners, both general and limited:

Provided that where one or more limited partners, holding in the aggregate not more than one-fourth of the total contribution of the limited partners, have not given their consent the partnership en commandite or limited partnership may nevertheless proceed with the change of its status, but it shall be required, for the purpose of such change, to liquidate and re-imburse to every partner who has not given his consent, if he so requests, his interest in the partnership en commandite or limited partnership on such terms as may be agreed, or as the court, on a demand of either the partnership or the limited partner, may deem fit to order.

(8) A partnership en commandite or limited partnership, the capital of which is divided into shares, may change its status to a partnership en commandite or limited partnership, the capital of which is not divided into shares, by a decision taken in accordance with the provisions of the deed of partnership or, in the absence of any such provision, with the consent of all the partners, both general and limited:

Provided that where one or more limited partners, holding in the aggregate not more than one-tenth of the share capital of the partnership, have not given their consent, the partnership en commandite or limited partnership may nevertheless proceed with the change of its status, but it shall be required, for the purpose of such change, to redeem the shares held by every partner in the partnership en commandite or limited partnership who has not given his consent, if he so requests, on such terms as may be agreed or as the court on a demand of either the partnership or of the limited partner may deem fit to order.

(9) It shall be the duty of the partner vested with the administration or representation of a partnership en commandite or limited partnership, which has decided to change its status in accordance with subarticle (7), to deliver to the Registrar for registration the instrument or a copy thereof as required by article 19, altering or adding to the deed of partnership together with a printed copy of the deed of partnership as amended, and the provisions of subarticle (4) shall thereafter apply to the partnership.

(10) It shall be the duty of the partner vested with the administration or representation of a partnership en commandite or limited partnership which has decided to change its status in accordance with subarticle (8), to deliver to the Registrar for registration, the instrument or a copy thereof as required by article 19, altering or adding to the deed of partnership together with a printed copy of the deed of partnership as amended, and the provisions of subarticle (4) shall thereafter no longer apply to the partnership.

(11) The change of status referred to in subarticle (7) or in subarticle (8) shall not take effect unless and until it is registered as required by subarticle (9) or by subarticle (10) respectively, of this article.

(12) (a) Where a partnership en commandite or limited partnership, the capital of which is divided into shares, is dissolved and a liquidator has been appointed, as soon as the affairs of the partnership are fully wound up, the liquidator shall make an account of the winding up, showing how the winding up has been conducted and how the property of the partnership en commandite or limited partnership has been disposed of, and shall draw up a scheme of distribution and he shall cause the account to be audited by one or more auditors appointed by a decision of the partners. The liquidator shall by judicial act serve on each of the partners a copy of the accounts and of the scheme of distribution, if any, together with the auditors’ report and giving any explanation thereof.

(b) The accounts and the scheme of distribution shall be deemed to have been approved by all the partners if no objection thereto is lodged by writ of summons by any of the partners within three months of the service of the judicial act referred to in paragraph (a).

The provisions of article 153 shall apply to an auditor appointed in terms of paragraph (a), and the words "the previous three years" in the said article 153 shall be c o n s t r u e d a s r e f e r r i n g t o t h e l a s t t h r e e y e a r s immediately preceding the date of dissolution. Such auditor shall not be a person who has held the office of auditor of the partnership en commandite or limited partnership at any time during the last three years immediately preceding the date of dissolution.

Partnership en commandite or limited partnership.

66A. (1) This article shall apply to a partnership en commandite or limited partnership which in the deed of partnership expressly limits its objects to the collective investment of its funds in securities and in other movable and immovable property, or in any of them, with the aim of spreading investment risk and giving the partners the benefit of the results of the management of its funds, and to matters ancillary or incidental thereto, and which qualifies as a collective investment scheme and is duly licensed in terms of the Investment Services Act, or for any other purpose as the Minister may from time to time prescribe by regulations.

(2) A partnership en commandite or limited partnership within the meaning of subarticle (1) shall be regulated by the provisions contained in the Tenth Schedule and, unless otherwise provided in the said Schedule, by the provisions of Part IV of this Act but only in so far as such provisions are not inconsistent with the said Schedule:

Provided that where any particular matter arises in relation to a partnership en commandite or limited partnership within the meaning of subarticle (1) which is not specifically regulated by any provision of the Tenth Schedule or Part IV of this Act, reference shall be made, where applicable and to the extent possible, to any relevant provision of this Act, including any regulations made thereunder.

(3) The Minister may make regulations for the better carrying out of any of the provisions of the Tenth Schedule and of Part IV of this Act as applicable to partnerships en commandite or limited partnerships within the meaning of subarticle (1), and may, without prejudice to the generality of the foregoing, by such regulations make provisions as to any of the following matters -

(a) the forms to be used for the purposes of this Act in respect of such partnerships en commandite or limited partnerships;

(b) the registration of such partnerships en commandite or limited partnerships under this Act and any matters incidental thereto;

(c) any matter to be prescribed under this Act in respect of partnerships en commandite or limited partnerships within the meaning of subarticle (1);

(d) the amendment of any provision -

(i) relating to matters to be filed with the Registrar in connection with registration of such partnerships en commandite or limited partnerships;

(ii) relating to the records to be kept by such partnerships en commandite or limited partnerships;

(e) to prescribe fees payable under this Act in respect of such partnerships en commandite or limited partnerships;

(f) the exemption of partnerships en commandite or limited partnerships within the meaning of subarticle

(1) or any category thereof from any of the provisions of the Tenth Schedule or of this Act, as the case may be, subject to such modifications, variations and conditions as may be specified.

(4) Regulations made under this article may make different provisions for different cases or classes of cases.

PART V - LIMITED LIABILITY COMPANY

TITLE I - FORMATION AND FUNCTIONING OF COMPANIES

Chapter I - Formation of a company and matters incidental thereto

Definition.

67. A company is formed by means of a capital divided into shares held by its members. The members’ liability is limited to the amount, if any, unpaid on the shares respectively held by each of them.

How a company is constituted.

68. A company shall not be validly constituted under this Act unless a memorandum of association is entered into and subscribed by at least two persons, and a certificate of registration is issued in respect thereof. Companies formed and registered under the Ordinance shall comply with this Act in accordance with the provisions of article 428.

Contents of memorandum.

69. (1) The memorandum of every company shall state:

(a) whether the company is a public company or a private company;

(b) the name and residence of each of the subscribers thereto;

(d) the registered office in Malta of the company;

(e) the objects of the company;

(f) the amount of share capital with which the company proposes to be registered (hereinafter referred to as

"the authorised capital"), the division thereof into shares of a fixed amount, the number of shares taken up by each of the subscribers and the amount paid up in respect of each share and, where the share capital is divided into different classes of shares, the rights attaching to the shares of each class;

(g) the number of the directors, the name and residence of the first directors and, where any of the directors is a body corporate, the name and registered or principal office of the body corporate, the manner in which the representation of the company is to be exercised, and the name of the first person or persons vested with such representation;

(h) the name and residence of the first company secretary or secretaries;

(i) the period, if any, fixed for the duration of the company.

(2) In the case of a public company, there shall be annexed to the memorandum a document providing:

(a) the total amount or an estimate of all the costs payable by the company or chargeable to it by reason of its formation up to the time it is authorised to commence business, and of all the costs relating to transactions leading to such authorisation; and

(b) a description of any special advantage granted prior to the time the company is authorized to commence business to anyone who has taken part in the formation of the company or in transactions leading to such authorisation:

Provided that, where in accordance with the proviso to article 77(1), a company is authorised to commence business at a date later than the date of its registration, the said document shall be delivered to the Registrar for registration within fourteen days from the date the company is authorised to commence business.

(3) Companies formed and registered before the coming into force of this subarticle shall comply with the provisions of subarticle (1)( f ) on the disclosure, in the memorandum of association of the company, of the rights attaching to the shares of each different class, within twelve months from the coming into force of this subarticle:

Provided that companies formed and registered before the coming into force of this subarticle shall be deemed to satisfy the requirements of subarticle (1)(f ) on the disclosure, in the memorandum of association, of the rights attaching to the shares of each different class, if such provision or equivalent thereof is already incorporated in the articles of association of the company.

Name of company.

70. (1) Subject to the provisions of subarticles (3) to (6), a public company may be designated by any name, but such name must end with the words "public limited company" or their abbreviation "p.l.c.".

(2) Subject to the provisions of subarticles (3) to (6), a private company may be designated by any name, but such name shall end with the words "private limited company" or the word "limited" or its abbreviation "ltd.".

(3) (a) Where a private company is an investment company with variable share capital, the name of the company shall be followed by the words "investment company with variable share capital" or by "SICAV", followed by the words "private limited company", "limited" or its abbreviation.

(b) Where a public company is an investment company with fixed share capital or an investment company with variable share capital, the name of the company shall be followed by the words "investment company with fixed share capital" or "investment company with variable share capital", as the case may be, followed by the words "public limited company", or its abbreviation. The words "investment company with fixed share capital" may be replaced with the words "investment company" or with "INVCO" and the words "investment company with variable share capital" may be replaced with "SICAV".

(4) A company shall not be registered by a name which -

(a) is the same as a name of another commercial partnership or so nearly similar as in the opinion of the Registrar it could create confusion; or

(b) is in the opinion of the Registrar offensive or otherwise undesirable; or

(c) has been reserved for registration for another commercial partnership by a notice in writing to the Registrar given not more than three months before the date of the second request:

Provided that the Registrar shall notify any refusal under this subarticle without delay to the person requesting the registration:

Provided further that in applying paragraph (b), the Registrar shall have regard to the business or proposed business of the company, to the protection of the names of individuals who are not connected in any way with the company, and, in the case of a private company, to the names of the members.

(5) A company shall not be registered by a name which includes the word "fiduciary", "nominee" or "trustee", or any abbreviation, contraction or derivative thereof, unless such company is authorised to act as a trustee in terms of the applicable laws of Malta, or unless otherwise permitted to do so by the relevant competent authority.

(6) A person or persons trading or carrying on business or other activity -

(a) under a name or title which ends with the words "public limited company" or "p.l.c." or "private limited company" or "limited" or "ltd." or a contraction or imitation thereof and which is not the name of a duly registered company; or

(b) under a name or title which contains the words "fiduciary", "nominee" or "trustee", or any abbreviation, contraction or derivative thereof, which is not the name of a company which is authorised to use such name as provided in subarticle (5); or

(c) under a name or title which ends with the words "investment company with fixed share capital", "investment company" or "INVCO" or a contraction or imitation thereof when the person or persons are not a public company which is an investment company with fixed share capital; or

(d) under a name or title which ends with the words "investment company with variable share capital" or "SICAV" or a contraction or imitation thereof when the person or persons are not an investment company with variable share capital, shall be liable to a penalty, and, for every day during which the default continues, to a further penalty.

Objects of company.

71. The objects of a company may not be simply stated to be any lawful purpose or trade in general.

Minimum share capital.

72. (1) The authorised share capital of a company shall be -

not less than twenty thousand liri subscribed by at least two persons in the case of a public company; or not less than five hundred liri subscribed by at least two persons in the case of a private company.

(2) Where the authorised share capital is equal to the minimum aforesaid, it shall be fully subscribed in the memorandum, and where it exceeds such minimum, at least that minimum shall be subscribed in the memorandum.

(3) In the case of a public company, not less than twenty-five per cent, and in the case of a private company, not less than twenty per cent, of the nominal value of each share taken up shall be paid up on the signing of the memorandum.

(4) The bearer of a share warrant issued in accordance with article 121 shall not be taken into account for the purpose of determining the number of persons specified in subarticle (1).

(5) The ordinary shares of a company shall not be redeemable, and every company shall at all times have ordinary shares.

Consideration for acquisition of shares.

73. (1) The consideration for the acquisition of shares in a company whether on the original subscription or a subsequent issue, may only consist of assets capable of economic assessment, and furthermore, future personal services and in general any undertakings to perform work or supply services may not be given by way of consideration.

(2) Where, on original subscription, the shares are issued for a consideration other than in cash, the full consideration shall be transferred to the company within five years from the date the company is authorised to commence business.

(3) Where shares are issued other than on original subscription for a consideration other than in cash, the full consideration shall be transferred within five years from the date of the decision to issue the shares.

(4) A report on any consideration other than in cash shall be drawn up before the company is registered or before the shares are issued, as the case may be, by one or more experts who are independent of the company and approved by the Registrar.

(5) The expert’s report shall contain at least a description of each of the assets comprising the consideration as well as the methods of valuation which have been used and shall state whether the values arrived at by the application of these methods correspond at least to the number and nominal value, and, where applicable, to the premium on the shares to be issued for them.

(6) The report shall be delivered to the Registrar for registration before the company is registered or before the shares are issued, as the case may be; and, in default, the Registrar shall accordingly refuse to register the company or the return of the allotments of the shares so issued, and, in the latter case, the issue shall be considered null and void.

(7) Where an amount standing to the credit of any of a company’s reserve accounts or of its profit and loss account is applied in paying up to any extent any shares allotted to members of the company or any premiums on shares so allotted, the amount applied shall not be considered as consideration other than in cash for the purposes of this article.

Transfer to company of non-cash asset in first two years.

74. (1) A company shall not acquire, within two years of its authorisation to commence business, any asset belonging to a person who subscribed the company’s memorandum or who is a member of the company for a consideration which is equivalent to at least one tenth of the issued capital of the company unless the following conditions are satisfied:

(a) the asset to be received by the company, and any consideration other than cash to be given by the company, shall have been valued by one or more experts who are independent of the company and approved by the Registrar;

(b) a report with respect to the matters specified in paragraph (a) shall have been made to the company during the six months immediately preceding the date of the agreement;

(d) not later than the giving of notice of the meeting at which the resolution is proposed, copies of the resolution and of the report shall have been circulated to the members of the company entitled to receive notice of the meeting and, if the person with whom the agreement in question is proposed to be made is not then a member of the company so entitled, to that person.

(2) The report referred to in subarticle (1)(b) shall be delivered to the Registrar for registration at the same time as it is circulated in accordance with subarticle (1)(d). If the company fails to comply with this subarticle, every officer of the company who is in default shall be liable to a penalty.

(3) If a company enters into an agreement in contravention of this article and either -

(a) the person with whom the company made the agreement has not received the expert’s report required for compliance with the conditions of this article; or

(b) there has been some other contravention of this article which that person knew or ought to have known amounted to a contravention, the company shall be entitled to recover from that person any consideration given by it under the agreement, or an amount equal to the value of the consideration at the time of the agreement, and the agreement, so far as not carried out, shall be void.

(4) The provisions of this article shall not apply -

(a) where it is part of the company’s ordinary business to acquire, or arrange for other persons to acquire, assets of a particular description, to an agreement entered into by the company in the ordinary course of its business for the transfer of an asset of that description to it or to such person, as the case may be; or

(b) to acquisitions made by the company at the instance or under the supervision of the court; or

Articles of association.

75. (1) There may be registered with the memorandum, articles of association (hereinafter referred to as "articles") which shall be signed by the subscribers to the memorandum and prescribing regulations for the company.

(2) If articles are not registered, or, if articles are registered, in so far as the articles do not exclude or modify the regulations contained in the First Schedule, such regulations shall be the regulations of the company in the same manner and to the same extent as if they were contained in duly registered articles.

Registration of memorandum and articles.

76. (1) The memorandum and articles, if any, shall be delivered for registration to the Registrar who, being satisfied that all the requirements of articles 68 to 73 and of articles 75 and 139 have been complied with, shall register them.

(2) Where the memorandum or the articles are drawn up in a public deed or in a private writing enrolled in the records of a notary public, an authentic copy thereof shall be delivered in lieu of the original.

(3) The aforesaid delivery shall be made by any one of the subscribers to the memorandum, or the authorised agent of such subscriber.

(4) Notwithstanding the provisions of subarticle (1), and without prejudice to the provisions of article 77(2), the responsibility for ensuring that the articles of association, if any, of a company, are correct, complete and in full compliance with this Act and any other applicable law shall lie with the persons who have entered into and subscribed to the memorandum of association.

Duty of Registrar and effects of registration.

77. (1) On the registration of the memorandum and articles, if any, of a company, the Registrar shall certify under his hand that the company is registered, and the company shall come into existence and shall be authorised to commence business as from the date of registration which date shall be indicated in the certificate:

Provided that if registration is obtained before the date, if any, fixed in the memorandum for the commencement of the company, the certificate shall indicate such date and the company shall come into existence and shall be authorised to commence business as from such later date.

(2) A certificate of registration given in respect of a company is conclusive evidence that the requirements of this Act in respect of registration and of matters precedent and incidental to it have been complied with and that the company is duly registered as a public or private company under this Act.

(3) The registration of a company by the Registrar under this article shall be without prejudice to any other licence or other authorisation as may be required in respect of the activities to be carried on by the company under any other law.

Where certificate of registration is not issued.

78. (1) All persons carrying on business or entering into agreements in the name of or on behalf of a company in respect of which a certificate of registration has not been issued under this Act, or before the date indicated in the certificate of registration as the date on which the company shall come into existence, shall, unless otherwise agreed, be personally and jointly and severally liable for their dealings with third parties entered into by them in the aforementioned capacity.

(2) Failing agreement to the contrary, the persons referred to in subarticle (1) shall have, as against one another and in respect of the assets and liabilities arising out of the business carried on in the company’s name or on its behalf, the rights and obligations of joint owners.

(3) Notwithstanding the provisions of subarticle (1), the dealings referred to in that subarticle shall, with respect to a third party who has dealt in good faith with persons purporting to act in the name of or on behalf of a company in respect of which a certificate of registration has not been issued under this Act or which has not yet come into existence, with effect from the date on which the company shall come into existence, be treated as having been undertaken by the company; provided that in such an event the provisions of subarticle (1) shall not apply. The company shall be entitled to be indemnified by the persons who had acted in its name or on its behalf in respect of its liability under this subarticle towards the said third party.

Alterations and additions to memorandum and articles.

79. (1) A company may by extraordinary resolution alter or add to its memorandum or articles:

Provided that -

(i) where the alteration consists in a change of the registered office in Malta of the company such alteration may be effected by a resolution of the directors; and

(ii) where the alteration consists in the conversion of any shares into stock or in the reconversion of that stock into shares, such alteration may only be made if the shares to be converted are paid up shares and if the stock is reconverted into paid up shares, but, if the company is so authorised by its memorandum or articles, it may by ordinary resolution convert any paid up shares into stock and reconvert that stock into paid up shares of any denomination.

(2) It shall be the duty of the directors and of the company secretary to deliver to the Registrar for registration a printed copy of any resolution as aforesaid within fourteen days after the date of the resolution, together with a revised and updated copy of the memorandum, and of the articles, if any, as amended by the said resolution and incorporating all the changes effected to date relating to the directors, company secretary, the representation of the company, change in registered office of the company, or any transfer or transmission of shares or any allotment of shares. Any previous amended text of the memorandum and articles, if any, may be discarded by the Registrar when a subsequent amended text is delivered to him for registration:

Provided that in the event of a discrepancy between the text of any amended memorandum and articles, if any, and the text of the original memorandum and articles, if any, registered in accordance with the provisions of article 76, the latter text together with resolutions registered in accordance with the provisions of subarticle (2) shall prevail.

Notwithstanding the provisions of subarticle (2), where the alteration consists in a change in the registered office in Malta of the company, the directors or company secretary shall send to the Registrar for registration a return of any change in the registered office, specifying the date of the change, together with the new registered office, within fourteen days from the happening thereof.

(3) Any alteration or addition to the memorandum or articles of a company shall not take effect, unless and until it is registered as provided in subarticle (2).

(4) The responsibility for ensuring that any proposed amendments to the articles of association, if any, of a company, are correct, complete and in full compliance with this Act and any other applicable law shall lie with the directors of the said company

(5) If default is made in complying with the provisions of subarticle (2), every officer of the company who is in default shall be liable to a penalty, and, for every day during which the default continues, to a further penalty.

Change of name of company.

80. Where a company changes its name under the provisions of article 79, the Registrar shall enter the new name on the register in place of the former name and shall issue a certificate of registration altered to meet the circumstances of the case.

Alteration in memorandum or articles increasing liability to contribute to share capital not to bind existing members without consent.

81. Notwithstanding anything in the memorandum or articles of a company no member shall be bound by any alteration made in the memorandum or articles after the date on which he became a member if and so far as the alteration requires him to subscribe for more shares than the number held by him at the date on which the alteration is made, or in any way increases his liability as at that date to contribute to the share capital of, or otherwise pay money to, the company:

Provided that this article shall not apply in any case where the member agrees in writing, either before or after the alteration is made, to be bound thereby.

Authentication of documents.

82. (1) A document or proceeding requiring authentication by a company may be signed by a director, the company secretary or other authorised officer of the company.

(2) All documents supplied to the Registrar shall be authenticated in accordance with this article.

Chapter II - Changes to a company’s share capital

Reduction of issued share capital.

83. (1) Notwithstanding the provisions of article 79(3), where the alteration consists in the reduction of the issued share capital, any such reduction shall not take effect until three months from the date of the publication of the statement referred to in article 401(1)(e) relating to the resolution effecting such alteration:

Provided that if a creditor of the company whose debt existed prior to the publication of the statement mentioned in this subarticle objects thereto by writ of summons filed within the period of three months reckoned as aforesaid and shows good cause why it should not take effect, the court shall either uphold the objection or allow the reduction on sufficient security being given:

Provided further that a reduction in share capital shall be void to the extent that it reduces the capital to less than the minimum prescribed by article 72.

(2) The Registrar of Courts shall without delay cause a copy of any writ of summons filed under subarticle (1) and of any judgment given thereon to be served on the Registrar for registration.

(3) The total or partial waiving of the unpaid part of the issued shares and the release of the holders of those shares from their obligation to pay up that unpaid part shall, notwithstanding anything contained in the memorandum or articles of a company, in all cases be considered as a reduction in share capital.

(4) Where there are different classes of shares the decision by the general meeting concerning a reduction in the issued share capital shall be subject to a separate vote for each class of shareholders whose rights are affected by the reduction, and for every separate vote taken the same majority shall be required as where the shares are not divided into different classes.

(5) An alteration consisting in the reduction of the issued share capital whose purpose is to offset losses incurred or to include sums of money in a reserve shall take effect immediately on the registration of the resolution concerning such a reduction and the provisions of subarticle (1) relating to the rights granted to creditors of the company shall not apply:

Provided that, following this operation, the amount of such reserve is not more than ten per cent of the reduced issued share capital:

Provided further that any such reserve shall be used only for offsetting losses incurred or for increasing the issued share capital by the capitalisation of such reserve.

(6) In the cases referred to in subarticle (5) the amounts deriving from the reduction of the issued share capital may not be used for making payments or distributions to shareholders or to discharge shareholders from the obligation to pay calls on their shares:

Provided that if the provisions of subarticles (1) and (2) relating to the rights granted to the creditors of the company are followed for the purpose of reducing any sum of money contained in any such reserve, as is referred to in subarticle (5), the amounts deriving therefrom may be used for making payments or distributions to shareholders.

(7) The notice convening the general meeting at which the extraordinary resolution for the reduction of issued share capital is to be taken, shall, in addition to the requirements laid down in article 135(1)(a ), also specify the purpose of the reduction and the way in which it is to be carried out.

Investment companies with variable share capital.

84. (1) A company may, by complying with the provisions of this article, be formed as an investment company with variable share capital.

(2) (a) The memorandum of an investment company with variable share capital shall, in respect of the share capital of the company, state in lieu of the matters specified in article 69(f) that -

(i) the share capital of the company shall be equal to the value for the time being of the issued share capital of the company; and

(ii) such share capital shall be divided into a specified number of shares without assigning any nominal value thereto; and

(b) furthermore, the memorandum of the company shall limit the object of the company to either one of the following -

(i) the collective investment of its funds in securities and in other movable and immovable property, or in any of them, with the aim of spreading investment risk; and giving shareholders of the company the benefit of the results of the management of its funds, and in the fulfilment of that object, it shall be entitled to perform any act which is connected with or ancillary thereto; or

(ii) to act and operate as a Retirement Fund within the meaning of articles 2 and 4 of the Special Cap. 450. Funds (Regulation) Act; and

(i) that the actual value of the paid up share capital of the company shall be at all times equal to the value of the assets of any kind of the company after the deduction of its liabilities; and

(ii) that the shares of the company shall be purchased by the company directly or indirectly out of the assets of the company, at the request of any of the holders thereof or as otherwise provided by the memorandum or articles of the company.

(3) Action taken by a company to ensure that the stock exchange value of its shares does not deviate from its net asset value by more than a percentage specified in its articles, which deviation shall not be greater than five per cent, shall be regarded as action taken for the purposes of subarticle (2)(c)(ii).

(4) An investment company with variable share capital shall not issue partly paid up shares.

(5) The purchase by an investment company with variable share capital of its own shares shall be on such terms and in such manner as may be provided by its articles.

(6) Shares of an investment company with variable share capital which have been purchased by the company itself shall be cancelled and the amount of the company’s issued share capital shall be reduced by the amount of the consideration paid by the company for the purchase of the shares, and nothing in this Act shall require an investment company with variable share capital to create any reserve.

(7) Without prejudice to any requirements that may be imposed on an investment company with variable share capital pursuant to any other enactment, the provisions of article 70(1) and (2), articles 72, 83, 85 to 88, 97, 103, 105 to 113, 115 and Chapter XI of Part V of this Act, shall not apply to such a company.

(8) Notwithstanding any other provision of this Act, an investment company with variable share capital shall not be obliged to give any of the details in Parts 2 and 3 of the form of annual return set out in the Seventh Schedule, other than the share capital of the company and the number of shares issued.

(9) Any reference in this Act to the nominal value of an issued or allotted share in, or of the issued or allotted share capital of, a company shall be construed, in the case of an investment company with variable share capital, as a reference to the net asset value.

(10) The Minister, in consultation with the Minister responsible under the Investment Services Act, acting on the advice of the competent authority under the said Act, may make regulations for the better carrying out of any of the provisions of this article; and without prejudice to the generality of the foregoing may, by such regulations, in particular:

(a) make further provision regarding the contents of the memorandum and articles of the company, including provision for the issue of fractional shares;

(b) exempt or provide for the exemption of such company, or any category thereof, from any of the provisions of this Act or of any other law in force, subject to such modifications, variations and conditions as may be specified;

(c) provide for the constitution and regulation of investment companies with variable share capital as umbrella or multi-class companies, and provide for the constitution of sub -funds, and the different classes of shares that may be issued by such companies; provide for the possibility of apportioning and allocating assets and liabilities between the different sub -funds or classes, for considering individual sub-funds or classes as separate and distinct entities for such purposes as may be established, and provide for the currency or currencies in which such sub-funds or different classes of shares may be designated;

(d) apply and extend mutatis mutandis the provisions of this article to other forms of commercial partnerships which constitute collective investment schemes for the purposes of the Investment Services Act and subject to such variations or modifications as may be prescribed;

(e) provide for any matter incidental to or connected with the above.

(11) The Minister, in consultation with the Minister responsible under the Special Funds (Regulation) Act, acting on the advice of Cap. 450. the Malta Financial Services Authority, may make regulations to apply and extend mutatis mutandis the provisions of this article to investment companies with variable share capital established for the purpose of acting and operating as a Retirement Fund within the meaning of articles 2 and 4 of the Special Funds (Regulation) Act; and without prejudice to the generality of the foregoing may, by such regulations, provide for any matter referred to in the immediatley preceding subarticle.

Power to make regulations regarding cell companies.

84A. (1) The Minister, in consultation with the Minister responsible for finance and acting on the advice of the competent authority under the Insurance Business Act, may make regulations which provide for the formation, constitution, authorisation and regulation of cell companies, make it possible for a company authorised under the Insurance Business Act, to carry on business of insurance, or any other business as may be prescribed, to convert into a cell company, and for all matters that may arise in connection therewith; and for the better carrying out of the provisions of this article, and without prejudice to the generality of the foregoing, may, by such regulations, in particular -

(a) make provision regarding the contents of the memorandum and articles of association of a cell company, including provision for the creation by the cell company of any one or more cells, and for segregating and protecting the cellular and other assets of the company, and establish reporting and other disclosure requirements;

(b) exempt or provide for the exemption of such company from any of the provisions of this Act or of any other law in force, subject to such modifications, variations and conditions as may be specified;

(c) make provision for the manner and the form whereby a cell company may create and issue cell shares and to make any provision relating to the assets of the cell company, including the requirement that the assets of a cell company should be of a specified class or description, or any other requirements in respect of the quality, nature or extent of such assets;

(d) make provision allowing cells or the cellular assets attributable to any cell of a cell company to be transferable to any other person;

(e) make provision for considering individual cells as separate and distinct entities for such purposes as may be established;

(f) provide for any matter consequential, incidental to or connected with any of the above matters.

(2) For the purpose of this article -

(a) "business of insurance" shall include the business of insurance manager, as well as the business of insurance broking under the Insurance Brokers and other Intermediaries Act; and reference to "company" shall include reference to a partnership en commandite or similar or equivalent body corporate the capital of which is divided into shares;

(b) "cell" means a cell created by a cell company for the purpose of segregating and protecting the cellular assets of the company in such manner as may be prescribed and includes a reference to segregated accounts, compartments or units within a company having multiple accounts, compartments or units, by whatever name designated, and the word "cellular" shall be interpreted and applied accordingly;

(c) "cellular assets" of a cell company means the assets of the company attributable to any cell of the company as may be prescribed; and

(d) "cell company" is a company formed or constituted as such or converted into a cell company and creating within itself one or more cells for the purpose of segregating and protecting the cellular assets of the company in such manner as may be prescribed.

Application of article 84(10)(c) to collective investment schemes.

84B. Nothing in article 84 shall be deemed to prohibit a company, which is not a company with variable share capital but which qualifies as a collective investment scheme and is duly licensed under the Investment Services Act, from being constituted as an umbrella or multi-class company and the provisions of article 84(10)(c) shall apply mutatis mutandis to such company.

Increase in issued share capital and directors’ authority to issue shares.

85. (1) Any increase in the issued share capital of a company shall be decided upon by an ordinary resolution of the company, unless the memorandum or articles require a higher percentage than that required for an ordinary resolution by article 135(2).

(2) The memorandum or articles of a company may permit the general meeting to authorise by ordinary resolution the Board of directors to issue shares up to a maximum amount as may be s p e c i f i e d i n t h e s a m e m e m o r a n d u m a n d a r t i c l e s , w h i c h authorisation shall be for a maximum period of five years, renewable for further periods of five years each; and where that permission is not contained in the company’s memorandum or articles, the same authority may be given to the Board of directors by an extraordinary resolution.

(3) Where there are several classes of shares, the resolution of the general meeting concerning the increase in the issued share capital referred to in subarticle (1) or the authorisation referred to in subarticle (2) shall be subject to a separate vote for each class of shareholders whose rights are affected by that resolution or authorisation, and the provisions relating to the majority required for the resolution by virtue of subarticle (1) and (2) shall apply for each class.

(4) A copy of any such ordinary or extraordinary resolution referred to in subarticles (1), (2) and (3) shall be delivered to the Registrar for registration, within fourteen days after the date of the relative resolution, failing which every officer of the company who is in default shall be liable to a penalty, and for every day during which the default continues, to a further penalty.

(5) The provisions of subarticles (1) to (4) shall apply to the issue of all securities which are convertible into shares or which carry the right to subscribe for shares, but not to the conversion of such securities, nor to the exercise of the right to subscribe.

(6) Where an increase in the issued share capital is not fully taken up, the issued share capital shall be increased by the amount of subscriptions received only if the conditions of the issue so provide.

Amount paid up on allotment of shares in a public company.

86. Shares shall be paid up on allotment to at least twenty-five per cent of their nominal value in the case of a public company.

Amount paid up on allotment of shares in a private company.

87. Shares shall be paid up on allotment to at least twenty per cent of their nominal value in the case of a private company.

Offering of shares on a pre-emptive basis on issue.

88. (1) Whenever shares of a public company are proposed to be allotted for consideration in cash, those shares shall be offered on a pre-emptive basis to shareholders in proportion to the share capital held by them:

Provided that shares in a company, whether public or private, shall not be offered on a pre-emptive basis to the company itself, notwithstanding any other provision of this Act empowering the company to hold its own shares.

(2) Where the issued share capital of a company as referred to in subarticle (1) having several classes of shares carrying different rights with regard to voting, or participation in distributions, or sharing in assets in the event of a winding up, is increased by issuing new shares for allotment in only one of these classes, the right of pre-emption of shareholders of the other classes is to be exercised only after the exercise of this right by the shareholders of the class in which the new shares issued are to be allotted.

(3) A copy of any offer of subscription on a pre-emptive basis indicating the period within which this right shall be exercised shall be delivered to the Registrar for registration:

Provided that where the public company has not issued share warrants, such registration shall not be required as long as all the shareholders of the company are informed in writing of the offer of subscription on a pre-emptive basis and of the period within which this right shall be exercised.

(4) The right of pre-emption referred to in subarticle (3) shall be exercised within a period of not less than fourteen days from the date of publication of the offer in the Gazette or on a website maintained by the Registrar in accordance with article 401(1)(e), or from the date of dispatch of the letters to the shareholders referred to in the same subarticle.

(5) The right of pre-emption shall not be restricted or withdrawn by the memorandum or articles:

Provided that, for a particular allotment as referred to in this article, the right of pre- emption may be restricted or withdrawn by extraordinary resolution of the general meeting. In such case the Board of directors shall be required to present to that general meeting a written report indicating the reasons for restriction or withdrawal of the right of pre-emption and justifying the proposed issue price.

(6) A copy of the resolution referred to in subarticle (5), shall be delivered by the directors or by the company secretary to the Registrar for registration.

(7) The memorandum or articles or an extraordinary resolution of the general meeting may authorise the Board of directors to restrict or withdraw the right of pre-emption if the Board is authorised to issue shares in accordance with article 85 and for as long as the Board remains so authorised.

(8) A copy of the resolution referred to in subarticle (7) shall be delivered to the Registrar for registration.

(9) The provisions of subarticles (1) to (8) shall apply to the issue of all securities which are convertible into shares or which carry the right to subscribe for shares, but not to the conversion of such securities, nor to the exercise of the right to subscribe.

(10) The right of pre-emption shall not be excluded for the purposes of subarticles (5) to (8) where, in accordance with the decision to allot shares, shares are issued to banks or financial institutions with a view to their being offered to shareholders of the company in accordance with subarticle (1).

(11) If default is made in complying with subarticles (6) or (8), every officer of the company who is in default shall be liable to a penalty, and, for every day during which the default continues, to a further penalty.

Chapter III - Capital issues by public companies

89. (1) It shall not be lawful for a public company to issue any form of application for its shares or debentures unless the company is registered and the form is issued with a prospectus which complies with the requirements of article 90:

Provided that the provisions of this Chapter shall not apply to a form of application issued either -

(a) in connection with a bona fide invitation to a person to enter into an underwriting agreement with respect to the shares or debentures; or

(b) in relation to shares or debentures which are not offered to the public; or

(c) by a holder of a collective investment scheme licence within the meaning of the Investment Services Act provided such issue is made in accordance with rules or regulations made under that Act.

(2) The issue of a prospectus or of a form of application for shares in or debentures of a company to existing members or debenture holders of the company shall not be deemed to be an offer to the public whether an applicant will or will not have the right to renounce in favour of other persons.

Dating of prospectus and matters to be stated therein.

90. (1) Every prospectus shall be dated and shall state the matters specified in Part I of the Second Schedule and set out the reports specified in Part II of that Schedule.

(2) A condition requiring or binding an applicant for shares or debentures to waive compliance with any requirement of this article or purporting to effect him with notice of any contract, document or matter not specifically referred to in the prospectus shall be void.

Penalty.

91. Any person responsible for the issue, circulation or distribution of a prospectus or for the issue of a form of application for shares or debentures, in contravention of any of the provisions of article 89 or of article 90(1) shall be liable to a penalty:

Provided that a director or other person responsible for the prospectus shall not incur liability if -

(a) as regards any matter not disclosed he proves that he was not cognizant thereof; or

(b) he proves that the contravention arose from an honest mistake of fact on his part; or

(c) the contravention was in respect of matters which, in the opinion of the court, were immaterial or otherwise such as ought, having regard to all the circumstances of the case, reasonably to be excused:

Provided further that in the event of failure to include in a prospectus a statement with respect to matters specified in paragraph 24 of the Second Schedule, no director or other person shall incur any liability in respect of the failure unless it be proved that he had knowledge of the matters not disclosed.

Prospectus including a statement by experts.

92. (1) A prospectus including a statement purporting to be made by an expert shall not be issued unless -

(a) the expert has given and has not, before delivery of a copy of the prospectus for registration, withdrawn his written consent to the issue thereof; and

(b) a statement that he has given and has not withdrawn his consent as aforesaid appears in the prospectus.

(2) If any prospectus is issued in contravention of the provisions of this article, every person who is knowingly a party to the issue thereof shall be liable to a penalty.

Registration of prospectus.

93. (1) No prospectus shall be issued unless, on or before the date of its publication as specified in article 99, there has been delivered to the Registrar for registration a copy thereof signed by every person who is named therein as a director of the company, or by his agent authorised in writing, and having endorsed thereon or attached thereto -

(a) any consent to the issue of the prospectus required by the last preceding article from any person as an expert; and

(b) a copy of any contract required by paragraph 23 of the Second Schedule to be stated in a prospectus or, in the case of a contract not reduced in writing, a memorandum giving full particulars thereof.

(2) If a prospectus is issued in contravention of this article, every person who is knowingly a party to the issue of the prospectus shall be liable to a penalty, and, for every day from the date of the issue of the prospectus until a copy thereof is delivered as aforesaid with the required documents endorsed thereon or attached thereto, to a further penalty.

Civil liability for misstatements in prospectus.

94. (1) The persons who are responsible for or who have authorised the issue of a prospectus shall be jointly and severally liable for any damage sustained by a person subscribing for shares or debentures on the faith of that prospectus, by reason of any untrue statement included therein:

Provided that a person who has given the consent required by article 92 shall not be liable as a person who has authorised the issue of a prospectus except in respect of an untrue statement made by him as an expert.

(2) No person shall be liable under this article if -

(a) he proves that he had reasonable grounds to believe and did, up to the time of the allotment of the shares or debentures believe, that the statement was true; or

(b) he proves, as regards an untrue statement made by an expert, that he had reasonable grounds to believe and did, up to the time of the allotment of the shares or debentures believe, that the person making the statement was competent to make it; or

(c) on becoming aware of the untrue statement before any allotment is made under the prospectus, he gave reasonable public notice of the untruthfulness of the statement.

Document containing offer of shares or debentures for sale to be deemed prospectus.

95. (1) Where a company allots or agrees to allot any shares in or debentures of the company with a view to all or any of those shares or debentures being offered for sale to the public, any document by which the offer for sale to the public is made shall for all purposes be deemed to be a prospectus and all the rules relating to prospectuses shall apply and have effect accordingly.

(2) It shall be presumed, unless the contrary is proved, that the allotment or agreement to allot was made with a view to the shares or debentures being offered for sale to the public if it is shown -

(a) that an offer for sale to the public was made within six months after the allotment; or agreement to allot; or

(b) that at the date when the offer was made the whole consideration to be received by the public company in respect of the shares or debentures had not been so received.

(3) The provisions of article 93 as applied by this article shall have effect -

(a) as if that article further required a prospectus to have attached thereto a copy of any contract under which the said shares or debentures have been or are to be allotted or, in the case of a contract not reduced in writing, a memorandum giving full particulars thereof; and

(b) as though the persons making the offer were persons named in the prospectus as directors of a company.

Interpretation of provisions relating to prospectus.

96. (1) For the purposes of the provisions of articles 89 to 95 -

(a) a statement included in a prospectus shall be deemed to be untrue if it is misleading in the form and context in which it is included; and

(b) a statement shall be deemed to be included in a prospectus if it is contained therein or in any document appearing on the face thereof or by reference incorporated therein or issued therewith.

(2) In this Chapter the term "expert" includes engineer, valuer, accountant and any other person whose profession gives authority to a statement made by him.

Chapter IV -Allotment of shares and debentures of companies

No allotment unless minimum subscription received.

97. (1) No allotment shall be made of any share capital of a public company offered to the public for subscription -

(a) unless there has been subscribed and paid in cash the amount stated in the prospectus as the minimum amount which, in the opinion of the directors, shall be raised by the issue of share capital in order to provide for the preliminary expenses, purchase of property and working capital as specified in the prospectus; and

(b) unless the capital is subscribed in full, whether or not in cash, or the conditions stated in the offer for allotment, where the offer is not fully subscribed, are satisfied.

(2) If the conditions referred to in subarticle (1) have not been complied with on the expiration of forty days after the issue of the prospectus, all money received from applicants for shares shall be forthwith repaid to them without interest.

(3) If any of the money is not repaid within forty-eight days after the issue of the prospectus, the directors of the company shall be jointly and severally liable to repay it with annual interest at the rate of two percentage points over the Central Bank of Malta minimum discount rate from the expiration of the fortieth day; except that a director shall not be so liable if he proves that the default in the repayment of the money was not due to any misconduct or negligence on his part.

(4) Any condition requiring or binding an applicant for shares to waive compliance with any requirement of this article shall be void.

(5) All money received from applicants in pursuance of the prospectus shall remain the property of the applicants until such time as the allotment is made in an irrevocable manner and shall not be available for the satisfaction of any debts of the company. Such money shall be kept in a separate bank account so long as the company may become liable to repay it under subarticle (2); and if default is made in complying with this subarticle, the company and every officer of it who is in default shall be liable to a penalty, and, for every day during which the default continues, to a further penalty.

Effect of irregular allotment.

98. (1) An allotment made by a company in contravention of article 97 shall be voidable at the instance of the applicant for shares referred to in the same article by writ of summons filed within one month after the date of the allotment:

Provided that the proceedings may be commenced even if the company has been dissolved and is being wound up.

(2) If a director knowingly contravenes or permits or authorises the contravention of article 97, he shall be liable to compensate the company and the allottee respectively for any loss, damages or costs which the company or the allottee may have sustained or incurred by the contravention:

Provided that proceedings to recover any such loss, damages or costs shall only be commenced by writ of summons within two years from the date of allotment.

Time of the opening of the subscription lists.

99. (1) No allotment shall be made of any shares in or debentures of a public company in pursuance of a prospectus and no proceedings shall be taken on applications made in pursuance of a prospectus until at least the beginning of the third working day or such later time, if any, as may be specified in the prospectus, after the publication in a daily newspaper circulating wholly or mainly in Malta of a notice stating that a prospectus has been issued.

(2) The beginning of the said third working day or such later time as aforesaid is hereinafter in this Act referred to as "the time for the opening of the subscription lists".

(3) In the application of this article to a prospectus offering shares or debentures for sale, subarticles (1) and (2) shall have effect with the substitution of references to sale for references to allotment.

Revocability of application for shares or debentures.

100. An application for shares in or debentures of a public company which is in pursuance of a prospectus shall not be revocable until after the expiration of the third working day after the time of the opening of the subscription lists, or the giving, before the expiration of the said third working day, by some person responsible under article 94 for the prospectus, of a public notice having the effect under that article of excluding the responsibility of the person giving it.

Allotment of shares, etc., to be dealt in on stock exchange.

101. (1) The following provisions of this article shall apply where a prospectus issued by or on behalf of a public company states that application has been or will be made for permission for the shares or debentures offered by it to be listed on a recognised investment exchange in or outside Malta.

(2) An allotment made on an application in pursuance of the prospectus shall, whenever made, be void if the permission has not been applied for before the third working day after the first issue of the prospectus or if the permission has been refused before the expiration of twenty-one days from the date of the closing of the subscription lists or such longer period, not exceeding forty-two days, as may be notified to the applicant, within those twenty-one days, for permission by or on behalf of the stock exchange.

(3) Where permission has not been applied for as required by subarticles (1) and (2), or has been refused, the company shall forthwith repay, without interest, all money received from applicants in pursuance of the prospectus.

(4) If any of the money is not repaid within eight days after the company becomes liable to repay it, the directors of the company shall be jointly and severally liable to repay the money with annual interest at the rate of two percentage points over the Central Bank of Malta minimum discount rate from the day the company becomes liable to repay it, except that a director shall not be liable if he proves that the default in the repayment of the money was not due to any misconduct or negligence on his part.

(5) All money received from applicants in pursuance of the prospectus shall remain the property of the applicants until such time as the allotment is made in an irrevocable manner and shall not be available for the satisfaction of any debts of the company. Such money shall be kept in a separate bank account so long as the company may become liable to repay it under subarticle (3): and if default is made in complying with this subarticle, the company and every officer of it who is in default shall be liable to a penalty, and, for every day during which the default continues, to a further penalty.

(6) Any condition requiring or binding an applicant for shares or debentures to waive compliance with any requirement of this article shall be void.

(7) For the purposes of this article, permission shall not be deemed to be refused if it is intimated that the application for it, though not at present granted, will be given further consideration.

(8) The provisions of this article shall have effect in relation to shares or debentures agreed to be taken by a person underwriting an offer of them by a prospectus as if he had applied for them in pursuance of the prospectus.

Operation of article 101 where prospectus offers shares for sale.

102. (1) The provisions of article 101, other than subarticle (4) thereof, shall apply to a prospectus offering shares for sale, otherwise than by allotment, subject to the following provisions of this article.

(2) Subarticles (1) and (2) of article 101 shall apply, as though the reference in the said subarticle (2) of article 101 to allotment were a reference to sale.

(3) Subarticle (3) of article 101 shall apply as though the reference therein to company were a reference to the offeror.

(4) If any of the money is not repaid within eight days after the offeror becomes liable to repay it, he shall become liable to pay annual interest on the money due, at the rate of two percentage points over the Central Bank of Malta minimum discount rate from the end of the eighth day.

(5) Subarticles (5) to (8) of article 101 shall apply, except that in subarticle (5) thereof -

(a) the first reference to the company shall be construed as a reference to the offeror; and

(b) the reference to the company and every officer of the company who is in default shall be construed as a reference to any person by or through whom the offer is made and who knowingly and wilfully authorises or permits the default.

Return as to allotments.

**103. (1) Whenever a company makes any allotment of its shares, the company shall, within one month thereafter, deliver to the Registrar for registration -

(a) a return of the allotments stating the number and the nominal amount of the shares comprised in the allotment, the names and addresses of the allottees and the amount paid and that due, and payable, on each share, whether on account of the nominal value of the share or by way of premiums; and

(b) in the case of shares allotted as fully or partly paid up otherwise than in cash, a contract in writing or, where the contract is not reduced to writing, a document containing the particulars of the contract, constituting the title of the allottee to the allotment, together with any contract of sale, or for services rendered or other consideration in respect of which the allotment was made, and a return stating the number and nominal value of shares so allotted, the extent to which they are to be treated as paid up, and the consideration for which they have been allotted; and

(2) If default is made in complying with the provisions of this article, every officer of the company who is in default shall be liable to a penalty, and, for every day during which the default continues, to a further penalty.

Chapter V - Maintenance of share capital and protection of class rights

Duty of directors on serious loss of capital.

104. (1) Where the net assets of a public company are half or less of its called-up issued share capital, the directors shall, not later than thirty days from the earliest day on which that fact is known to any director of the company, duly convene a general meeting of the company by means of a notice to that effect for a date not later than forty days from the date of the notice for the purpose of considering whether any, and if so, what steps should be taken to deal with the situation, including consideration as to whether the company should be dissolved.

In this subarticle, "net assets" shall have the same meaning assigned to it under article 193(2).

(2) In a meeting convened in pursuance of subarticle (1), only the steps mentioned in the said subarticle may be considered.

(3) If a general meeting as required by subarticle (1) is not convened, each of the directors of the company in default shall be liable to a penalty, and, for every day during which the default continues, to a further penalty.

Company may not subscribe for its own shares.

105. (1) A company shall not subscribe for any of its own shares, whether on original subscription or on any subsequent subscription, and if any of its shares have been subscribed for by a person acting in his own name but on behalf of the company the subscriber shall be deemed to have subscribed for them for his own account.

(2) On the registration of a company, the subscribers to the memorandum shall be jointly and severally liable to pay for the shares subscribed in contravention of subarticle (1).

(3) In the case of an increase in the issued share capital, the members and directors shall be liable jointly and severally to pay for the shares subscribed in contravention of subarticle (1) provided that any member or director may be released from such liability if he proves that the breach occurred through no fault of his own.

Conditions in which a company may acquire its own shares.

106. (1) A company may acquire any of its own shares otherwise than by subscription, provided all the following conditions are respected -

(a) provision is made by the memorandum or articles of the company for authorising the acquisition by the company of its own shares;

(b) authorisation is given by an extraordinary resolution, which resolution shall determine the terms and conditions of such acquisitions and in particular the maximum number of shares to be acquired, the duration of the period for which the authorisation is given and which may not exceed eighteen months and, in the case of acquisition for valuable consideration, the maximum and minimum consideration;

(b) above subject however to the condition that shares already held by the company itself shall be treated as carrying no voting rights;

(d) the nominal value of the acquired shares, including shares previously acquired by the company and heldby it shall not exceed ten per cent of the issued share capital;

(e) no acquisitions by a company of its own shares shall be made when on the closing date of the last accounting period the net assets as set out in the company’s annual accounts are, or following such distribution, would become lower than the amount of issued share capital plus those reserves which may not be distributed under the provisions of this Act or the company’s memorandum or articles; and in any case it shall not be possible for the company to acquire any of its own shares except out of the proceeds of a fresh issue of shares made specifically for the purpose, or out of profits available for distribution;

(f) the shares acquired shall be fully paid up shares; and

(g) a company may not as a result of the acquisition of any of its shares become the only holder of its ordinary shares.

(2) The company shall deliver to the Registrar for registration a copy of the resolution mentioned in subarticle (1). If default is made in complying with the provisions of this subarticle, every officer of the company who is in default shall be liable to a penalty, and, for every day during which the default continues, to a further penalty.

(3) The provisions of subarticle (1)(b) shall not apply where the acquisition of a company’s own shares is necessary to prevent serious and imminent harm to the company.

(4) The provisions of subarticle (1)(b) shall furthermore not apply to shares acquired either by the company itself or by a person acting in his own name but on the company’s behalf for distribution to that company’s employees or to the employees of its parent company or of any of its subsidiary undertakings. Such shares shall be distributed within one year of their acquisition.

(5) References in this article and in articles 107 to 110 to a company holding, acquiring or otherwise dealing in its own shares shall be deemed to include references to the company so doing either itself or through a person acting in his own name but on the company’s behalf.

Acquisition of own shares by a company without application of article 106.

107. (1) A company may acquire any of its own shares otherwise than by subscription without complying with the provisions of article 106, other than subarticle (1)(g) thereof, where the shares are -

(a) acquired by the company in the course of a reduction of the issued share capital made in accordance with article 83; or

(b) the subject of an application which is revoked in accordance with the provisions of article 100; or

(d) acquired in any procedure for the conversion, the amalgamation or the division of companies pursuant to the provisions contained in Part VII, Part VIII and Part IX, respectively, of this Act; or

(e) acquired in any procedure for the change of status of a company pursuant to the provisions of article 213; or

(f) acquired by the company pursuant to an order of the court made under the provisions of this Act for the re- purchase of shares held by dissenting shareholders, including any order made in terms of article 402(3)(d); or

(g) fully paid up and acquired by an investment company with fixed share capital or by another company forming part of the same group at the member’s request provided that such acquisitions shall not have the effect of reducing the company’s net assets below the amount of the issued share capital plus any reserves the distribution of which is forbidden by law;

(h) acquired by the company during a redemption of preference shares in accordance with article 115.

(2) Where shares acquired pursuant to subarticle (1)(b) to (f) are retained by the company and are not disposed of within thirty months of their acquisition the company shall by extraordinary resolution cancel such shares within six months of the expiry of the said thirty months.

(3) The provisions of article 83 dealing with the reduction of issued share capital shall apply where shares are cancelled pursuant to subarticle (2):

Provided that the court may not disallow the cancellation but, if good cause is shown, it shall only order that sufficient security be given to the creditor who had objected to the cancellation, and if sufficient security is not immediately available, the court shall order the provision of such security immediately it becomes available to the company and no distribution of dividend may be effected by the company in the meantime.

(4) If the company fails to comply with subarticle (2) within the time limit prescribed, any member or director of the company may apply to the court for an order that such shares be cancelled.

(5) Where the nominal value of the shares held by the company in pursuance of any of the provisions of subarticle (1), including shares which the company may have acquired through a person acting in his own name but on behalf of the company, does not exceed ten per cent of the issued share capital thereof, the provisions of subarticles (2) to (4) shall not apply.

Shares acquired or held in contravention of articles 106 and 1.

108. (1) If shares acquired or held in contravention of article 106 and of article 107(1) are not disposed of within one year of their acquisition, the company shall cancel such shares within six months of the expiry of the said year.

(i) Where shares are cancelled pursuant to subarticle (1) the provisions of article 83 shall apply subject to the proviso to article 107(3).

(ii) If the company fails to comply with subarticle (1) within the time limit prescribed, any member or director of the company may apply to the court for an order that such shares be cancelled.

Conditions for acquisition by a company of its own shares where permitted by law.

109. During the time that a company holds any of its own shares -

(a) they shall carry no voting rights notwithstanding any provisions to the contrary in the company’s memorandum or articles; and

(b) if the shares are included among the assets of the company shown in the balance sheet, a reserve of the same amount, unavailable for distribution, shall be included among the reserves.

Undertaking may not subscribe for or acquire shares in its parent company or provide financial assistance for the purchase of, or subscription for, its own or its parent company’s shares.

110. (1) It shall not be lawful for an undertaking -

(a) to subscribe for, hold, acquire or otherwise deal in shares in a company which is its parent company; or

(b) to give, whether directly or indirectly, and whether by means of a loan, guarantee, the provision of security or otherwise, any financial assistance for the purpose of an acquisition or subscription made or to be made by any person of or for any shares in the company or its parent company.

(2) The provisions of subarticle (1) shall not apply to transactions effected with a view to the acquisition of shares by or for the company’s employees or the employees of a group company:

Provided that such transactions shall not have the effect of reducing the net assets of the company below the amount specified in article 106(1)(e).

(3) Subarticle (1) shall not apply to the provision of financial assistance by an investment company with fixed share capital for the purpose of or in connection with the acquisition of its fully paid up shares by another undertaking:

Provided that such provision of financial assistance may not have the effect of reducing the net assets of the company below the amount specified in article 106(1)(e).

Effect of acceptance of a company’s own shares as security.

111. The acceptance of a company’s own shares by way of pledge or other form of security shall be treated as an acquisition by the company of such shares for the purposes of articles 106, 107 and 109.

Forfeiture or surrender of shares.

112. (1) Any share in a company may be forfeited from any shareholder in favour of the company and any shareholder may surrender any or all of his shares in a company in favour of that company if the shareholder fails to pay any call or instalment of a call on the day appointed for payment thereof and as long as provision to that effect is contained in the memorandum or articles of the company.

(2) The provisions of article 109 shall apply to a forfeiture or surrender of shares until such time as the company disposes of or otherwise cancels them.

Conditions for payment of commissions, discounts, etc.

113. (1) It shall be lawful for a company to pay a commission or make a discount or allowance to any person in consideration for his subscribing or agreeing to subscribe, whether absolutely or conditionally for any shares in the company, or procuring or agreeing to procure subscriptions, whether absolute or conditional, for any shares in the company, provided that -

(a) authority therefor is given by the memorandum or articles; and

(b) the commission, discount or allowance does not exceed ten per cent of the price at which the shares are issued or the amount authorised by the memorandum or articles, whichever is the less; and

(c) the amount or rate per cent of the commission, discount or allowance and the number of shares which persons have agreed in consideration thereof to subscribe absolutely shall be disclosed in the manner required by subarticle (3): and

(d) in no event may the value of such shares be reduced to below their nominal value as a result of the payment of such commission, discount or allowance.

(2) If shares are issued in contravention of the provisions of this article the holder thereof shall be bound to pay the company an amount equal to the amount of the commission, discount or allowance given in excess of that permitted by this article, with annual interest at the rate of two percentage points over the Central Bank of Malta minimum discount rate.

(3) The conditions specified in subarticle (1) shall, in the case

of shares offered to the public for subscription, be disclosed in the prospectus and in the case of shares not so offered -

(a) they shall be disclosed in a statement signed by every director of the company or by any other person in representation of any director so authorised in writing and delivered to the Registrar for registration before the actual payment of the commission, discount or allowance; and

(b) where a circular or notice, not being a prospectus, giving subscription for the shares is issued, they shall also be disclosed in such circular or notice.

(4) If default is made in complying with subarticle (3)(a), every officer of the company who is in default shall be liable to a penalty.

Application of premium received on issue of shares.

114. (1) Where a company issues shares at a premium whether for cash or otherwise, a sum equal to the aggregate amount or value of the premiums on those shares shall be immediately paid in full and transferred to an account, to be called "the share premium account", and the provisions of this Act relating to the reduction of the issued share capital of a company shall, except as provided in this article, apply as if the share premium account were paid up share capital of the company.

(2) The share premium account may, notwithstanding anything contained in the foregoing subarticle, be applied by the company -

(a) in paying up unissued shares of the company to be issued to members of the company as fully paid bonus shares; or

(b) in writing off the preliminary expenses of the company or the expenses of or the commission paid or discount allowed on, any issue of shares or debentures of the company; or

(c) in providing for the premium payable on redemption of any redeemable preference shares or of any debentures of the company.

Redeemable preference shares.

115. (1) Where a company, duly authorised by its memorandum or articles, issues preference shares which are to be redeemed or are liable to be redeemed at the option of the company or the shareholder -

(a) no such shares shall be redeemed except out of the profits of the company which would otherwise be available for dividend or, in accordance with subarticle (4), out of the proceeds of a fresh issue of shares made for the purpose of the redemption;

(b) no such shares shall be issued after 1st June 2003 unless the following conditions are satisfied as regards the terms and manner of redemption -

(i) the date on or by which, or dates between which, the shares are to be or may be redeemed must be specified in the company’s memorandum or articles or, if the memorandum or articles so provide, fixed by the directors, and in the latter case the date or dates must be fixed before the shares are issued;

(ii) any other circumstances in which the shares are to be or may be redeemed must be specified in the company’s memorandum or articles;

(iii) the amount payable on redemption must be specified in, or determined in accordance with, the company’s memorandum or articles, and in the latter case the memorandum or articles must not provide for the amount to be determined by reference to any person’s discretion or opinion; and

(iv) any other terms and conditions of redemption shall be specified in the company’s memorandum or articles;

(c) no such shares shall be redeemed unless they are fully paid up and the terms of redemption shall require full payment on redemption;

(d) the premium, if any, payable on redemption shall have been provided for out of the profits of the company or out of the company’s share premium account before the shares are redeemed;

(e) where any such shares are redeemed otherwise than out of the proceeds of a fresh issue, there shall, out of profits, which would otherwise have been available for distribution as dividend, be transferred to a reserve to be called "the capital redemption reserve", a sum equal to the nominal amount of the shares redeemed, and the provisions of this Act relating to the reduction of the issued share capital of a company shall, except as provided in this article, apply as if the capital redemption reserve were paid up share capital of the company.

(2) The capital redemption reserve may, notwithstanding anything contained in this article, be applied by the company in paying up unissued shares of the company to be issued to members of the company as fully paid bonus shares.

(3) Preference shares redeemed under this article shall be treated as cancelled on redemption, and the amount of the company’s issued share capital shall be diminished by the nominal value of those shares accordingly:

Provided that a redemption of preference shares by a company shall not to be taken as reducing the amount of the company’s authorised share capital.

(4) Without prejudice to the provisions of subarticle (3), where a company is about to redeem preference shares, it shall have the power to issue shares up to the nominal value of the preference shares to be redeemed as if those preference shares had never been issued.

(5) A notice of the redemption of preference shares referred to in the preceding subarticles of this article shall be delivered by the company to the Registrar for registration, within fourteen days after the date of redemption.

(6) If default is made in complying with the provisions of subarticle (5) every officer of the company who is in default shall be liable to a penalty, and, for every day during which the default continues, to a further penalty.

Rights of holders of special classes of shares and changes or variations thereof.

116. (1) If, in the case of a company the share capital of which is divided into different classes of shares, provision is made by the memorandum or articles for authorising the change of any shares in the company from one class into another or for the variation of the rights attached to any class of shares in the company, subject to the consent of any specified proportion of the holders of the issued shares of that class and of any other class affected thereby or the sanction of a resolution passed at a separate meeting of the holders of those shares and of the holders of any other shares affected thereby, and in pursuance of the said provision the shares are changed from one class into another or the rights attached to any such class of shares are at any time varied, the holders of not less in the aggregate than fifteen per cent either of the issued shares of that class or of any other class affected thereby, being persons who did not consent to or vote in favour of the resolution for the change or variation, may by writ of summons filed within twenty-one days of the consent or the resolution, demand that the change or variation shall not have effect.

(2) On any such demand the court, if it is satisfied, having regard to all circumstances of the case, that the change or variation would unfairly prejudice the holders of shares, the class of which is being changed or the rights of which are being varied, or theholders of any other class of shares affected thereby, shall disallow the change or variation.

(3) The Registrar of Courts shall without delay cause a copy of any writ of summons filed under subarticle (1) and of any judgmentgiven thereon to be served on the Registrar for registration, and the said writ of summons shall, on pain of nullity, include a demand tothat effect.

(4) Article 79(2) and (4) shall apply in respect of any consent or resolution given or taken in terms of subarticle (1).

(5) Where no provision is made by the memorandum or articlesfor authorising the change or variation referred to in subarticle (1),no such change or variation may be made.

Chapter VI - Miscellaneous provisions about shares and debentures

Numbering of shares.

117. Each share in a company shall be distinguished by its appropriate number:

Provided that, if at any time all the issued shares in a company, or all the issued shares therein of a particular class, are fully paid up and rank pari passu for all purposes, none of those shares need thereafter have a distinguishing number so long as they remain fully paid up and rank pari passu for all purposes with all shares of the same class for the time being issued and fully paid up.

Transfer of shares or debentures.

118. (1) Notwithstanding any provisions contained in any other law, a transfer of shares in or debentures of a company may be made by private writing.

(2) It shall not be lawful for a company to register a transfer of shares in or debentures of the company unless a proper instrument of transfer or an authentic copy thereof has been delivered to the company:

Provided that, without prejudice to any obligation arising under the provisions of the Duty on Documents and Transfers Act, nothing in this article shall prejudice any power of the company to register as shareholder or debenture holder any person to whom the right to any shares in or debentures of the company has been transmitted causa mortis.

Registration of transfer or transmission of shares or debentures.

119. (1) On the application of the transferor or of the transferee of any share in or debenture of a company, the company shall enter in its register of members or of debentures, as the case may be, the name and address of the transferee and where the application is made by the transferor the entry shall be made in the same manner and subject to the same conditions as if the application for the entry were made by the transferee.

(2) If a company refuses to register a transfer of shares or debentures, it shall, within two months after the date on which the transfer was lodged, send to the transferee notice of the refusal.

(3) Notwithstanding the provisions of the regulations contained in Part I of the First Schedule and notwithstanding anything contained in a public company’s memorandum or articles, the directors of a public company shall be obliged to register the transfer of any shares in the company in favour of any person who has acquired those shares as a result of a judicial sale thereof.

(4) On the application of the person to whom the right to any shares in or debentures of a company has been transmitted causa mortis, the company shall register in its register of members or debentures, as the case may be, the name and address of such person.

(5) If a company refuses to register a transmission as is referred to in subarticle (4), it shall, within two months after the date on which the transmission is lodged, send to the person to whom the right to any shares or debentures of a company has been transmitted causa mortis, notice of the refusal.

(6) If default is made in complying with the provisions of subarticles (2) or (5), every officer of the company who is in default, shall be liable to a penalty, and, for every day during which the default continues, to a further penalty.

Issue of certificates.

120. (1) Every company shall, within two months after the allotment of any of its shares or debentures and within two months after the date on which a transfer of any such shares or debentures is registered with the company, and within one month from the date on which any such shares or debentures transmitted causa mortis have been registered in the name of the person entitled to be registered as the holder thereof, deliver the certificates of all shares, debentures or debenture stock allotted, transferred or transmitted causa mortis to the persons entitled thereto, unless the conditions of issue of the shares or debentures otherwise provide.

(2) The expression "transfer" for the purposes of this article means a transfer on which the relevant duty, if any, has been paid and is otherwise valid, and does not include such a transfer as the company is for any reason entitled to refuse to register and does not register.

(3) In the case of a transfer or of a transmission causa mortis of shares the company shall within fourteen days after the date on which a transfer of any such shares is registered with the company, and within one month from the date on which any such shares transmitted causa mortis have been registered in the name of the person entitled to be registered as the holder thereof, deliver to the Registrar for registration a notice of the transfer or the transmission causa mortis stating the names and addresses of the transferees or the names and addresses of the persons entitled to the shares transmitted causa mortis, as the case may be.

(4) If default is made in complying with any of the provisions of this article, every officer of the company who is in default shall be liable to a penalty, and, for every day during which the default continues, to a further penalty.

Share warrants.

121. (1) A public company, if so authorised by its memorandum or articles, may, with respect to any fully paid up shares, issue a warrant to bearer, in this Act referred to as a "share warrant", stating that the bearer of the warrant is entitled to the shares therein specified and may provide, by coupons or otherwise, for the payment of the future dividends on shares included in the warrant.

(2) The shares specified in a share warrant may be transferred by the delivery of the warrant.

Pledging of securities.

122. (1) Securities may, unless otherwise provided in the memorandum or articles of the company or under the conditions of issue of those securities, be pledged by their holder in favour of any person as security for any obligation. The pledge of securities shall be constituted by means of an instrument in writing entered into between the pledgor and the pledgee:

Provided that the pledge of share warrants or debenture warrants shall be constituted by delivery of the warrant to the pledgee, and the provisions of subarticles (2) to (5), (10) to (12), (14) and (15) shall not apply thereto:

Provided further that in the case of a private company, securities may not be pledged unless the memorandum or articles of the company specifically so provide; and in relation to transfers of shares by members of the company any restriction resulting from the memorandum or articles of the company shall, subject to the provisions of subarticle (10), be deemed not to apply to transfers by the pledgee in terms of subarticle (6) or resulting from any judicial sale.

(2) Notice of the pledge shall be delivered by the pledgor or the pledgee to the Registrar for registration within fourteen days of the granting of the pledge. The company whose securities have been pledged, shall also be notified of the pledge in writing within the said period and the company shall record that fact in the register of holders of the respective securities.

(3) The pledge of securities shall be effective in relation to a third party only after the registration by the Registrar of the notice referred to in subarticle (2).

(4) Saving the provisions of subarticle (3), during the existence of a pledge of securities, any transfer or other assignment, made by the pledgor, whether by onerous or gratuitous title, of the pledged securities shall be null and void.

(5) Notwithstanding the provisions of subarticle (4), any transfer or other assignment of securities made with the consent of the pledgee shall be valid and the securities to be transferred shall continue to be subject to the pledge.

(6) Without prejudice to the right of the pledgee to apply for the judicial sale of the securities and notwithstanding the provisions of the Civil Code or of the memorandum or articles of Cap. 16. the company, in the event of a default under the agreement of pledge and upon giving notice by judicial act to the pledgor and the company, the pledgee shall be entitled to -

(i) dispose of the securities which are pledged in his favour; or

(ii) appropriate and acquire the securities himself, in settlement of the debt due to him or of part thereof.

(7) For the purposes of subarticle (6) the value of the securities may be established by agreement between the pledgor and the pledgee after notice of default has been given by the pledgee to the pledgor in terms of the said subarticle (6), and no prior agreement thereon shall be valid:

Provided that, in case of disagreement, the fair value for the sale or appropriation of the securities shall be determined by a certified public accountant or a certified public accountant and auditor appointed by the Civil Court, First Hall, on the application of the pledgee.

(8) For the purposes of subarticle (7), the fair value of the securities shall be that obtaining on the date of the notice referred to in subarticle (6).

(9) The pledgee shall, in selling the securities in accordance with the provisions of subarticle (6), be obliged to seek the best price being not less than their fair value as determined in accordance with subarticle (7). In the event that a buyer cannot be found for the securities at their fair value, the pledgee shall apply to the court for the securities to be sold at less than their fair value as aforesaid subject to such conditions as the court may deem fit.

(10) In the case of a pledge of shares in a private company, the pledgee shall be obliged, prior to the exercise of the right granted by subarticle (6), to offer the shares to other shareholders of the company in accordance with any pre-emption rights relating to the transfer of shares as laid down in the memorandum or articles of that company, and, failing such pre-emption rights, to all the other shareholders of the company in proportion to their holdings. In either case the shareholders shall be entitled to purchase the shares at the price determined in accordance with subarticle (7). Such offer shall be kept open for at least ten working days.

(11) In the case of a pledge of shares in a public company the memorandum or articles of which require any shareholder wishing to transfer shares in the company to offer them on a pre-emptive basis to other shareholders of the company, the pledgee shall accordingly be obliged, prior to the exercise of the right granted by subarticle (6), to offer the shares to those shareholders, who shall be entitled to purchase the shares at the price determined in accordance with subarticle (7). Such offer shall be kept open for at least ten working days.

(12) (a) In the case of a pledge of securities in a public c o m p a n y w h i c h a r e q u o t e d o n t h e r e c o g n i s e d investment exchange and in respect of which securities arrangements have been made for the maintenance by the recognised investment exchange of the relevant r e g i s t e r o f h o l d e r s t h e r e o f , t h e p r o v i s i o n s o f subarticles (2) to (11) and (15) shall not apply for such quoted securities. The following provisions shall apply instead:

(i) the pledgor or the pledgee shall deliver within fourteen days of the granting of the pledge of a quoted security a certified copy of the signed pledge agreement to the recognised investment exchange, which shall also be served with a notice of termination of the pledge by the pledgee within fourteen days of the termination of the pledge;

(ii) the company whose quoted securities have been pledged shall also be notified of the pledge or of its termination within the said periods and the company shall record that fact in the register of holders of the respective securities;

(iii) such pledge of securities shall be effective in relation to a third party only from the date of delivery of the signed pledge agreement to the recognised investment exchange and any transfer or other assignment made therefrom by the pledgor, whether by onerous or gratuitous title, of the pledged securities shall be null and void; and

(iv) the pledgee shall, in the event of a default under the agreement of pledge and upon giving notice by judicial act to the pledgor, the recognised investment exchange and the company, have the securities sold through a licensed stockbroker.

(b) In the case of a pledge of securities in a public company which are quoted on a prescribed foreign Stock Exchange, the provisions of subarticles (7) to (11) shall not apply and in the event of a default under the agreement of pledge, the pledgee shall, upon notice to the pledgor and the company in accordance with subarticle (6) have the shares sold through a licensed stockbroker.

(13) In the exercise of his rights under this article, the pledgee shall only sell or appropriate such number of securities as are needed to raise sufficient proceeds to repay the debt due. All remaining shares shall be released to the pledgor.

(14) It shall be lawful for the parties to an agreement of pledge of securities to agree on the person or persons who shall exercise all the rights belonging to the holder of securities including voting rights and the right to receive dividends and interest payments:

Provided that, should the agreement between the parties not make provision for such matters, all rights pertaining to a holder of securities shall, for the duration of the pledge, be exercised by the pledgor until such time as he defaults under the agreement of pledge or until the pledgee enforces his security; and in any such case, upon giving notice by a judicial act to the pledgor and the company, all the rights belonging to the pledgor shall immediately become exercisable by the pledgee:

Provided further that, unless the pledgor and the pledgee have otherwise agreed in the pledge agreement and notice thereof has been given to the company, dividends or interests payments due on securities which are pledged shall, during such time as the pledge is registered in the register of holders of the respective securities, be paid by the company to the pledgee who shall appropriate any such amounts received to the interest due on the debt secured by the pledge, and, if there is an excess, to the capital.

(15) Notice of termination of the pledge shall be delivered by the pledgee to the Registrar for registration within fourteen days of the termination of the pledge. The company, securities in which have been pledged, shall also be notified in writing of the termination of the pledge within the said period and the company shall record that fact in the register of holders of the respective securities.

(16) Subject to the provisions of subarticles (6) to (9) and (13), the terms and conditions of the pledge of a share warrant or of a debenture warrant shall be determined by agreement between the pledgor and the pledgee. The pledge of a share warrant or of a debenture warrant shall be effective in relation to a third party from the date of delivery of the share warrant or debenture warrant to the pledgee.

Register of members.

123. (1) Every company shall keep a register of its members and shall enter therein the following particulars:

(a) the names and addresses of the members and a statement of the shares held by each member, distinguishing each share by its number, so long as the share has a number, and of the amount paid or agreed to be considered as paid on the shares of each member;

(b) the date at which each person was entered in the register as a member; and

Provided that on the issue of a share warrant the company shall strike out of its register of members the name of the member then entered therein as holding the shares specified in the warrant and shall enter in place of the aforesaid requirements the following particulars:

(i) the fact of the issue of the warrant;

(ii) a statement of the shares included in the warrant, distinguishing each share by its number so long as the share has a number; and

(iii) the date of the issue of the warrant:

Provided further that where the company has converted any of its shares into stock and has registered the conversion with the Registrar, the register shall show the amount of stock held by each member instead of the amount of shares and the particulars relating to shares specified in paragraph (a).

(2) Where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this Act, be treated as a single member; and, unless otherwise provided in the memorandum or articles, the name of only one of such persons shall be entered in the register of members. Such person shall be elected by the joint holders and shall for all intents and purposes be deemed vis-à-vis the company to be the member of the company in respect of all the shares so held.

(3) The register of members shall be kept at the registered office of the company or at such other place as may be specified in the memorandum or articles.

(4) If default is made in complying with any requirement of this article, every officer of the company who is in default shall be liable to a penalty, and, for every day during which the default continues, to a further penalty.

Register of debentures.

124. (1) Every company shall keep a register of debentures and shall enter therein the names and addresses of the registered holders and particulars of the debentures held by them respectively.

(2) The register of debentures shall be kept at the registered office of the company or at such other place as may be specified in the memorandum or articles.

(3) Where two or more persons hold one or more debentures jointly, they shall for the purposes of this Act be treated as a single debenture holde r; and, unless otherwise provided in the memorandum or articles, the name of only one of such persons shall be entered in the register of debentures. Such person shall be elected by the joint holders and shall for all intents and purposes be deemed vis-à-vis the company to be the holder of all the debentures so held.

(4) If default is made in complying with any requirement of this article, every officer of the company who is in default shall be liable to a penalty and, for every day during which the default continues, to a further penalty.

Inspection of registers.

125. Except when duly closed in accordance with the provisions of article 126, and subject to such reasonable restrictions as the company in general meeting may impose -

(a) the register of members shall be open to the inspection of any member of the company without charge; and

(b) the register of debentures shall be open to the inspection of any person without charge.

Power to close registers.

126. (1) A company may, on giving notice by advertisement in a daily newspaper circulating wholly or mainly in Malta, close the register of members to inspection for any period or periods not exceeding in the whole thirty days in each year.

(2) The register of debentures may be closed to inspection in accordance with provisions contained in the memorandum or articles or in the debentures or, in the case of debenture stock, in the stock certificates, during such period or periods, not exceeding in the whole thirty days in any one year, as may be therein specified.

(3) The memorandum or articles may provide that, during such time as the register of members or the register of debentures is closed in accordance with the provisions of subarticles (1) and (2), no new particulars may be entered therein.

Trustees and nominees.

127. (1) Unless otherwise provided in its articles, a company formed and registered in Malta shall not recognise any nominee relationship or trust in respect of any security issued by it, and the company shall not recognise, even when having notice thereof, any interest or other right in such security, but shall only recognise the registered holder thereof.

(2) Notwithstanding anything contained in this article, the persons beneficially entitled to a security shall be taken into account, and any nominee or any trust relationship shall be disregarded, for determining the status of the company for the purpose of Chapter XII of this Title:

Provided that the company shall not be obliged to obtain or to record any information on the number of beneficiaries and it shall be the sole duty of the trustee to inform the company of the number of beneficiaries if it appears to the trustee that, having regard to the number of beneficiaries, it may result in the aggregate number of persons interested exceeding fifty. The Registrar may at any time order any trustee to declare in writing to the company the number of beneficiaries and in such a case reference shall only be made to beneficiaries who enjoy a fixed interest in the shares under the trust.

(3) Where a trustee holds shares in a company for the benefit of beneficiaries:

(a) the memorandum of association and articles of association, if any, shall be deemed to be validly entered into for the purposes of articles 68 and 75 if they are signed only by the trustee when all the shares in the company are subscribed by the trustee;

(b) the memorandum of association, the register of members, share certificates, returns of allotments and any annual return of a company may specify the number of shares held by the trustee on its own account, if any, and the amount of shares held under trusts or each trust if more than one, and the provisions of article 123(1)(a), (b) and (c) shall be construed accordingly;

(c) a resolution in writing pursuant to article 210 shall be deemed to be valid and effective if it is signed only by the trustee when all the shares in the company are subscribed by the trustee.

(4) (a) Where a beneficial owner of shares in a company which are held by a trustee, transfers or otherwise disposes of the beneficial ownership of such shares inter vivos to a third party, such a transaction shall be deemed to constitute a transfer of shares for the purposes of the Duty on Documents and Transfer Act, and for the purposes of article 5(1) of the Income Tax Act.

(b) Where a change in the registered holder of shares in a company does not involve a change in the beneficial ownership thereof, such change shall not be deemed to constitute a transfer of shares for the purposes of the Duty on Documents and Transfers Act, and for the purposes of article 5(1) of the Income Tax Act, but shall nevertheless be noted in the register of members.

(c) For the purposes of article 49 of the Duty on Documents and Transfers Act, "transferor" and "transferee" in a transfer of shares inter vivos shall be deemed to include a trustee acting on behalf of either the transferor or the transferee of the beneficial ownership of such shares, or of both such transferor and transferee.

(5) In this article:

"beneficial owner" means the person beneficially entitled to the shares under a trust or a fiduciary agreement;

"trustee" shall mean a person who may act as a trustee in accordance with the Trusts and Trustees Act and shall include any Cap. 331. fiduciary holding shares on behalf of another person.

(6) Except where expressly permitted under article 212, nothing in this article shall be deemed to imply that a company may have less than two members.

Chapter VII - Meetings and Resolutions

Holding of annual general meeting.

128.L (1) Every company shall in each year hold a general meeting as its annual general meeting in addition to any other meetings in that year, and shall specify the meeting as such in the notices calling it, and not more than fifteen months shall elapse between the date of one annual general meeting of the company and that of the next:

Provided that so long as a company holds its first annual general meeting within eighteen months of its registration it need not hold it in the year of its registration or in the following year.

(2) Every general meeting other than an annual general meeting shall be an extraordinary general meeting.

(3) If default is made in complying with the provisions of subarticle (1), every officer of the company who is in default shall be liable to a penalty, and, for every day during which the default continues, to a further penalty.

Convening of extraordinary general meeting on requisition.

129. (1) The directors of a company shall, on the requisition of a member or members of the company holding at the date of the deposit of the requisition not less than one-tenth of such of the paid up share capital of the company as at the date of the deposit carried the right of voting at general meetings of the company, forthwith proceed duly to convene an extraordinary general meeting of the company.

(2) The requisition shall state the objects of the meeting and shall be signed by the requisitionist or requisitionists and deposited at the registered office of the company and may consist of several documents in like form each signed by the requisitionist, or if there is more than one requisitionist in any one document by all of them.

(3) If the directors do not within twenty-one days from the date of the deposit of the requisition proceed duly to convene a meeting, the requisitionist or requisitionists may convene a meeting in the same manner, as nearly as possible, as that in which meetings are to be convened by the directors, but a meeting so convened shall not be held after the expiration of three months from the date of the deposit of the requisition.

(4) Any reasonable expense incurred by the requisitionist or requisitionists by reason of the failure of the directors duly to convene a meeting shall be repaid to the requisitionist or requisitionists by the company, and any sum so paid shall be due personally by the directors who were in default and may be retained by the company out of any sums due or to become due from the company by way of fees or other remuneration in respect of their services to such of the directors as were in default.

Length of notice for calling general meetings.

130. A general meeting of a company shall be deemed not to have been duly convened unless at least fourteen days’ notice has been given in writing, and any provision in the company’s memorandum or articles shall be construed as requiring fourteen days’ notice in writing in so far as it provides for the calling of a meeting of a company, other than an adjourned meeting, by a shorter notice:

Provided that a meeting of the company shall notwithstanding that it is called by a shorter notice, be deemed to have been duly convened if it is so agreed by all the members entitled to attend and vote thereat.

General provisions as to meetings and votes.

131. The following provisions shall have effect in so far as the articles of a company do not contain other provisions in that behalf-

(a) notice of any general meeting of a company shall be given to every member of the company and shall be served in the manner in which notices are required to be served by the First Schedule;

(b) two members personally present shall be a quorum;

(d) every member shall have one vote in respect of each share or each lira of stock held by him unless otherwise provided in the terms of issue of such shares or stock.

Powers of court to order meeting.

132. (1) If for any reason it is impracticable to call a meeting of a company in any manner in which meetings of the company may be called, or to conduct the meetings of that company in the manner prescribed by the articles or this Act, the court may, either on its own motion or on the demand of either of the parties to the proceedings during the course of such proceedings or, in the absence of any proceedings, on the application of any director of the company or of any member of the company who would be entitled to vote at the meeting, order a meeting of the company to be called, held and conducted in such manner as the court thinks fit, and where any such order is made, may give such ancillary or consequential directions as it thinks expedient, including a direction that one member of the company present in person or by proxy shall be deemed to constitute a meeting.

(2) The provisions of subarticle (1) shall also apply to the calling of meetings of the board of directors of a company, if the court considers that the circumstances justify such course of action.

Proxies.

133. (1) Notwithstanding anything contained in the memorandum or articles of a company, any member entitled to attend and vote at a meeting of the company or at a meeting of any class of members of the company shall be entitled to appoint another person, whether a member or not, as his proxy to attend and vote instead of him, and a proxy so appointed shall have the same right as the member to speak at the meeting and to demand a poll.

(2) The appointment of a proxy shall be in writing.

(3) In every notice calling a meeting of a company there shall appear with reasonable prominence a statement that a member entitled to attend and vote is entitled to appoint a proxy and that a proxy need not also be a member. If default is made in complying with this subarticle, every officer of the company who is in default shall be liable to a penalty.

(4) A provision in a company’s memorandum or articles shall be void in so far as it would have the effect of requiring an instrument appointing a proxy, or any other document necessary to show the validity of, or otherwise relating to, the appointment of a proxy, to be received by the company or any other person more than forty-eight hours before a meeting or adjourned meeting for that appointment to be effective.

(5) A company shall not issue at its own expense to some only of the members entitled to be sent a notice of a meeting and to vote thereat by proxy, invitations to appoint as proxy a person or one of a number of persons specified in the invitations. If default is made in complying with this subarticle, every officer of the company who is in default shall be liable to a penalty:

Provided that an officer shall not be liable to a penalty by reason only of the issue to a member at his request in writing of a form of appointment naming the proxy, or of a list of persons willing to act as proxy, if the form or list is available on request in writing to every member entitled to vote at the meeting by proxy.

(6) The provisions of this article shall apply to meetings of any class of members of a company as they apply to general meetings of the company.

Right to demand a poll.

134. (1) Any provision contained in the memorandum or articles of a company shall be void in so far as it would have the effect either-

(a) of excluding the right to demand a poll at a general meeting on any question other than the election of the chairman of the meeting or the adjournment of the meeting; or

(b) of making ineffective a demand for a poll on any such question which is made either -

(i) by not less than five members having the right to vote at the meeting; or

(ii) by a member or members representing not less than one-tenth of the total voting rights of all the members having the right to vote at the meeting; or

(iii) by a member or members holding shares in the company conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right.

(2) The instrument appointing a proxy to vote at a meeting of the company shall be deemed to confer authority to demand or join in demanding a poll; and for the purposes of subarticle (1) a demand by a person as proxy for a member shall be the same as a demand by the member.

(3) On a poll taken at a meeting of a company or a meeting of any class of members of that company, a member entitled to more than one vote need not, if he votes, use all his votes or cast all the votes he uses in the same way.

Extraordinary and ordinary resolutions.

135. (1) A resolution shall be an extraordinary resolution where-

(a) it has been taken at a general meeting of which notice specifying the intention to propose the text of the resolution as an extraordinary resolution and the principal purpose thereof has been duly given; and

(b) it has been passed by a member or members having the right to attend and vote at the meeting holding in the aggregate not less than seventy-five per cent in nominal value of the shares represented and entitled to vote at the meeting and at least fifty-one per cent, or such other higher percentage as the memorandum or articles may prescribe, in nominal value of all the shares entitled to vote at the meeting:

Provided that, if one of the aforesaid majorities is obtained, but not both, another meeting shall be convened within thirty days in accordance with the provisions for the calling of meetings to take a fresh vote on the proposed resolution. At the second meeting the resolution may be passed by a member or members having the right to attend and vote at the meeting holding in the aggregate not less than seventy-five per cent in nominal value of the shares represented and entitled to vote at the meeting. However, if more than half in nominal value of all the shares having the right to vote at the meeting is represented at that meeting, a simple majority in nominal value of such shares so represented shall suffice.

(2) An ordinary resolution shall be passed by a member or members having the right to attend and vote holding in the aggregate shares entitling the holder or holders thereof to more than fifty per cent of the voting rights attached to shares represented and entitled to vote at the meeting, or such other higher percentage as the memorandum or articles may prescribe.

(3) In the case of a private company a resolution shall be an extraordinary resolution where -

(a) the provisions of subarticle (1)(a) are complied with; and

(b) it has been passed by a number of members having the right to attend and vote at any such meeting holding in the aggregate not less than fifty-one per cent in nominal value of the shares conferring that right or such other higher percentage as the memorandum or articles may prescribe.

Chapter VIII - Management and Administration

Power of company to borrow money, hypothecate or charge its undertaking, etc.

136. A company shall, unless otherwise provided in its memorandum or articles, have the power to borrow money and to guarantee the obligations of any third party and, for such purpose, to hypothecate or charge its undertakings, property and uncalled capital or any part thereof including as security for its obligations or for those of any third party, and to issue debentures, debenture stock and other securities whether outright or as security for its liabilities or obligations or for those of any third party.

General duties of directors.

136A. (1) A director of a company shall be bound to act honestly and in good faith in the best interests of the company.

(2) The directors of a company shall promote the well-being of the company and shall be responsible for:

(a) the general governance of the company and its proper administration and management; and

(b) the general supervision of its affairs.

(3) In particular, but without prejudice to any other duty assigned to the directors of a company, or to any one of them, by the memorandum or articles of association or by this Act or any other law, the directors of a company shall:

(a) be obliged to exercise the degree of care, diligence and skill which would be exercised by a reasonably diligent person having both -

(i) the knowledge, skill and experience that may reasonably be expected of a person carrying out the same functions as are carried out by or entrusted to that director in relation to the company; and

(ii) the knowledge, skill and experience that the director has;

(b) not make secret or personal profits from their position without the consent of the company, nor make personal gain from confidential company information;

(d) not use any property, information or opportunity of the company for their own or anyone else’s benefit, nor obtain benefit in any other way in connection with the exercise of their powers, except with the consent of the company in general meeting or except as permitted by the company’s memorandum or articles of association;

(e) exercise the powers they have for the purposes for which the powers were conferred and shall not misuse such powers.

Directors.

137. (1) Every public company shall have at least two directors.

(2) Every private company shall have at least one director, and where a private company has one director, all references in this Act to two or more directors shall be construed as references to such one director.

(3) The business of a company shall be managed by the directors who may exercise all such powers of the company, including those specified in article 136, as are not by this Act or by the memorandum or articles of the company, required to be exercised by the company in general meeting.

(4) Notwithstanding anything contained in the memorandum and articles of association relating to the manner in which the representation of the company is to be exercised, anything done by the board of directors of a company which exceeds the limits of their authority or by any director which is beyond his powers, shall be binding on the company unless that act exceeds the powers granted to the board of directors or to a director, as the case may be, by virtue of this Act.

(5) Any limitation on the powers of the board of directors or of any director of the company shall not be relied on as against third parties independently of whether that limitation, published or not, arises from the memorandum or articles or from any resolution of the general meeting or from a decision of the board of directors of the company.

(6) Where an act of the company falls outside the company’s objects, the company shall not be bound if it proves that, when the act was done, the third party knew that it was outside the company’s objects or the third party could not in view of the circumstances have been unaware thereof:

Provided that the publication of the memorandum and articles of the company shall not in itself be sufficient to prove that the third party knew, or could not have been unaware, that the act was outside the company’s objects.

(7) If the number of directors of a company is reduced below two any member of the company may at any time after the lapse of thirty days therefrom, make an application to the court for the court to appoint a director or directors for the company in accordance with its memorandum and this without prejudice to the right of the continuing director to fill any vacancy so created in accordance with the provisions of article 140(6) within the thirty days specified herein or at any time thereafter for as long as a director is not appointed by the court.

(8) A person appointed by the court in accordance with the provisions of subarticle (7) shall hold office until the next annual general meeting although he shall be eligible for re-election.

(9) The provisions of subarticle (7) shall furthermore be without prejudice to the provisions of article 140(1) to (5) and of article 214(2)(b)(ii) and to the right of the company to fill any such vacancy in general meeting.

Company secretary.

138. (1) Every company shall have a company secretary.

(2) No company shall:

(a) have as company secretary its sole director;

(b) have as sole director of the company a body corporate the sole director of which is company secretary to the company.

(3) It shall be the duty of the directors of a company to take all reasonable steps to ensure that the company secretary is an individual who appears to them to have the requisite knowledge and experience to discharge the functions of company secretary.

(4) In the event that the post of company secretary becomes vacant, the directors of the company shall, within fourteen days from the date when the post becomes vacant, appoint another individual to fill the post.

(5) The directors of a company shall have the power to remove the company secretary and they shall appoint another individual in his stead within fourteen days from the date of his removal.

(6) Anything required or authorised to be done by or to the company secretary may, if the office is vacant or if there is for any other reason no company secretary capable of acting, be done by or to any officer of the company authorised generally or specifically in that behalf by the directors.

(7) A provision authorising a thing to be done by or to a director and the company secretary is not satisfied by its being done by or to the same person acting both as director and as, or in place of, the company secretary.

(8) If default is made in complying with the provisions of subarticle (4) every director of the company who is in default shall be liable to a penalty, and for every day during which the default continues, to a further penalty.

Appointment of directors.

139. (1) A person shall not be capable of being appointed director of a public company unless he has personally, or by his agent authorised in writing, signed the memorandum indicating his consent to act as a director or has otherwise signed and delivered to the Registrar for registration a consent in writing to act as such director.

(2) Without prejudice to the provisions of subarticle (1), where a director is by the memorandum or articles of a private or of a public company required to hold a specified share qualification, he shall either sign the memorandum for a number of shares not less than his qualification or sign and deliver to the Registrar for registration an undertaking in writing to take from the company and pay for his qualification shares:

Provided that he shall vacate his office if he fails to obtain his qualification within two months after his appointment, or such shorter time as may be fixed by the memorandum or articles, or if at any time thereafter he ceases to hold his qualification; and he shall be incapable of being reappointed director of the company until he has obtained his qualification.

(3) For the purposes of any provision in the memorandum or articles of a public company requiring a director or manager to hold a specified share qualification, the bearer of a share warrant shall not be deemed to be the holder of the shares specified in the warrant.

(4) Unless otherwise provided in the memorandum or articles of a company, a director of a company other than the first directors shall be appointed by ordinary resolution of the company in general meeting.

(5) Where the holders of a particular class of shares have the right to appoint one or more directors, in terms of the memorandum and articles of the company, such appointment shall be made by a member or members holding in the aggregate more than fifty per cent in nominal value of the shares represented and entitled to vote at the meeting of the holders of the shares of that class.

Removal of directors and casual vacancies.

140. (1) A company may remove a director before the expiration of his period of office by a resolution taken at a general meeting of the company and passed by a member or members having the right to attend and vote, holding in the aggregate shares entitling the holder or holders thereof to more than fifty per cent of the voting rights attached to shares represented and entitled to vote at the meeting.

(2) The provisions of subarticle (1) shall apply notwithstanding anything in the company’s memorandum or articles or in any agreement between it and the director.

(3) On receipt of a notice of an intended resolution to remove a director under this article the company shall forthwith send a copy thereof to the director concerned and the director, whether or not he is a member of the company, shall be entitled to be heard on the resolution at the meeting.

(4) A vacancy created by the removal of a director under this article, if not filled at the meeting at which he is removed, may be filled as a casual vacancy.

(5) Nothing in this article shall be taken as -

(a) depriving a person removed hereunder of compensation or damages payable to him in respect of the termination of his appointment as director or of any other appointment terminating with the termination of his appointment as director; or

(b) derogating from any power to remove a director which may exist apart from this article.

(6) (a) Unless otherwise provided in the memorandum or articles of a company, a casual vacancy may be filled by the continuing director or directors, and without prejudice to the aforesaid powers of the directors, it may be filled by the company in general meeting.

(b) A person appointed by the directors to fill a casual vacancy shall hold office until the next following annual general meeting and shall be eligible for re-election, but shall not be taken into account in determining the directors who are to retire by rotation at that meeting.

(c) A person appointed to fill a casual vacancy by the company in general meeting shall be treated, for the purpose of determining the time at which he or any other director is to retire, as if he had become director on the day on which the person in whose place he is appointed was last appointed director.

Representation of the company.

141. (1) Where for any reason the representation of a company ceases to be vested in any person or persons, the company shall appoint another person or persons to exercise such function. The appointment shall be made by ordinary resolution taken at a general meeting notice of which shall be issued within fourteen days from the date when the vacancy occurs.

(2) The company may by ordinary resolution replace any person or persons vested with the representation of the company.

(3) Where, and for as long as, the representation of a company cannot be exercised in accordance with the memorandum of the company, any director shall represent the company in judicial proceedings against it.

Disqualification for appointment as director or company secretary.

142. (1) A person shall not be qualified for appointment or to hold office as director of a company or company secretary if -

(a) he is interdicted or incapacitated or is an undischarged bankrupt;

(b) he has been convicted of any of the crimes affecting public trust or of theft or of fraud or of knowingly receiving property obtained by theft or fraud;

(d) he is subject to a disqualification order under article 320.

(2) Notwithstanding the provisions of this Act or of the memorandum and articles of a company relating to the formalities of the appointment of a director or other officer and to his qualification, any irregularity concerning the appointment of a director or other officer of a company raised after the completion of the publication of his appointment shall not be relied upon by the company as against third parties unless the company proves that such parties were aware of the irregularity at the relevant time.

(3) Third parties who were not aware of the irregularities referred to in subarticle (2) at the relevant time may rely on that irregularity as against the company.

Directors competing with company.

143. (1) A director of a company may not, in competition with the company and without the approval of the same company given at a general meeting, carry on business on his own account or on account of others, nor may he be a partner with unlimited liability in another partnership or a director of a company which is in competition with that company.

(2) Where a director acts in violation of the prohibition contained in this article, the company may, at its option, either take action for damages and interest against him or demand payment of any profits made by him in contravention of this article.

(3) The provisions of this article shall be without prejudice to any other remedy which a company may have against a director for breach of duty.

Prohibition of loans, etc. to directors.

144. (1) It shall not be lawful for a company -

(a) to make a loan to any person who is its director or a director of its parent company, or to enter into any guarantee or provide any security in connection with a loan made to such a person as aforesaid by any other person:

Provided that nothing in this paragraph shall apply either -

(i) to anything done, with the approval of the company given at a general meeting, to provide any such person as aforesaid with funds to meet expenditure incurred or to be incurred by him for the purposes of the company or for the purpose of enabling him properly to perform his duties as an officer of the company; or

(ii) in the case of a company whose ordinary business includes the lending of money or the giving of guarantees in connection with loans made by other persons, to anything done by the company in the ordinary course of that business;

(b) to make to any director of the company any payment by way of compensation for loss of office, or as consideration for or in connection with his retirement from office, without particulars with respect to the proposed payment, including the amount thereof, being disclosed to members of the company and the proposal being approved by the company in general meeting.

(2) For the purposes of this article, the expression "director" shall include any person in accordance with whose directives or instructions the directors of a company are accustomed to act.

Duty of director to disclose interest in a contract with company.

145. (1) It shall be the duty of a director of a company who is in any way, whether directly or indirectly, interested in a contract or proposed contract with the company to declare the nature of his interest to the other directors either at the meeting of the directors at which the question of entering into the contract is first taken into consideration, or, if the director was not at the date of that meeting interested in the contract or proposed contract, at the next meeting of the directors held after he became so interested.

(2) Any director who fails to comply with the provisions of this article shall be liable to a penalty.

Return as to changes among directors, company secretary and in representation of company.

146. (1) Every company shall send to the Registrar for registration a return of any change among its directors, or company secretary or in the representation of the company, specifying the date of the change, together with the name and residence of any new director or company secretary, within fourteen days from the happening thereof:

Provided that the Registrar may, before registering the return, take such steps and require such information as he may deem necessary to ascertain the correctness of the return and to determine whether the provisions of this Act have been complied with.

(2) If default is made in complying with the provisions of subarticle (1), every officer of the company who is in default shall be liable to a penalty, and, for every day during which the default continues, to a further penalty.

Joint and several liability of directors for breach of duty.

147. (1) The personal liability of the directors in damages for any breach of duty shall be joint and several:

Provided that where a particular duty has been entrusted to one or more of the directors, only such director or directors shall be liable in damages.

(2) A director shall not be liable for the acts of his co-directors if he proves either -

(a) that he did not know of the breach of duty before or at the time of its occurrence and that on becoming aware of it after its occurrence he signified forthwith to the co-directors his dissent in writing; or

(b) that, knowing that the co-directors intended to commit a breach of duty, he took all reasonable steps to prevent it.

Provisions as to liability of officers and auditors.

148. (1) Any provision, whether contained in the memorandum or articles of a company or in any contract with a company or otherwise for exempting any officer of the company or any person engaged by the company as auditor from, or indemnifying him against, any liability which by virtue of any rule of law would in the absence thereof have been attached to him in respect of negligence, default or breach of duty or otherwise of which he may be guilty in relation to the company shall be void:

Provided that a company may, in pursuance of any such provision as aforesaid, indemnify any such officer or auditor against any liability incurred by him in defending any proceedings in which judgment is given in his favour or in which he is acquitted.

(2) Nothing in this article shall be construed as preventing or restricting a company from purchasing and maintaining for any of its officers insurance against any such liability as is referred to in subarticle (1); or as preventing or restricting any officer or auditor of a company from personally purchasing and maintaining any such insurance.

Minutes of proceedings.

149. (1) Every company shall cause minutes of all proceedings of general meetings and all proceedings at meetings of its directors to be entered in books kept for that purpose.

(2) Any such minute, if purporting to be signed by the chairman of the meeting at which the proceedings were held, or by the chairman of the next succeeding meeting, shall be evidence of the proceedings.

(3) The books containing the minutes of proceedings of any general meeting of a company shall be kept at the registered office of the company, or at such other place as may be specified in the memorandum or articles, and shall, during business hours, subject to such reasonable restrictions as the company may by its articles or in general meeting impose, be open to the inspection of any member of the company without charge.

(4) If a company fails to comply with the requirements of subarticles (1) or (3), every officer of the company who is in default shall be liable to a penalty.

General duty of officers of a company.

150. Anything required to be done by a company under any provision of this Act shall be deemed also to be required to be done by the officers of the company.

Chapter IX - Auditors

Appointment of auditors.

151. (1) A company shall, at each general meeting at which the annual accounts are laid, appoint an auditor or auditors to hold office from the conclusion of that meeting until the conclusion of the next general meeting at which such accounts are laid. The company may appoint joint auditors and references in this Act to auditor or auditors shall be deemed to include references to single or joint auditors as the case may be.

(2) The first auditors of the company may be appointed by the directors at any time before the first general meeting of the company at which the annual accounts are laid, and the auditors so appointed shall hold office until the conclusion of that meeting.

(3) If the directors fail to exercise their powers under subarticle (2), the powers may be exercised by the company in general meeting.

(4) If no auditors are appointed or re-appointed as required by the foregoing subarticles of this article, the court on an application made by any of the directors or by any member of the company or by the Registrar may appoint a person to fill the vacancy.

(5) In the case specified in subarticle (4), the company shall within two weeks of the general meeting at which an auditor or auditors should have been appointed by virtue of subarticle (1), give notice to the Registrar that his power to apply to the court has become exercisable.

(6) If a company fails to give the notice required by subarticle (5), every officer of the company who is in default shall be liable to a penalty, and, for every day during which the default continues, to a further penalty.

Filling of casual vacancies.

152. (1) The directors shall at any time before the general meeting of the company at which the annual accounts are laid fill a casual vacancy in the office of auditor:

Provided that the company in general meeting may fill such a casual vacancy itself.

(2) While such a vacancy continues, any surviving or continuing auditor or auditors may continue to act.

(3) Where it is proposed -

(a) to appoint an auditor to fill a casual vacancy in the office of auditor by resolution of the general meeting; or

(b) to re-appoint by resolution of the general meeting a retiring auditor who was appointed by the directors to fill a casual vacancy, as auditor, or to appoint a new auditor instead of that auditor, notice specifying the terms of the proposed resolution shall be given forthwith to the person proposed to be appointed and, if the casual vacancy was caused by the resignation of an auditor, to the auditor who resigned.

(4) Any director who fails to comply with the provisions of subarticle (1) shall be liable to the same penalty as that provided for in article 151(6).

Disqualification from appointment as auditor.

153. A person shall be disqualified from appointment as auditor or from holding the office of auditor of a company if - (a) in the case of an individual, he has at any time during

the previous three years been -

(i) an officer or employee of the company; or

(ii) a partner, employer or employee of an officer of the company; or

(iii) a partner or employee of an employee of the company; or

(iv) related by consanguinity or affinity in the direct line, or, up to the third degree, in the collateral line, to any officer of the company;

(b) in the case of a partnership, any of the partners thereof is an individual who falls within paragraph (a) or the partnership itself falls within the said paragraph (a):

Provided that the third degree referred to in paragraph (a)(iv) shall be reduced to the second degree by consanguinity in the case of a partnership if the partner to whom the relationship relates is totally excluded from the audit concerned.

Right to information.

154. (1) The auditors of a company shall have a right of access at all times to the company’s accounting records, accounts and vouchers, and shall be entitled to require from the company’s officers such information and explanations as they think necessary for the performance of their duties as auditors.

(2) An officer of a company who knowingly or recklessly makes to the company’s auditors a statement, whether written or oral which -

(a) conveys or purports to convey any information or explanations which the auditors require, or are entitled to require, as auditors of the company; and

(b) is misleading, false or deceptive in a material particular; shall be guilty of an offence and liable on conviction to a fine (multa) of not more than two thousand liri or to imprisonment for a term not exceeding six months or to both such fine and imprisonment.

(3) A subsidiary undertaking which is registered in Malta, and the auditors of such an undertaking, shall give to the auditors of any parent company of the subsidiary undertaking such information and explanations as they may reasonably require for the purposes of their duties as auditors of that company. If a subsidiary undertaking fails to comply with the provisions of this subarticle, every officer thereof who is in default shall be liable to a penalty; and if an auditor fails without reasonable cause to comply with this subarticle he shall be liable to a penalty.

(4) A parent company having a subsidiary undertaking which is not registered in Malta shall, if required by its auditors to do so, take all such steps as are reasonably open to it to obtain from the subsidiary undertaking such information and explanations as they may reasonably require for the purposes of their duties as auditors of that company. If a parent company fails to comply with the provisions of this subarticle, every officer of the company who is in default shall be liable to a penalty.

Right to attend company meetings.

155. A company’s auditors shall be entitled -

(a) to receive all notices of, and other communications relating to, any general meeting which a member of the company is entitled to receive;

(b) to attend any general meeting of the company; and

(c) to be heard at any general meeting which they attend on any part of the business of the meeting which concerns them as auditors.

Remuneration of auditors.

156. (1) The remuneration of auditors appointed by the company in general meeting shall be fixed by the company in general meeting or in such manner as the company in general meeting may determine. The remuneration of auditors appointed by the directors or the court shall be fixed by the directors or the court as the case may be.

(2) There shall be stated in the notes to the accounts the amount of the remuneration of the company’s auditors in their capacity as such; and where consolidated accounts are prepared, the notes to the consolidated accounts shall state the total remuneration paid to the auditors of the parent company in respect of all undertakings included in the consolidation, and also the total remuneration paid to all other auditors in respect of such undertakings.

(3) For the purposes of this article "remuneration" includes sums paid in respect of expenses.

(4) The provisions of this article shall apply in relation to benefits in kind as to payments in cash, and in relation to any such benefit references to its amount are to its estimated money value. The nature of any such benefit shall also be disclosed.

(5) The Minister may make provision by regulation for securing the disclosure of the amount of any remuneration received or receivable by a company’s auditors or their associates in respect of services other than those of auditors in their capacity as such, and, in particular, the regulations may -

(a) define "associate" in relation to an auditor;

(b) require the disclosure of remuneration in respect of services rendered to associated undertakings of the company; and

Removal of auditors.

157. (1) Notwithstanding anything in a company’s memorandum or articles or in any other agreement, the company may at any time remove an auditor from office in the same manner as that specified in article 140(1).

(2) Where a resolution removing an auditor is passed at a general meeting of a company, the company shall within fourteen days give notice thereof to the Registrar for registration. If a company fails to give the notice required by this subarticle, every officer of the company who is in default shall be liable to a penalty, and, for every day during which the default continues, to a further penalty.

(3) Nothing in this article shall be taken as depriving a person removed under its provisions of compensation for damages payable to him in respect of the termination of his appointment as auditor or of any appointment terminating with that of auditor.

(4) An auditor of a company who has been removed shall have, notwithstanding his removal, the rights conferred by article 155 in relation to any general meeting of the company -

(a) at which his term of office would otherwise have expired; or

(b) at which it is proposed to fill the vacancy caused by his removal.

In such a case the references in that article to matters concerning the auditor as auditor shall be construed as references to matters concerning him as a former auditor.

Rights of auditors who are removed or not re-appointed.

158. (1) Notice specifying the text of and reasons for a proposed resolution of a general meeting of a company whereby it is intended to -

(a) remove an auditor before the expiration of his term of office; or

(b) appoint as auditor a person other than a retiring auditor; shall be sent forthwith by the company to the person proposed to be removed, to the person proposed to be appointed and to the retiring auditor, as the case may be.

(2) The auditor proposed to be removed or, as the case may be, the retiring auditor may make with respect to the intended resolution representations in writing to the company not exceeding a reasonable length and request their notification to members of the company.

(3) The company shall, unless the representations are received by it too late for it to do so -

(a) in any notice of the resolution given to members of the company, state the fact of the representations having been made; and

(b) send a copy of the representations to every member of the company to whom notice of the meeting is or has been sent.

(4) If a copy of any such representations is not sent out as required because it was received too late or because of the company’s default, the auditor may, without prejudice to his right to be heard orally, require that the representations be read out at the meeting.

Resignation of auditor.

159. (1) An auditor of a company may resign his office by depositing a notice in writing to that effect at the company’s registered office and he shall so resign if he ceases to be qualified as an auditor or if he fails to satisfy the conditions of qualification provided in article 153. The notice shall not be effective unless it is accompanied by the statement required by article 161.

(2) An effective notice of resignation shall operate to bring the auditor’s term of office to an end as of the date on which the notice is deposited or on such later date as may be specified in it.

(3) The company shall within fourteen days of the deposit of a notice of resignation send a copy of the notice to the Registrar for registration. If default is made in complying with this subarticle, every officer of the company who is in default shall be liable to a penalty, and, for every day during which the default continues, to a further penalty.

Rights of resigning auditor.

160. (1) The provisions of this article shall apply where an auditor’s notice of resignation is accompanied by a statement of circumstances which he considers should be brought to the attention of members or creditors of the company.

(2) The resigning auditor may deposit with the notice a signed requisition calling on the directors of the company forthwith duly to convene an extraordinary general meeting of the company for the purpose of receiving and considering such explanation of the circumstances connected with his resignation as he may wish to place before the meeting.

(3) The resigning auditor may request the company to circulate to its members -

(a) before the meeting convened on his requisition; or

(b) before any general meeting at which his term of office would otherwise have expired or at which it is proposed to fill the vacancy caused by his resignation; a statement in writing of the circumstances connected with his resignation as referred to in subarticle (1).

(4) The company shall, unless the statement is received too late for it to comply -

(a) in any notice of the meeting given to members of the company, state the fact of the statement having been made; and

(b) send a copy of the statement to every member of the company to whom notice of the meeting is or has been sent.

(5) If the directors do not within twenty-one days from the date of the deposit of a requisition under this article proceed duly to convene a meeting for a day not more than twenty-eight days after the date on which the notice convening the meeting is given, every director who failed to take all reasonable steps to secure that a meeting was convened as mentioned in subarticle (2) shall be liable to a penalty.

(6) If a copy of the statement is not sent out as required because it was received too late or because of the company’s default, the auditor may, without prejudice to his right to be heard orally, require that the statement be read out at the meeting.

(7) An auditor who has resigned has, notwithstanding his resignation, the rights conferred by article 155 in relation to any such general meeting of the company as is mentioned in subarticle (3)(a) or (b), and, in such a case, the references in that article to matters concerning the auditor as auditor shall be construed as references to matters concerning him as a former auditor.

Statement by person ceasing to hold office as auditor.

161. (1) Where an auditor ceases for any reason to hold office, he shall deposit at the company’s registered office a statement of any circumstances connected with his ceasing to hold office which he considers should be brought to the attention of the members or creditors of the company or, if he considers that there are no such circumstances, a statement that there are none.

(2) In the case of resignation, the statement shall be deposited along with the notice of resignation; in the case of failure to seek re-appointment, the statement shall be deposited not less than fourteen days before the general meeting at which auditors are to be reappointed; in any other case, the statement shall be deposited not later than the end of the period of fourteen days beginning with the date on which the auditor ceases to hold office.

(3) Where the statement is of circumstances which the auditor requests to be brought to the attention of the members or creditors of the company, the company shall within fourteen days of the deposit of the statement either -

(a) send a copy of it to every person who under article 180 is entitled to be sent copies of the annual accounts; or

(b) submit an application to the court for an order that there are grounds of sufficient gravity to warrant that the statement should not be circulated.

(4) Where the company submits an application to the court, the court shall notify the auditor of the application and shall hear both parties before making a decision on the company’s application.

(5) Unless the auditor receives notice of such an application before the end of the period of twenty-one days beginning with the day on which he deposited the statement, he shall within a further seven days send a copy of the statement to the Registrar.

(6) If the court is satisfied that the auditor is using the statement to secure needless publicity for defamatory matter -

(a) it shall direct that copies of the statement need not be sent out; and

(b) it may further order the company’s costs on the application to be paid in whole or in part by the auditor, notwithstanding that he is not a party to the application; and the company shall within fourteen days of the court’s decision send to the persons mentioned in subarticle (3)(a) a statement setting out the effect of the order.

(7) If the court is not so satisfied, the company shall within fourteen days of the court’s decision -

(a) send copies of the statement to the persons mentioned in subarticle (3)(a); and

(b) notify the auditor of the court’s decision, and the auditor shall within seven days of receiving such notice send a copy of the statement to the Registrar.

Failure to comply with article 161.

162. (1) If a person ceasing to hold office as auditor fails without just cause to comply with the provisions of article 161 he shall be liable to a penalty.

(2) In proceedings for a default under subarticle (1) it shall be a defence for the person against whom action is taken to show that he took all reasonable steps and exercised all due diligence to avoid that default.

(3) If a company makes default in complying with the provisions of article 161, every officer of the company who is in default shall be liable to a penalty, and, for every day during which the default continues, to a further penalty.

Chapter X - Accounts, Audit and Annual Return

Keeping of accounting records.

163. (1) In lieu of the requirements of articles 13 to 18 of the Commercial Code a company shall be required to keep proper accounting records with respect to -

(a) all sums of money received and expended by the company and the matters in respect of which the receipt and expenditure takes place;

(b) the assets and liabilities of the company;

(i) statements of stocks held by the company at the end of each accounting period of the company;

(ii) all statements of stocktakings from which any such statement of stocks as is mentioned in sub-paragraph (i) has been or is to be prepared; and

(iii) except in the case of goods sold by way of ordinary retail trade, statements of all goods sold and purchased, showing the goods and the buyers and sellers in sufficient detail to enable all these to be identified.

(2) For the purposes of subarticle (1), proper accounting records shall be deemed to have been kept with respect to the matters aforesaid if such records are sufficient to show and explain the company’s transactions and are such as to -

(a) disclose with reasonable accuracy, at any time, thefinancial position of the company at that time; and

(b) enable the directors to ensure that any balance sheet and profit and loss account prepared under this Chapter complies with the requirements of this Act.

(3) The accounting records shall be kept at the registered office of the company or at such other place as the directors think fit, and shall be at all times open to inspection by the officers of the company:

Provided that if accounting records are kept at a place outside Malta there shall be sent to, and kept at a place in Malta and at all times be open to the inspection of the officers of the company such accounts and returns with respect to the business dealt with in the accounting records so kept as will disclose with reasonable accuracy the financial position of that business at intervals not exceeding six months and will enable to be prepared, in accordance with this Act, the company’s balance sheet and its profit and loss account.

(4) A parent company which has a subsidiary undertaking, in relation to which the above requirements do not apply, shall take reasonable steps to secure that the subsidiary undertaking keeps such accounting records as to enable the directors of the parent company to ensure that any balance sheet and profit and loss account prepared complies with the requirements of this Act.

(5) Notwithstanding the provisions of article 26 of the Commercial Code, the accounting records of the company shall be kept for a period of ten years:

Provided that where the accounting records are kept in a bound or unified form, the ten years shall commence to run from the date of the last entry made therein.

(6) If a company fails to comply with any provision of subarticles (1) to (4), every officer of the company who is in default shall be guilty of an offence and liable on conviction to a fine (multa) of not more than five thousand liri, unless he shows that he acted diligently and that, in the circumstances in which the company’s business was carried on, the default was excusable.

(7) If a company fails to comply with the provisions of subarticle (5), every officer of the company who is in default shall be liable to a penalty.

Accounting reference period and accounting reference date.

164. (1) A company’s accounting periods are determined by reference to its accounting reference date.

(2) A company may give notice in the prescribed form to the Registrar specifying a date in the calendar year as being its accounting reference date:

Provided that no such notice shall have effect unless it is given before the end of nine months beginning with the date of the company’s registration; and, failing such notice, the company’s accounting reference date shall be the thirty-first of December.

(3) A company’s first accounting reference period shall be such period ending with its accounting reference date as begins on the date of its registration and is a period of not less than six months and not more than eighteen months; and each successive period of twelve months beginning after the end of the first accounting reference period and ending with the accounting reference date shall also be an accounting reference period of the company.

(4) A company’s first accounting period shall commence on the first day of its first accounting reference period and shall end on a date not more than seven days before or after the end of that accounting reference period as the directors may determine. Subsequent accounting periods shall commence on the day immediately following the company’s previous accounting period and shall end on a date not more than seven days before or after the end of the next accounting reference period as the directors may determine.

(5) The directors of a parent company shall secure that, except where there are good reasons against it, the accounting period of each of its subsidiary undertakings shall coincide with the parent company’s own accounting period.

Alteration of accounting reference period.

165. (1) At any time during a period which is an accounting reference period of a company by virtue of article 164 or 166 the company may give notice in the prescribed form to the Registrar specifying a date in the calendar year ("the new accounting reference date") on which that accounting reference period ("the current accounting reference period") and each subsequent accounting reference period of the company is to be treated as coming to an end or, as the case may require, as having come to an end.

(2) At any time after the end of a period which was an accounting reference period of a company by virtue of article 164 or 166 the company may give notice in the prescribed form to the Registrar specifying a date in the calendar year ("the new accounting reference date") on which that accounting reference period ("the previous accounting reference period") and each subsequent accounting reference period of the company is to be treated as coming or, as the case may require, as having come to an end.

(3) A notice under subarticle (2), shall, however -

(a) have no effect unless the company is a subsidiary undertaking or parent company of another company and the new accounting reference date coincides with the accounting reference date of that other company; and

(b) have no effect if the period allowed under article 182 for delivery of the annual accounts in relation to the previous accounting period to be laid before the company in general meeting has already expired at the time when the notice is given.

(4) A notice under this article shall state whether the current or previous accounting reference period of the company -

(a) is to be treated as shortened, so as to come to an end or, as the case may require, be treated as having come to an end on the new accounting reference date on the first occasion on which that date falls or fell after the beginning of that accounting reference period; or

(b) is to be treated as extended, so as to come to an end or, as the case may require, be treated as having come to an end on the new accounting reference date on the second occasion on which that date falls or fell after the beginning of that accounting reference period.

(5) A notice which states that the current or previous accounting reference period is to be extended shall have no effect if the current or previous accounting reference period, as extended in accordance with the notice, would exceed eighteen months.

(6) Subject to any direction given by the Registrar under subarticle (7), a notice which states that the current or previous accounting reference period is to be extended shall have no effect unless -

(a) no earlier accounting reference period of the company has been extended by virtue of a previous notice given by the company under this article; or

(b) the notice is given not less than five years after the date on which any earlier accounting reference period of the company which was so extended came to an end; or

(c) the company is a subsidiary undertaking or parent company of another undertaking and the new accounting reference date coincides with the accounting reference date of that other undertaking.

(7) The Registrar may, if he thinks fit, direct that the provisions of subarticle (6) shall not apply to a notice already given by a company under this article or, as the case may be, in relation to a notice which may be so given.

Consequence of giving notice under article 165.

166. (1) Where a company has given notice with effect in accordance with article 165 and that notice has not been superseded by a subsequent notice by the company which has such effect, the new date specified in the notice shall be the company’s accounting reference date in substitution for that which, by virtue of article 165 or this article, was its accounting reference date at the time when the notice was given.

(2) Where by virtue of a notice as is referred to in subarticle (1) one date is substituted for another as the accounting reference date of a company -

(a) the current or previous accounting reference period, shortened or extended, as the case may be, in accordance with the notice; and

(b) each successive period of twelve months beginning after the end of that accounting reference period, as so shortened or extended, and ending with the new accounting reference date, shall be treated as having been an accounting reference period of the company, instead of any period which would have been an accounting reference period of the company if the notice had not been given.

(3) The provisions of article 165 and the provisions of this article shall not affect any accounting reference period of the company which -

(a) in the case of a notice under article 165(1) is earlier than the current accounting reference period; or

(b) in the case of a notice under article 165(2) is earlier than the previous accounting reference period.

General provisions as to content and form of individual accounts.

167. (1) The directors of every company shall prepare for each accounting period individual accounts comprising the balance sheet as at the last day of the accounting period to which they refer, the profit and loss account for that period, the notes to the accounts and any other financial statements which may be required by generally accepted accounting principles and practice. These documents shall constitute a composite whole.

(2) The individual accounts shall be drawn up clearly and in accordance with the provisions of this Act and with generally accepted accounting principles and practice:

Provided that in the event that a provision of this Act is in conflict or is not compatible with generally accepted accounting principles and practice, the accounts shall be drawn up so as to give a true and fair view in terms of the requirements established under subarticle (3).

(3) The individual accounts shall give a true and fair view of the company’s assets, liabilities, financial position and profit or loss.

(4) The individual accounts shall comply with the requirements of the Third Schedule as to the form and content of the balance sheet and profit and loss account and as to additional information to be provided by way of notes to the accounts.

(5) Where the application of the provisions of this Act would not be sufficient to give a true and fair view within the meaning of subarticle (3), additional information shall be given.

(6) Where in exceptional cases the application of a provision of this Act is incompatible with the obligation for the individual accounts to give a true and fair view, that provision shall be departed from in order to give a true and fair view. Any such departure shall be disclosed in the notes to the accounts together with an explanation of the reasons for it and a statement of its effect on the assets, liabilities, financial position and profit or loss.

Annual accounts of banks and financial institutions.

168. (1) Notwithstanding the provisions of article 167(4) and of article 171(4), banks governed by the Banking Act, financial institutions governed by the Financial Institutions Act, and insurance companies governed by the Insurance Business Act* need not apply the provisions of the Third and Fourth Schedules.

(2) Banks and financial institutions shall follow the directives issued by the relevant competent authority under the Banking Act, and the Financial Institutions Act, respectively, in relation to the form and content of their annual accounts or if no such directives have been issued they shall follow any guidelines issued by such competent authority in this regard.

(3) Insurance companies shall comply with regulations made under the Insurance Business Act in respect of the form and content of their annual accounts or if no such regulations have been made they shall follow any directives issued by the competent authority in this regard.

(4) Special provisions may be prescribed by the Minister by notice in the Gazette for the annual accounts of investment companies with fixed share capital and of financial holding companies in lieu of the provisions of the Third and Fourth Schedules.

Accounts of investment company with variable capital.

169. (1) Notwithstanding the provisions of article 167(4) in so far as they relate to the application of the Third Schedule for the individual accounts of companies, an investment company with variable share capital shall prepare its individual accounts in accordance with the format set out in the Fifth Schedule.

(2) The director’s report of an investment company with variable share capital shall provide information sufficient to enable investors to make an informed judgment on the development of the company’s activities and its financial performance.

(3) In all other respects, the annual accounts and director’s report of an investment company with variable share capital shall be prepared in accordance with the provisions applicable to companies generally to the extent that they are not inconsistent with the provisions of the preceding subarticles of this article and the Fifth Schedule.

Duty to prepare consolidated accounts.

170. (1) If at the end of an accounting period a company is a parent company the directors shall, as well as preparing the individual accounts for that company, also prepare consolidated accounts.

(2) A parent company and all of its subsidiary undertakings shall be undertakings to be consolidated regardless of where the registered offices or principal offices of such subsidiary undertakings are situated.

(3) A subsidiary undertaking may be excluded from consolidation if its inclusion is not material for the purpose of giving a true and fair vi ew; but two or m ore su bsidiary undertakings may be excluded only if their inclusion is not material when taken together.

(4) A subsidiary undertaking may be excluded from consolidation where -

(a) severe long-term restrictions substantially hinder the exercise of the rights of the parent company over the assets or management of that undertaking; or

(b) the interest of the parent company is held exclusively with a view to subsequent resale and the undertaking has not previously been included in consolidated accounts prepared by the parent company.

The reference in paragraph (a) to the rights of the parent company and the reference in paragraph ( b) to the interest of the parent company are, respectively, to rights and interests held by or attributed to the company for the purposes of article 2(2) in the absence of which it would not be the parent company.

(5) Where the activities of one or more subsidiary undertakings are so different from those of other undertakings to be included in the consolidation that their inclusion would be incompatible with the obligation to give a true and fair view, those undertakings shall be excluded from consolidation. This subarticle shall not apply merely because some of the undertakings are industrial, some commercial and some provide services, or because they carry on industrial or commercial activities involving different products or because they provide different services.

(6) Where all the subsidiary undertakings of a parent company fall within the above exclusions, no consolidated accounts shall be required.

(7) Where the undertaking excluded from the consolidation pursuant to subarticle (5) is an undertaking not established in Malta its individual accounts shall be attached to the consolidated accounts of the parent company translated into English or Maltese, where the original is not in one of these languages.

(8) The requirements specified in subarticle (7) shall be subject to the following qualifications -

(a) an undertaking is not required to prepare for the purposes of this article accounts which would not otherwise be prepared, and if no accounts satisfying the said requirements are prepared, none need be attached;

(b) a document need not be appended if it would not otherwise be required to be published, or made available for public inspection, anywhere in the world, but in that case the reason for not attaching it shall be stated in the notes to the accounts of the company.

Form and content of consolidated accounts.

171. (1) Consolidated accounts shall comprise the consolidated balance sheet as at the last day of the accounting period to which these refer, the consolidated profit and loss account for that period, the notes to the consolidated accounts and any other financial statements which may be required by generally accepted accounting principles and practice. These documents shall constitute a composite whole.

(2) The consolidated accounts shall be drawn up clearly and in accordance with the provisions of this Act and with generally accepted accounting principles and practice:

(3) Consolidated accounts shall give a true and fair view of the assets, liabilities, financial position and profit or loss of the undertakings included therein taken as a whole.

(4) Consolidated accounts shall comply with the provisions of the Fourth Schedule as to the form and content of the consolidated balance sheet and consolidated profit and loss account and as to additional information to be provided by way of notes to the consolidated accounts.

(5) Where the application of the provisions of this Act would not be sufficient to give a true and fair view within the meaning of subarticle (3), additional information shall be given.

(6) Where in exceptional cases the application of a provision of this Act is incompatible with the obligation for the consolidated accounts to give a true and fair view, that provision shall be departed from in order to give a true and fair view. Any such departure shall be disclosed in the notes to the consolidated accounts together with an explanation of the reasons for it and a statement of its effect on the assets, liabilities, financial position and profit and loss.

Financial holding company exemption.

172. (1) A parent company which is a financial holding company shall be exempt from the requirement to prepare consolidated accounts if it meets the following conditions -

(a) it has not intervened during the accounting period, directly or indirectly, in the management of a subsidiary undertaking;

(b) it has not exercised the voting rights attaching to its participating interest in respect of the appointment of a member of the board of directors of the subsidiary undertaking during the accounting period and the five preceding accounting periods; or, where the exercise of voting rights was necessary for the operation of the board of directors of the subsidiary undertaking, such voting rights were exercised without any interference or influence on the part of the parent company or of any of its subsidiary undertakings, and:

(i) no member with majority voting rights in that parent company; or

(ii) no member of the board of directors of that parent company; or

(iii) no member of the board of directors of a member with majority voting rights in that parent company, is a member of the board of directors of the subsidiary undertaking;

(c) it has made loans only to undertakings in which it holds participating interests provided that where such loans have been made to other parties, they shall have been repaid by the end of the previous accounting period; and

(d) the exemption has been granted by the Registrar after he has verified that the conditions set out in this subarticle have been fulfilled.

(2) A financial holding company which is exempted from the requirement to prepare consolidated accounts pursuant to the provisions of subarticle (1), shall also be exempted from the requirement to provide the information laid out in paragraph 32 of the Third Schedule in the case of a holding other than a majority holding:

Provided that the exemption from the requirement to provide the information laid out in paragraph 32 of the Third Schedule shall also extend to majority holdings where in the opinion of the directors the disclosures required thereby are such that they would be seriously prejudicial to the company, to its members or to one of its subsidiaries. When any information is omitted following the application of the provisions of this proviso, such omission shall be disclosed in the notes to the accounts.

(3) For the purposes of this article, the term "board of directors" includes the management or administrative organ of an undertaking, by whatever name called, formed in Malta or elsewhere, not being a company formed and registered in Malta.

Consolidated accounts - size exemption.

173. (1) A parent company shall be exempt from the requirements to prepare consolidated accounts if as at its balance sheet date the undertakings to be consolidated do not together, on the basis of their latest individual accounts, exceed the limits of two of the three criteria laid down in article 185:

Provided that none of the undertakings to be consolidated is a company the securities of which have been admitted to official listing on the recognised investment exchange.

(2) For the purposes of this article "securities" includes -

(a) shares and stock;

(b) debentures, including debenture stock, loan stock, bonds, certificates of deposit and other instruments creating or acknowledging indebtedness;

(c) warrants or other instruments entitling the holder to subscribe for securities falling within paragraph (a) or (b); and

(d) certificates or other instruments which confer -

(i) property rights in respect of a security falling within paragraph (a), (b) or (c);

(ii) any right to acquire, dispose of, underwrite or convert a security, being a right to which the holder would be entitled if he held any such security to which the certificate or other instrument relates; or

(iii) a contractual right, other than an option, to acquire any such security otherwise than by subscription.

Exemption for parent companies included in accounts of larger groups.

174. (1) A parent company shall be exempt from the requirement to prepare consolidated accounts if it is itself a subsidiary company in the following cases -

(a) where the said parent company is a wholly-owned subsidiary company of an immediate parent company formed and registered under the law of Malta; or

(b) where ninety per cent or more in nominal value of the shares in the said parent company are held by a parent company and notice requesting the preparation of consolidated accounts has not been served on the first mentioned company by shareholders holding in the aggregate the remaining percentage in nominal value of all the shares thereof. Such notice shall not be valid unless it is served not later than six months after the commencement of the accounting period to which it relates.

(2) The exemption referred to in subarticle (1) shall be c o n d i t i o n a l u p o n c o m p l i a n c e w i t h a l l o f t h e f o l l o w i n g requirements -

(a) that in the case of a parent company which is itself a subsidiary company of a parent company formed and registered under the law of Malta, such company is included in consolidated accounts for a larger group drawn up to the same date, or to an earlier date in the same accounting period, by a parent company formed and registered under the law of Malta;

(b) that in the case of a parent company which is itself a subsidiary company of a parent undertaking not established under the law of Malta, the exempted undertaking is included in consolidated accounts for a larger group drawn up to the same date, or to an earlier date in the same accounting period, provided such consolidated accounts and the director’s report thereon are drawn up in a manner equivalent to that prescribed by this Act and have been audited by one or more persons authorised to audit accounts under the national law governing the undertaking which drew them up;

(c) that the said parent company discloses in its individual accounts that it is exempt from the obligation to prepare and deliver consolidated accounts;

(d) that the said parent company states in its individual accounts the name of the parent undertaking which draws up the consolidated accounts referred to in paragraph (a) or (b);

(e) that the said parent company delivers to the Registrar within the period allowed for delivering its individual accounts, copies of the consolidated accounts referred to in paragraph (a) or (b), and of the parent undertaking’s directors’ report or its equivalent, together with the auditors’ report on those consolidated accounts; and

(f) that if any document comprised in accounts and reports delivered in accordance with paragraph (e) is in a language other than Maltese or English, there is annexed to the copy of that document a translation of it into Maltese or English, certified to be a correct translation in such manner as may be prescribed.

(3) The exemption shall not apply to a parent company any of whose securities have been admitted to official listing on the recognised investment exchange.

(4) Shares held by directors of a company for the purpose of complying with any share qualification requirement shall be disregarded in determining for the purposes of subarticle (1)(a) whether the company is a wholly-owned subsidiary company.

(5) For the purposes of subarticle (1)(b) shares held by a wholly-owned subsidiary undertaking of the parent undertaking, or held on behalf of the parent company or a wholly-owned subsidiary undertaking, shall be attributed to the parent company.

(6) For the purposes of subarticle (3) "securities" shall have the same meaning as laid down in article 173(2).

Disclosure required in notes to the accounts.

175. (1) Where the company is not required to prepare consolidated accounts, the information specified in Part III of the Third Schedule shall be given in notes to the accounts; and where the company is required to prepare consolidated accounts, the information by way of notes to the consolidated accounts specified in the Fourth Schedule shall be given.

(2) If the directors of the company are of the opinion that the number of undertakings in respect of which the company is required to disclose information under any provision of the Third and Fourth Schedules is such that compliance with that provision would result in information of excessive length being given, the information need only be given in respect of -

(a) the companies whose results or financial position, in the opinion of the directors, principally affected the figures shown in the company’s annual accounts; and

(b) companies excluded from consolidation under article 170(3) or (4).

(3) In any case where the provisions of subarticle (2) are applied -

(a) there shall be included in the notes to the company’s annual accounts a statement that the information given relates only to such companies as are mentioned in that subarticle; and

(b) the full information, whether disclosed in the notes to the accounts or the notes to the consolidated accounts or not, shall be annexed to the company’s next annual return.

For the purpose of this subarticle the "next annual return" means the return next delivered to the Registrar after the annual accounts referred to in this article have been approved under article 176.

Approval and signing of annual accounts.

176. (1) A company’s annual accounts shall be approved by the board of directors and the balance sheet shall be dated and signed on behalf of the board by two directors of the company.

(2) Every copy of the balance sheet which is laid before the company in general meeting, or which is otherwise circulated, published or issued, shall state the name of the directors who signed the balance sheet on behalf of the board.

(3) The copy of the company’s balance sheet which is delivered to the Registrar shall be signed on behalf of the board by the same directors who signed the balance sheet pursuant to subarticle (1).

(4) If annual accounts are approved which do not comply with the provisions of this Act, every director of the company who is party to their approval and who knows that they do not comply or is negligent as to whether they comply shall be liable to a penalty. For this purpose every director of the company at the time the accounts are approved shall be taken to be a party to their approval unless he proves that he took all reasonable steps to prevent their being approved.

(5) If a copy of the annual accounts -

(a) is laid before the company, or otherwise circulated, published or issued, without having been signed as required by this article or without the required statement of the signatory’s name being included; or

(b) is delivered to the Registrar without being signed as required by this article, every officer of the company who is in default shall be liable to a penalty.

Contents of the directors’ report.

177. (1) For each accounting period the directors shall prepare a report, hereinafter referred to as "the directors’ report".

(2) The directors’ report shall state the names of the persons who, at any time during the accounting period, were directors of the company, the principal activities of the company and its subsidiaries in the course of the accounting period and any significant change in those activities during such period, and a fair review of the development of the business of the company and its subsidiaries during the accounting period, and of their position at the end of that period.

(3) The directors’ report shall furthermore comply with the Sixth Schedule as regards the disclosure of the matters mentioned therein.

(4) In the case of default in complying with the provisions of this article, every person who was a director of the company immediately before the end of the period for laying annual accounts for the relevant accounting period shall be liable to a penalty. In proceedings against a person under this subarticle, it shall be a defence for him to prove that he took all reasonable steps for securing compliance with the requirements of this article.

Approval and signing of directors’ report.

178. (1) The directors’ report shall be approved by the board of directors and dated and signed on behalf of the board by two directors of the company.

(2) Every copy of the directors’ report which is laid before the company in general meeting, or which is otherwise circulated, published or issued, shall state the name of the person who signed it on behalf of the board.

(3) The copy of the directors’ report which is delivered to the Registrar shall be signed and dated on behalf of the board by a director or the company secretary of the company.

(4) If a copy of the directors’ report -

(a) is laid before the company, or otherwise circulated, published or issued, without the report having been signed as required by this article or without the required statement of the signatory’s name being included; or

(b) is delivered to the Registrar without being signed as required by this article, every officer of the company who is in default shall be liable to a penalty.

Auditors’ report.

179. (1) A company’s auditors shall make a report to the company’s members on all annual accounts of the company of which copies are to be laid before the company in general meeting during their tenure of office.

(2) The auditors’ report shall be drawn up in accordance with International Standards on Auditing and shall state whether in the auditors’ opinion the annual accounts have been properly prepared in accordance with this Act, and in particular whether a true and fair view is given -

(a) in the case of an individual balance sheet, of the state of affairs of the company as at the end of the accounting period;

(b) in the case of an individual profit and loss account, of the profit or loss of the company for the accounting period;

(c) in the case of consolidated accounts, of the state of affairs as at the end of the accounting period, and the profit or loss for the accounting period, of the undertakings included in the consolidation as a whole, so far as concerns members of the company.

(3) The auditors shall consider whether the information given in the directors’ report for the accounting period for which the annual accounts are prepared is consistent with those accounts; and if they are of the opinion that it is not they shall state that fact in their report.

(4) The auditors’ report shall state the names of the auditors and shall be signed and dated by them.

(5) Every copy of the auditors’ report which is laid before the company in general meeting, or which is otherwise circulated, published or issued, shall state the names of the auditors.

(6) The copy of the auditors’ report which is delivered to the Registrar shall state the names of the auditors and be signed by them.

(7) If a copy of the auditors’ report -

(a) is laid before the company, or otherwise circulated, published or issued, without the required statement of the auditors’ names; or

(b) is delivered to the Registrar without the required statement of the auditors’ names or without being signed as required by this article, every officer of the company who is in default shall be liable to a penalty.

(8) References in this article to signature by the auditors are, where the office of auditor is held by a partnership, to the signature of an individual partner or partners signing on behalf of the partnership and authorised to sign on its behalf.

(9) A company’s auditors shall, in preparing their report, carry out such investigations as will enable them to form an opinion as to -

(a) whether proper accounting records have been kept by the company and proper returns adequate for their audit have been received from branches not visited by them, and

(b) whether the company’s individual accounts are in agreement with the accounting records and returns.

(10) If the auditors are of the opinion that proper accounting records have not been kept, or that proper returns adequate for their audit have not been received from branches not visited by them, or if the company’s individual accounts are not in agreement with the accounting records and returns, the auditors shall state that fact in their report.

(11) If the auditors are unable to obtain all the information and explanations which, to the best of their knowledge and belief, are necessary for the purpose of their audit, they shall state that fact in their report.

(12) If the requirements of article 31(o) of the Third Schedule are not complied with in the annual accounts, the auditors shall include in their report, so far as they are reasonably able to do so, a statement giving the required particulars.

(13) In this article, "International Standards on Auditing" refers to the standards approved by the Council of the International Federation of Accountants, established at the International Congress of Accountants in Munich in 1977 as may be amended from time to time.

Persons to whom a copy of the accounts of a company are to be sent.

180. (1) In the case of every company, a copy of the annual accounts of a company for the accounting period shall, not less than fourteen days before the date of the meeting at which they are to be laid in accordance with the provisions of article 181, be sent to each of the following persons:

(a) every member of the company;

(b) every holder of the company’s debentures; and

(2) Notwithstanding the provisions of subarticle (1), copies of the annual accounts shall, unless otherwise provided in the memorandum or articles, not be required to be sent to a debenture holder who is not entitled to receive notices of general meetings.

(3) If copies of the annual accounts are sent less than fourteen days before the date of the meeting, they shall, notwithstanding that fact, be deemed to have been duly sent if it is so agreed by all the members entitled to attend the meeting who received them late.

(4) If default is made in complying with subarticle (1), the company and every officer who is in default shall be liable to a penalty.

(5) Any member of the company and any holder of the company’s debentures, whether or not such holder is entitled to have sent to him copies of the company’s annual accounts, shall be entitled to be furnished, on demand and without charge, with a copy of the last annual accounts laid before the company in general meeting.

(6) If, when a person makes a demand for a document with which he is entitled by this article to be furnished, every officer of the company who defaults in complying with the demand within seven days after its making, shall be liable to a penalty, and, for every day during which the default continues, to a further penalty.

(7) For the purposes of this article, reference to the term

"annual accounts" shall include the directors’ report as specified in article 177 and the auditors’ report as specified in article 179.

Directors to lay accounts before the general meeting.

181. (1) In respect of each accounting period of a company the directors shall lay before the company in general meeting for its approval copies of the annual accounts of the company for that period. There shall be annexed to the annual accounts, the auditors’ report as specified in article 179 and the directors’ report as specified in article 177.

(2) The auditors’ report shall be read before the company in general meeting, and be open to the inspection of any member of the company.

(3) If default is made in complying with the provisions of subarticle (1), or if the annual accounts laid before the company do not comply with the provisions of this Act, every person who immediately before the end of the period for laying such accounts was a director of the company shall be liable to a penalty and, for every day during which the default continues, to a further penalty.

(4) It shall be a defence for a person charged under subarticle

(3) to prove that he took all reasonable steps for securing that the requirements of subarticle (1) would be complied with before the end of the period for laying of annual accounts. It shall not be a defence to prove that the document or documents in question were not in fact prepared as required by this Act.

Period for laying and approval of accounts.

182. (1) The period allowed for laying before and approval by the company in general meeting of a company’s annual accounts for an accounting period shall be as provided in this article.

(2) Subject to the following subarticles of this article, the period allowed shall be -

(a) for a private company, ten months after the end of the relevant accounting reference period; and

(b) for a public company, seven months after the end of that period.

(3) If a company carries on business, or has interests, outside Malta and in respect of an accounting period, the directors, before the end of the period allowed by subarticle (2), give to the Registrar notice in the prescribed form -

(a) stating that the company so carries on business or has such interests; and

(b) claiming an extension of the period so allowed by a further three months, the period allowed in relation to that accounting period shall be so extended.

(4) Where a company’s first accounting period is a period of more than twelve months from the date of its registration, the period otherwise allowed for laying before and approval by the company in general meeting of annual accounts shall be reduced by the number of days by which the relevant accounting period is longer than twelve months. However, the period allowed shall not by this provision be reduced to less than three months after the end of that accounting period.

(5) Where a company’s relevant accounting period has been shortened due to a change in the accounting reference date, the period allowed for laying and delivering annual accounts shall be -

(a) the period allowed in accordance with subarticles (2) to (4); or

(b) the period of three months beginning with the date of a notice given to the Registrar when notice has been given to change the accounting reference date,

Copies of accounts to be provided to Registrar.

183. (1) The company directors shall deliver to the Registrar for registration a copy of the company’s annual accounts laid before the company in general meeting in accordance with article 181 together with a copy of the auditors’ report thereon, and the directors’ report accompanying the annual accounts within forty-two days from the end of the period for laying of annual accounts prescribed by article 182.

(2) Where, in accordance with article 185, a company qualifies to draw up abridged annual accounts relating to an accounting period, the directors of the company may deliver to the Registrar abridged annual accounts in respect of that accounting period and such delivery shall satisfy the company’s obligation under subarticle (1):

Provided that where the company which qualifies to draw up abridged annual accounts is an exempt company, it may deliver to the Registrar only its abridged balance sheet, all the notes to the accounts relevant for the purposes of that balance sheet and the auditors’ report, but without the profit and loss account and the directors’ report:

Provided further that where the exempt company which qualifies to draw up abridged accounts is a company referred to in article 185(1)(b), it may deliver to the Registrar only its abridged balance sheet, all the notes to the accounts relevant for the purposes of that balance sheet, but without the profit and loss account, the directors’ report and the auditors’ report.

(3) The statements referred to in article 185(10), shall also be required where, notwithstanding that the annual accounts have not been drawn up in abridged form, the directors take advantage of exemptions conferred by subarticle (2) regarding the delivery of the annual accounts in abridged form.

(4) Where the directors of a company propose to take advantage of the exemptions conferred by subarticle (2), the auditors shall have the duty to provide the directors with a special auditors’ report stating whether in their opinion the company is entitled to those exemptions as claimed in the directors’ statements and whether the documents to be proposed to be delivered in accordance with this article are properly prepared:

Provided that the special auditors’ report shall not be required where the annual accounts of the company, in respect of which the auditors’ report referred to in article 179 has been made, are to be published as drawn up:

Provided further that the provisions of this subarticle shall not apply to companies referred to in article 185(1)(b).

(5) The annual accounts delivered shall be accompanied by the special auditors’ report referred to in subarticle (4), where required to be drawn up in pursuance of the same subarticle.

(6) In the case provided for in subarticle (5) a copy of the auditors’ report prepared under article 179 need not be delivered separately but the full text of it shall be reproduced in the special auditors’ report; and if the auditors’ report prepared under article 179 is qualified, there shall be included in the special auditors’ repo rt an y fu rt her m a te ri al necessary to un derstan d the qualification.

(7) Article 179(4) shall apply to a special auditors’ report under this article as it applies to a report under article 179.

(8) Where a company, which is a parent company, prepares consolidated accounts in accordance with the provisions of this Act it need not include a copy of its profit and loss account with the annual accounts to be delivered to the Registrar as prescribed in subarticle (1) where the following conditions are fulfilled -

(a) the application of this exemption is disclosed in the notes to the accounts of the parent company and in the notes to the consolidated accounts; and

(b) the profit or loss of the parent company, determined in accordance with the provisions of this Act, shall be shown separately either on the face of the parent company’s balance sheet or in the notes to the accounts of the parent company.

(9) If any document comprised in the annual accounts is in a language other than Maltese or English, the company shall annex to the copy of that delivered document a translation of it into either Maltese or English, certified to be a correct translation in such manner as may be prescribed.

(10) In the case of default in complying with the provisions of this article, or where the annual accounts delivered to the Registrar do not comply with the provisions of this Act, every officer of the company who is in default shall be liable to a penalty, and, for every day during which the default continues, to a further penalty. In proceedings under this subarticle it shall not be a defence to prove that the document or documents in question were not in fact prepared as required by this Act.

Annual return.

184. (1) Every company shall, after 1st January 2004, upon each anniversary of its registration, make a return in the form set out in the Seventh Schedule showing the matters therein specified and made up to the date of such anniversary:

Provided that -

(a) where a company was, immediately before the 1st January 2004, in default with respect to the delivery of one or more annual returns, this article shall not affect the obligation of the company to make such a return or returns or the payment of any penalty arising from such a default;

(b) where a company has converted any of its shares into stock and registered the conversion as provided in article 79, the list of past and present members shown in Part 3 of the Seventh Schedule shall state the amount of stock held by each of the existing members instead of the amount of shares and the particulars relating to shares required by that part.

(2) The annual return, duly completed, shall be signed by at least one director of the company or the company secretary and forwarded to the Registrar for registration within forty-two days after the date to which it is made up.

(3) If default is made in complying with the provisions of this article, every officer of the company who is in default shall be liable to a penalty, and, for every day during which the default continues, to a further penalty.

Exemptions for small companies.

185. (1) (a) Companies which on their balance sheet dates do not exceed the limits of two of the three following criteria -

balance sheet total: one million one hundred thousand liri;

turnover: two million two hundred thousand liri;

average number of employees during the accounting period: fifty;

shall in this Act be designated as "small companies" and may, for all purposes of this Act, draw up abridged balance sheets and abridged layouts of profit and loss account as specified in subarticle (2) and abridged notes to the accounts as specified in subarticle (3).

(b) Private companies which on their balance sheet dates do not exceed the limits of two of the three following criteria:

balance sheet total: twenty thousand liri;

turnover: forty thousand liri;

average number of employees during the accounting period: two;

shall be exempted from the provisions of Chapter IX of Part V and from the requirement imposed by article 179 and such companies may, for all purposes of this Act, draw up abridged balance sheets and abridged layouts of profit and loss account as specified in subarticle (2) and abridged notes to the accounts as specified in subarticle (3).

(2) For the purposes of this article, the word "abridged" -

(a) when used therein in relation to a balance sheet shall mean an abbreviated version of the balance sheet, showing only those items to which a letter or Roman number is assigned in the balance sheet formats shown under Part I of the Third Schedule to this Act, immediately following paragraph 13, under the heading "Balance Sheet Formats", but such version shall, in all other respects, correspond to the full balance sheet;

(b) when used therein in relation to profit and loss account layouts shall mean the full profit and loss account with the exception that the following items can be combined as one item under the heading "gross profit or loss" -

(i) items l, 2, 3 and 6 in Format 1;

(ii) items 1 to 5 in Format 2;

(iii) items A.1, B.1 and B.2 in Format 3; and

(iv) items A.1, A.2 and B.1 to B.4 in Format 4.

The formats herein stated are those shown in Part I of the Third Schedule, immediately following paragraph 13, under the heading "Profit and Loss Account Formats".

(3) Companies referred to in subarticle (1) may draw up abridged notes to the accounts omitting the disclosures prescribed by indents (d) and (g) to (o) of paragraph 31 of Part III of the Third Schedule. The notes to the accounts shall however disclose the information specified in indent (j) of the said paragraph 31 in total for all the items concerned.

(4) Where on its balance sheet date other than its first balance sheet date, a company exceeds or ceases to exceed the limits of two of the three criteria indicated in subarticle (1), that fact shall affect the application of the derogation provided for in that subarticle only if it occurs in two consecutive accounting periods.

(5) The balance sheet total referred to in this article shall consist of the assets in A to E in the layout in Format 1 of the Balance Sheet Formats contained in Part 1 of the Third Schedule, immediately following paragraph 13, or those in A to E in the layout in Format 2 of the Balance Sheet Formats contained in the said Part of the same Schedule.

(6) A parent company shall not be treated as qualifying as a small company in relation to an accounting period unless the group of which it is parent qualifies as a small group. A group qualifies as a small group in relation to an accounting period if it does not exceed the limits of two of the three following criteria:

aggregate balance sheet total: one million one hundred thousand liri net or one million three hundred and twenty thousand liri gross;

aggregate turnover: two million two hundred thousand liri net or two million six hundred and forty thousand liri gross;

aggregate number of employees: fifty:

Provided that the provisions of this subarticle shall not apply to a parent company which is exempted from the requirement to prepare consolidated accounts in accordance with article 174.

(7) The provisions of subarticle (4) shall apply to parent companies as though the reference to company were a reference to parent company.

(8) The aggregate figures shall be ascertained by aggregating the relevant figures determined in accordance with subarticles (1) and (6). In relation to the aggregate figures for turnover and balance sheet total, "net" means with the set-offs and other adjustments required for the preparation of consolidated accounts and "gross" means without those set-offs and other adjustments; and a company may satisfy the relevant requirements on the basis of either the net or the gross figure.

(9) The figures for each subsidiary undertaking shall be those included in its individual accounts for the relevant accounting period, that is -

(a) if its accounting period ends with that of the parent company, that accounting period; and

(b) if not, its accounting period ending last before the end of the accounting period of the parent company.

If such figures cannot be obtained without disproportionate expense or undue delay, the latest available figures shall be taken.

(10) Where the directors of a company take advantage of the exemptions conferred by this article, the company’s abridged balance sheet shall contain:

(a) a statement that advantage is taken of the exemptions conferred by this article, and

(b) a statement of the grounds on which, in the directors’ opinion, the company is entitled to those exemptions.

(11) The statements referred to in subarticle (10) shall appear in the abridged balance sheet immediately above the signature required by article 176(1).

(12) In determining the average number of employees during the accounting period, for the purposes of this article -

(a) in relation to whole -time employees, the average number of employees shall be that established on the basis of the following formula:

A the aggregate number of full weeks worked during the accounting period by all the whole-time employees of the company divided by the number of full weeks comprised in that period, rounded off to the nearest number; and

(b) in relation to part-time employees, the average number of employees shall be that established on the basis of the following formula:

the aggregate number of hours worked during the accounting period by all the part-time employees of the company divided by the number of full weeks comprised in that period and again divided by forty, rounded off to the nearest number.

Share capital in any convertible currency.

186. (1) The share capital of a company may be denominated in any currency which is a convertible currency within the meaning assigned to it by the Central Bank of Malta Act, and, for the purposes of this Chapter, the euro shall be a convertible currency.

(2) A company may by extraordinary resolution change the currency in which its share capital is expressed, and for this purpose the conversion rules set out in the Eighth Schedule shall apply in respect of any company other than an investment company with variable share capital.

(3) For the purposes of applying the provisions of this Act relating to minimum share capital, share capital expressed in a currency other than liri shall be calculated on the basis of the liri equivalent at the date of -

(a) the registration of the memorandum, in the case of formation of a company; or

(b) the registration of the extraordinary resolution, in the case referred to in subarticle (2); or

(c) the registration of the extraordinary resolution effecting a reduction of the issued share capital, in the case where a company reduces its issued share capital.

(4) Without prejudice to the provisions of article 83, a copy of the extraordinary resolution referred to in subarticle (2) shall be delivered to the Registrar for registration and shall not be effective until it is so registered.

(5) The exchange rate to be used shall be the average of the buying and selling rates prevailing at the date of registration referred to in subarticle (3), as the case may be.

(6) An investment company with variable share capital may only change the currency in which its share capital is expressed by complying with such conversion rules as may be prescribed by the Minister under article 188.

Accounts in any convertible currency.

187. (1) A company shall draw up its annual accounts in the same currency as that of its share capital.

(2) Where the annual accounts of a company are drawn up in a currency other than liri, there shall be stated on the balance sheet of the company the exchange rate between the currency used and liri on the balance sheet date and such rate shall be the official closing middle rate issued by the Central Bank of Malta for that date.

(3) For the purposes of applying any provision of this Act which sets a threshold by reference to an amount in liri in the annual accounts of a company, such amount as stated in a foreign currency in the company’s annual accounts shall be converted into liri by using the exchange rate referred to in subarticle (2).

(4) Annual accounts shall be published in the currency in which they are drawn up. They may also be published in both the currency in which they are drawn up and in euro. The conversion into euro shall be made by using the exchange rate between the currency used and the euro on the balance sheet date, and such rate shall be the official closing middle rate issued by the Central Bank of Malta. This rate shall be disclosed in the notes to the accounts.

Power of Minister to make regulations altering accounting requirements.

188. For the purposes of this Chapter, the Minister may by order make regulations which -

(a) add to the classes of documents required to be prepared, laid before the company in general meeting or delivered to the Registrar;

(b) restrict the categories of companies which have the benefit of any exemption, exception or special provision;

(d) otherwise render the accounting requirements of this

Act more onerous;

(e) in derogation of the provisions of article 187, permit a company to draw up its annual accounts in a different currency from that of its share capital, regulate the manner and the conditions as may be considered appropriate for this purpose, and make provision in the Eighth Schedule to this Act for the application of the said Schedule, with such variations as may be specified, in relation to such a company;

(f) prescribe conversion rules applicable on a change in the currency in which the share capital of an investment company with variable share capital is expressed; or

(g) amend or vary any of the provisions of this Chapter for the purpose of bringing them in line with the requirements of International Accounting Standards or International Standards on Auditing.

Consequential provisions to

189. (1) Regulations made under article 188 may -

(a) make different provision for different cases; and

(b) repeal and re-issue provisions of any regulation with modifications of form or arrangement, whether or not they are modified in substance.

(2) Regulations made under article 188 may contain such transitional and other supplementary and incidental provisions as appear to the Minister to be appropriate.

Court order to make good failure to lay or deliver accounts.

190. (1) If -

(a) in respect of a company’s accounting period any of the requirements of article 182(1) has not been complied with before the end of the period prescribed by that article; and

(b) the directors of the company fail to make good the default within fourteen days after the service of a notice on them requiring compliance, the court may, on application by any member or creditor of the company, or by the Registrar, make an order directing the directors, or any of them, to make good the default within such time as may be specified in the order.

(2) The court’s order may provide that all costs of and incidental to the application shall be borne by the directors.

(3) Nothing in this article shall prejudice the provisions of this Act relating to penalties for non-compliance.

Application to other commercial partnerships.

191. (1) Where all the partners of a partnership en nom collectif or where all the partners having unlimited liability of a partnership en commandite or limited partnership, the capital of which is not divided into shares, are themselves partnerships en commandite or limited partnerships, the capital of which is divided into shares, the provisions of Chapter IX and of this Chapter of this Title shall, in so far as they are applicable, apply to such a partnership.

(2) The provisions of subarticle (1) shall also apply where all the partners of a partnership en nom collectif or where all the partners having unlimited liability of a partnership en commandite or limited partnership the capital of which is not divided into shares are themselves companies, or are partnerships or firms constituted or incorporated outside Malta which are of a type which is comparable to that of a company or that of a partnership en commandite or limited partnership the capital of which is divided into shares as regulated by this Act.

(3) Where all the partners of a partnership en nom collectif or where all the partners having unlimited liability of a partnership en commandite or limited partnership the capital of which is not divided into shares are themselves companies or are partnerships en commandite or limited partnerships the capital of which is divided into shares, or are commercial partnerships to which subarticle (1) or subarticle (2) applies, the provisions of Chapter IX and of this Chapter of this Title shall, in so far as applicable, apply to such a partnership.

Chapter XI - Distribution of Profits and Assets

Certain distributions prohibited.

192. (1) A company shall not make a distribution except out of profits available for the purpose.

(2) For the purposes of this Chapter, "distribution" means every description of distribution of a company’s assets to its members, whether in cash or otherwise, except distribution by way of -

(a) an issue of shares as fully or partly paid bonus shares;

(b) the redemption or purchase of any of the company’s own shares out of capital, including the proceeds of any fresh issue of shares, or out of undistributable reserves as stipulated in article 193(3);

(c) the reduction of the issued share capital by extinguishing or reducing the liability of any of the members on any of the company’s shares in respect of issued share capital not paid up, or by paying off paid up issued share capital; and

(d) a distribution of assets to members of the company on its winding up.

(3) For the purposes of this Chapter, a company’s profits available for distribution shall be its accumulated, realised profits, so far as not previously utilised by distribution or capitalisation, less its accumulated, realised losses, so far as not previously written off in a reduction or reorganisation of issued share capital duly made. The provisions of this subarticle shall be subject to the provisions of articles 194 and 195.

(4) A company shall not apply an unrealised profit in paying up debentures, or any amounts unpaid on its issued share capital.

(5) Where the directors of a company are, after making all reasonable enquiries, unable to determine whether a particular profit made before the 1st January, 1995 is realised or unrealised, they may treat the profit as realised; and where after making such enquiries they are unable to determine whether a particular loss so made is realised or unrealised, they may treat the loss as unrealised.

Distributions by public companies.

193. (1) A public company may only make a distribution at any time -

(a) if at that time the amount of its net assets is not less than the aggregate of its called-up issued share capital and undistributable reserves; and

(b) if, and to the extent that, the distribution does not reduce the amount of those assets to less than that aggregate.

The provisions of this subarticle shall be subject to the provisions of articles 194 and 195.

(2) In subarticle (1), "net assets" means the aggregate of the company’s assets less the aggregate of its liabilities. "Liabilities" include any amount retained as reasonably necessary for the purpose of providing for any liability or loss which is either likely to be incurred or certain to be incurred but uncertain as to amount or as to the date on which it will arise.

(3) A company’s undistributable reserves are -

(a) the share premium account;

(b) the capital redemption reserve;

(c) the amount by which the company’s accumulated, unrealised profits, so far as not previously utilised by capitalization of a description to which this paragraph applies, exceed its accumulated, unrealised losses, so far as not previously written off in a reduction or reorganisation of capital duly made; and

(d) any other reserve which the company is prohibited from distributing by any legislation or by its memorandum or articles; and paragraph (c) shall apply to every description of capitalization except a transfer of profits of the company to its capital redemption reserve on or after 1st January, 1995.

(4) A public company shall not include any uncalled issued share capital as an asset in any accounts relevant for the purposes of this article.

Other distributions by investment companies with fixed share capital.

194. (1) Subject to the following provisions of this article, an investment company with fixed share capital may also make a distribution at any time out of its accumulated, realised revenue profits, so far as not previously utilised by a distribution or capitalisation, less its accumulated revenue losses, whether realised or unrealised, so far as not previously written off in a reduction or reorganisation of capital duly made -

(a) if at that time the amount of its assets is at least equal to one and a half times the aggregate of its liabilities, and

(b) if, and to the extent that, the distribution does not reduce that amount to less than one and a half times that aggregate.

(2) In subarticle (1)(a), "liabilities" includes any provision for liabilities or charges within the meaning of paragraph 7 of the Third Schedule.

(3) An investment company with fixed share capital shall not include any uncalled issued share capital as an asset in any accounts relevant for the purposes of this article.

(4) An investment company with fixed share capital may not make a distribution by virtue of subarticle (1) unless -

(a) its shares are listed on the recognised investment exchange; and

(b) during the relevant period it has not -

(i) distributed any of its capital profits, or

(ii) applied any unrealised profits or any capital profits, realised or unrealised, in paying up debentures or amounts unpaid on its issued share capital.

(5) The "relevant period" under subarticle (4) shall be the period beginning with -

(a) the first day of the accounting period immediately preceding that in which the proposed distribution is to be made; or

(b) where the distribution is to be made in the company’s first accounting period, the first day of that period, and ending with the date of the distribution.

(6) "Investment company with fixed share capital" means a public company which complies with the following requirements:

(a) the business of the company consists either of -

(i) investing in funds mainly in securities with the aim of spreading investment risk and giving members of the company the benefit of the results of the management of its funds; or

(ii) acting and operating as a Retirement Fund within the meaning of articles 2 and 4 of the Special Funds (Regulation) Act;

(b) none of the company’s holdings in companies other than those which are, for the time being, in investment companies with fixed share capital, represents more than fifteen per cent by value of the investing company’s investments;

(d) the company has not retained, otherwise than in compliance with this Chapter, in respect of any accounting period, more than fifteen per cent of the income it derives from securities.

Extension of article 194 to other companies.

195. (1) The Minister may make regulations extending the provisions of article 194, with or without modifications, to investment companies with variable share capital or to other companies whose principal business consists of investing their funds in securities, land or other assets with the aim of spreading investment risk and giving their members the benefit of the results of the management of the assets.

(2) Regulations made under this article may make different provision for different categories of companies and may contain such transitional and supplemental provisions as the Minister considers necessary.

Treatment of development costs.

196. (1) Subject to the following provisions of this article, where development costs are shown as an asset in a company’s annual accounts, any amount shown in respect of those costs is to be treated -

(a) under article 192, as a realised loss; and

(b) under article 194, as a realised revenue loss.

(2) The provisions of subarticle (1) shall not apply -

(a) to any part of that amount representing an unrealised profit made on revaluation of those costs; and

(b) where -

(i) there are special circumstances in the company’s case justifying the directors in deciding that the amount there mentioned is not to be treated as required by subarticle (1), and

(ii) the provision in the notes to the accounts required by paragraph 18 of the Third Schedule states that the amount is not to be so treated and explains the circumstances relied upon to justify the decision of the directors to that effect.

Distribution to be justified by reference to company’s accounts.

197. (1) The provisions of this article and of articles 198 to 203 shall apply for determining the question whether a distribution may be made by a company without contravening articles 192, 193, or 194.

(2) The amount of a distribution which may be made shall be determined by reference to the following items as stated in the company’s accounts -

(a) profits, losses, assets and liabilities;

(b) provisions of any of the kinds mentioned in the Third Schedule to this Act in paragraphs 7, 16 and 17 and these paragraphs as applied by paragraph 28 of the said Third Schedule; and

(3) The company’s accounts which are relevant for the purposes of this article shall be its last annual accounts, that is to say those which were laid in respect of the last preceding accounting period in respect of which accounts so prepared were laid:

Provided that in the following two cases -

(a) where the distribution would be found to contravene the relevant article in this Chapter if reference were made only to the company’s last annual accounts; or

(b) where the distribution is proposed to be declared during the company’s first accounting period, or before any annual accounts are laid in respect of that period, the accounts relevant under this article, called "interim accounts" in the first case, and "initial accounts" in the second, shall be those necessary to enable a reasonable judgment to be made as to the amounts of the items mentioned in subarticle (2).

(4) The relevant article of this Chapter is treated as contravened in the case of a distribution unless the requirements laid down in this article and in the following three articles, as and where applicable, in respect of the relevant accounts are complied with in relation to that distribution.

Requirements for last annual accounts.

198. (1) If the company’s last annual accounts constitute the only accounts relevant under article 197, the requirements laid down in this article shall apply in regard to such accounts.

(2) The accounts shall have been properly prepared in accordance with the provisions of this Act, or have been so prepared subject only to matters which are not material for determining, by reference to items mentioned in article 197(2), whether the distribution would contravene the relevant article of this Chapter.

(3) Without prejudice to the provisions of subarticle (2) -

(a) so much of the accounts as consists of a balance sheet shall give a true and fair view of the state of the company’s affairs as at the balance sheet date; and

(b) so much of the accounts as consists of a profit and loss account shall give a true and fair view of the company’s profit or loss for the period in respect of which the accounts were prepared.

(4) The auditors shall have made their report on the accounts, and subarticle (5) shall apply if the report is not a report without qualification to the effect that in the auditor’s opinion the accounts have been properly prepared in accordance with the provisions of this Act.

(5) The auditors shall, in the case referred to in subarticle (4), have stated in writing, either at the time of their report or subsequently, whether in their opinion, the matter in respect of which their report is qualified is material for determining, by reference to items mentioned in article 197(2), whether the distribution would contravene the relevant article, and a copy of the statement shall have been laid before the company in general meeting.

(6) A statement under subarticle (5) shall suffice for purposes of a particular distribution not only if it relates to a distribution which has been proposed but also if it relates to distributions of any d e s c r i p t i o n w h i c h i n c l u d e t h a t p a r t i c u l a r d i s t r i b u t i o n , notwithstanding that at the time of the statement it had not been proposed.

Requirements for interim accounts.

199. (1) The provisions of this article shall constitute the requirements in respect of interim accounts prepared for a proposed distribution by a public company.

(2) The accounts shall have been properly prepared, or shall have been so prepared subject only to matters which are not material for determining, by reference to items mentioned in article 197(2), whether the proposed distribution would contravene the relevant article of this Chapter.

(3) "Properly prepared" shall mean that the accounts shall comply with this Act with such modifications as are necessary because the accounts are prepared otherwise than in respect of an accounting period and any balance sheet comprised in the accounts shall have been signed in accordance with article 176.

(4) Without prejudice to the provisions of subarticle (3) -

(a) so much of the accounts as consists of a balance sheet shall give a true and fair view of the state of the company’s affairs as at the balance sheet date; and

(b) so much of the accounts as consists of a profit and loss account shall give a true and fair view of the company’s profit or loss for the period in respect of which the accounts were prepared.

(5) A copy of the accounts shall have been delivered to the Registrar for registration.

(6) If the accounts are in a language other than English or Maltese, a translation into English or Maltese of the accounts, certified to be a correct translation in such manner as may be prescribed, shall also have been delivered to the Registrar.

Requirements for initial accounts.

200. (1) The provisions of this article shall constitute the requirements in respect of initial accounts prepared for a proposed distribution by a public company.

(2) The accounts shall have been properly prepared, or they shall have been so prepared subject only to matters which are not material for determining, by reference to items mentioned in article 197(2), whether the proposed distribution would contravene the relevant article of this Chapter.

(3) Article 199(3) and (4) shall apply as respects the meaning of "properly prepared".

(4) The company’s auditors shall have made a report stating whether, in their opinion, the accounts have been properly prepared, and subarticle (5) shall apply if their report is a qualified report, that is to say it is not a report without qualification to the effect that in the auditors’ opinion the accounts have been so prepared.

(5) The auditors shall in the case referred to in subarticle (4) also have stated in writing, whether, in their opinion, the matter in respect of which their report is qualified is material for determining, by reference to items mentioned in article 197(2), whether the distribution would contravene the relevant article of this Chapter.

(6) A copy of the accounts, of the auditors’ report under subarticle (4) and of the auditors’ statement, if any, under subarticle (5) shall have been delivered to the Registrar.

(7) If the accounts are, or the auditors’ report under subarticle (4) or their statement, if any, under subarticle (5), is in a language other than Maltese or English, a translation into English or Maltese of the accounts, the report or the statement, as the case may be, certified to be a correct translation in such manner as may be prescribed, shall also have been delivered to the Registrar.

Method of applying article 197 to successive distributions.

201. For the purpose of determining, by reference to particular accounts, whether a proposed distribution may be made by a company, article 197 shall have effect, in a case where one or more d i s t r i b u t i o n s h a v e a l r e a d y b e e n m a d e i n p u r s u a n c e o f determinations made by reference to those same accounts, as if the amount of the proposed distribution was increased by the amount of the distributions so made.

Treatment of assets in the relevant accounts.

202. For the purposes of articles 192 and 193, a provision of any kind mentioned in the Third Schedule in paragraph 7(1) and paragraphs 16 and 17 including these paragraphs as applied by paragraph 28 of the said Third Schedule, shall be treated as a realised loss.

Distributions in kind.

203. Where a company makes a distribution of, or including, a non-cash asset, and any part of the amount at which that asset is stated in the accounts relevant for the purposes of the distribution in accordance with articles 197 to 202 represents an unrealised profit, that profit is to be treated as a realised profit -

(a) for the purpose of determining the lawfulness of the distribution in accordance with this Chapter, whether before or after the distribution takes place; and

(b) for the purpose of paragraph 14(c)(i) and paragraph 30(3) of the Third Schedule in relation to anything done with a view to or in connection with the making of that distribution.

Consequence of unlawful distribution.

204. Where a distribution, or part of a distribution, made by a company to one of its members is made in contravention of this Chapter and, at the time of the distribution, that member knows or has reasonable grounds for believing that it is so made, he shall be liable to repay it, or that part of it, as the case may be, to the company or, in the case of a distribution made otherwise than in cash, to pay the company a sum equal to the value of the distribution, or of the part of the distribution, at that time.

Obligations imposed apart from article 204 not to be prejudiced.

205. The provisions of article 204 shall apply without prejudice to any obligation imposed apart from that article on a member of a company to repay a distribution unlawfully made to him.

Saving for provision in articles operative before 1st January, 1995.

206. Where immediately before 1st January, 1995 a company was authorised by a provision of its articles to apply its unrealised profits in paying up in full or in part unissued shares to be allotted to members of the company as fully or partly paid bonus shares, that provision shall continue, subject to any alteration of the articles, as authority for those profits to be so applied after that date.

Interpretations for the purposes of this Chapter.

207. (1) The provisions of this article shall have effect for the interpretation of this Chapter.

(2) "Capitalisation", in relation to a company’s profits, shall mean any of the following operations, whenever carried out -

(a) the application of the profits to wholly or partly pay up unissued shares in the company to be allotted to members of the company as fully or partly paid bonus shares; or

(b) the transfer of the profits to the capital redemption reserve.

(3) References in this Chapter to profits and losses of any description shall be, respectively, to profits and losses of that description made at any time and, except where the context otherwise requires, shall be, respectively, to revenue and capital profits and revenue and capital losses.

Saving for other restraints on distribution.

208. The provisions of this Chapter shall be without prejudice to any other provision of law, or any provision of a company’s memorandum or articles, restricting the sums out of which, or the cases in which, a distribution may be made.

Chapter XII - Private Company

Definition.

209. (1) A private company is a company which, besides fulfilling the requirements of this Act for it to hold the status of a private company, is one which, by its memorandum or articles -

(a) restricts the right to transfer its shares; and

(b) limits the number of its members to fifty; and

(2) A private company shall not -

(a) offer to the public, whether for cash or otherwise, any shares in or debentures of the company; or

(b) allot or agree to allot, whether for cash or otherwise, any shares in or debentures of the company with a view to all or any of those shares or debentures being offered to the public, within the meaning given to the expression "offers made to the public" in article 2(3).

(3) Where a private company contravenes the provisions of subarticle (2), every officer thereof who is in default shall be liable to a penalty.

Resolutions in writing.

210. Subject to the provisions of this Act, in the case of a private company, a resolution in writing signed by all the members for the time being entitled to receive notice of and to attend and vote at the general meetings shall be as valid and effective as if the same had been passed at a general meeting of the company duly convened and held and the provisions of article 155 shall not apply. Annual general meetings of the company may be held in accordance with this article:

Provided that a resolution in writing as aforesaid shall be void if it purports to remove a director or an auditor before the expiration of his term of office, or otherwise purports to deprive the auditors of the right granted to them by virtue of the provisions of article 155.

Exempt company.

211. (1) A private company shall have the status of an exempt company if the conditions mentioned in subarticle (2) are contained in its memorandum or articles.

(2) The conditions required by subarticle (1) are -

(a) that the number of persons holding debentures of the company is not more than fifty; and

(b) that no body corporate is the holder of, or has any interest in, any shares or debentures of the company or is a director of the company, and neither the company nor any of the directors is party to an arrangement whereby the policy of the company is capable of being determined by persons other than the directors, members or debenture holders thereof.

(3) For the purposes of this article -

(a) shares held by an exempt company shall not disqualify a company from being also exempt if, taking all the following companies together, that is to say -

(i) the exempt company in question (hereinafter referred to as the "relevant company");

(ii) any company holding shares to which this paragraph has to be applied in determining the relevant company’s right to be exempt as aforesaid; and

(iii) any further company taken into account for the purposes of this paragraph in determining the right to be so exempted of any company holding any such shares as aforesaid, the total number of persons holding shares in those companies is not more than fifty, the companies themselves being disregarded; and

(b) any interest of the relevant company itself in any of its shares or debentures shall be disregarded.

(4) Companies referred to in subarticle (1) shall be exempt from the requirements of article 138(7) and of article 144(1)(a); and the proviso to article 183(2) shall apply.

*(5) A sole director of an exempt company shall be entitled to hold office as a company secretary thereof during his directorship.

(6) Where an exempt company has only one director, any requirement of this Act that two directors of a company shall act, shall be interpreted in relation to the exempt company as requiring one director to act.

Single member companies.

212. (1) A company referred to in article 211(1) may have a single member notwithstanding the provisions of article 68 and of article 72(1) or of any other provision of this Act, where the objects of such a company specify which activity of the company shall be its main trading activity and the business of the company shall consist principally of that activity.

(2) The provisions of article 214(2)(b)(i) shall not apply to companies falling within the terms of this article.

(3) A company may have a single member upon registration or it may become a single member company through the acquisition of all its shares by one person, provided that such a company complies with the provisions laid down in subarticle (1).

(4) When a company becomes a single member company through the acquisition of all its shares by one person, the company shall, within fourteen days, deliver to the Registrar for registration a notice -

(a) specifying the fact that it has become a single member company and stating the name and residence of that single member; and

(b) confirming compliance with the provisions laid down in subarticle (1).

Such notice shall be deemed to satisfy the requirements of article 120(3).

(5) Where a person becomes a single member as a result of acquiring shares in the company causa mortis, such fact shall be stated in the notice referred to in subarticle (4) and such notice shall be deemed to satisfy the requirements of article 120(3).

(6) If default is made in complying with subarticles (4), (5) and (10), every officer of the company who is in default shall be liable to a penalty, and, for every day during which the default continues, to a further penalty.

(7) The single member shall exercise the powers of the general meeting of the company and the decisions taken by him in this capacity shall be recorded as minutes of the general meeting and the provisions of this Act regulating general meetings shall be construed accordingly. The decisions referred to in this subarticle shall be deemed to be resolutions of the company for the purposes of the application of the provisions of this Act:

Provided that the provisions of this subarticle shall not prejudice the rights of the auditors of the company under the provisions of article 155, and the rights granted to persons as are, by the articles of the company, entitled to receive notices of, attend and be heard at general meetings of the company.

(8) The single member shall record in writing all agreements between him and the company as represented by him in a minute book kept by the company specifically for the purpose.

(9) If default is made in complying with the provisions of subarticle (8), the single member shall be liable to a penalty.

(10) When a company ceases to be a single member company, it shall, within fourteen days, deliver to the Registrar for registration a notice specifying the fact that it is no longer a single member company and the provisions of this article shall not apply to such company from the date it has ceased to be a single member company.

Change of status of company.

213. (1) A private company may change its status to a public company by altering its memorandum or articles and incorporating in such alteration all those changes required by the provisions of this Act for a company to hold the status of a public company, including the removal of the restrictions resulting by virtue of the provisions of article 209 which conflict with the status of a public company.

(2) The alteration referred to in subarticle (1) shall not take effect unless and until it is registered and the provisions of article 79(2) shall apply thereto.

(3) The Registrar shall, upon the registration referred to in subarticle (2), enter in the register the fact of such change as referred to in subarticle (1) and he shall issue a certificate of registration altered to reflect that change.

(4) A public company may change its status to a private company if, after having effected compliance with the restrictions resulting by virtue of the provisions of article 209, it alters its memorandum or articles, incorporating in such alteration all those changes required by the provisions of this Act for a company to hold the status of a private company, including the introduction of the restrictions resulting by virtue of the provisions of article 209.

(5) The alteration referred to in subarticle (4) shall not take effect unless and until that alteration, accompanied by a declaration made by the directors of the company that the company is effectively in compliance with the provisions of article 209, is registered, and the provisions of article 79(2) shall apply thereto.

(6) The Registrar shall, upon the registration referred to in subarticle (5), enter in the register the fact of such change as referred to in subarticle (4) and he shall issue a certificate of registration altered to reflect that change.

(7) A private company may change its status to an exempt company if, after having effected compliance with the conditions laid down in article 211, it alters its memorandum or articles by incorporating therein all the said conditions.

(8) The alteration referred to in subarticle (7) shall not take effect unless and until that alteration, accompanied by a declaration made by the directors of the company that the company is effectively in compliance with the provisions of article 211, is registered, and the provisions of article 79(2) shall apply thereto.

(9) An exempt company which resolves not to continue fulfilling any of the conditions of article 211, shall change its status to a private company by altering its memorandum or articles to remove any such conditions.

(10) The alteration referred to in subarticle (9) shall not take effect unless and until it is registered and the provisions of article 79(2) shall apply thereto.

(11) Where a private company changes its status to a public company in accordance with the provisions of this article, the company shall, in addition to the documents referred to in subarticle (2), deliver to the Registrar for registration -

(a) a copy of a balance sheet prepared as at a date being not more than four months before the date of the registration of the alteration referred to in subarticle (1), together with a report of the company’s auditors in relation to that balance sheet; and

(b) a written statement by the company’s auditors that in their opinion the balance sheet shows that at the balance sheet date the amount of the company’s net assets was not less than the aggregate of its called up issued share capital and undistributable reserves; and

(c) a declaration by any director of the company that between the balance sheet date and the date of delivery of the alteration to the Registrar for registration, there has been no change in the company’s financial position that has resulted in the amount of its net assets becoming less than the aggregate of its called up issued share capital and undistributable reserves.

In this subarticle, "net assets" shall have the same meaning assigned to it under article 193(2).

(12) A private company which proceeds to change its status to a public company in accordance with the provisions of this article shall not allot or propose to allot shares for a consideration otherwise than in cash at any time between the date of the balance sheet and the date of delivery of the alteration referred to in subarticle (11).

(13) Where a public company changes its status to a private company in accordance with the provisions of this article, it shall be required to redeem the shares held by the dissenting members, if they so request, on such terms as may be agreed or as the court, on a demand of either the company or the dissenting members, thinks fit to order.

TITLE II - DISSOLUTION AND CONSEQUENTIAL WINDING UP OF COMPANIES

Causes of dissolution and consequential winding up.

214. (1) A company shall be dissolved and consequently wound up in the following cases -

(a) the company has by extraordinary resolution resolved that the company be dissolved and consequently wound up by the court;

(b) the company has by extraordinary resolution resolved that the company be dissolved and consequently wound up voluntarily.

(2) In addition to the modes of dissolution referred to in subarticle (1) -

(a) a company may be dissolved and wound up by the court in the following cases -

(i) if the business of the company is suspended for an uninterrupted period of twenty-four months;

(ii) the company is unable to pay its debts; and

(b) a company shall be dissolved by the court in the following cases -

(i) the number of members of the company is reduced to below two and remains so reduced for more than six months:

Provided that this paragraph shall not apply to single member companies specified in article 212(3);

(ii) the number of directors is reduced to below the minimum prescribed by article 137 and remains so reduced for more than six months;

(iii) the court is of the opinion that there are grounds of sufficient gravity to warrant the dissolution and consequent winding up of the company;

(iv) when the period, if any, fixed for the duration of the company by the memorandum or articles expires, or the event occurs, if any, on the occurrence of which the memorandum or articles provide that the company is to be wound up, and the company in general meeting has not before such expiry or event passed a resolution to be wound up voluntarily.

(3) In the cases of dissolution falling within subarticle (2)(b), the court shall, at its discretion, determine whether the company shall be wound up by the court or voluntarily:

Provided that for the purposes of subparagraphs (ii) and (iv) of the said paragraph (b), the court at its discretion and upon good cause being shown may, and for the purposes of sub-paragraph (i) of the same paragraph, the court shall, before ordering the dissolution of the company, allow a period of time not exceeding thirty days, within which the company may remedy the default and upon proof being submitted to it that any such default has been remedied, the court shall not order the company’s dissolution.

(4) Where a company continues carrying on business without having at least two members beyond the period of six months referred to in subarticle (2)(b)(i), a person who, for the whole or any part of the period that the company carries on business after the said six months, is a member of the company and knows that it is carrying on business with only one member, shall be held unlimitedly and jointly and severally liable with the company for all the obligations contracted by the company for the whole period or as the case may be, that part of it, from the lapse of the six months until the dissolution of the company or until such time as the default is remedied by the company in accordance with the proviso to subarticle (3).

(5) For the purposes of subarticle (2)(a)(ii), a company shall be deemed to be unable to pay its debts -

(a) if a debt due by the company has remained unsatisfied in whole or in part after twenty-four weeks from the enforcement of an executive title against the company by any of the executive acts specified in article 273 of the Code of Organisation and Civil Procedure; or

(b) if it is proved to the satisfaction of the court that the company is unable to pay its debts, account being taken also of contingent and prospective liabilities of the company.

(6) Where a company has passed a resolution in accordance with subarticle (1)(a), it shall be required to give the notice specified in article 265(1) and subarticle (2) thereof shall apply.

(7) For the purposes of this Title, a company shall be wound up by the court if it is wound up in accordance with the provisions of Sub-Title I of this Title; and a company shall be wound up voluntarily if it is wound up in accordance with the provisions of Sub-Title II of this Title.

Meaning of "contributory".

215. The term "contributory" means every person liable to contribute to the assets of a company in the event of its dissolution, and the provisions of articles 216 and 217 shall apply for determining the persons so liable:

Provided that a reference in a company’s memorandum or articles to a contributory shall not, unless the context otherwise requires, include a person who is a contributory only by virtue of article 217.

Liability as contributories of present and past members.

216. In the winding up of a company every present and past member shall be liable to contribute to the assets of the company to an amount sufficient for payment of its debts and liabilities, and the costs, charges and expenses of the winding up, and for the adjustment of rights of the contributories among themselves, subject to the following qualifications -

(a) no contributions shall be required from any member exceeding the amount, if any, unpaid on the shares in respect of which he is liable as a present or past member;

(b) a past member shall not be liable to contribute in any of the following cases -

(i) if he has ceased to be a member for at least one year before the dissolution of the company;

(ii) in respect of any debt or liability contracted after he has ceased to be a member;

(iii) unless it appears to the court that the existing members are unable to satisfy the contributions required to be made by them in pursuance of this Act;

(c) a sum due to any member of a company, as a member, by way of dividends, profits or otherwise shall not be deemed to be a debt of the company payable to that member in the case of competition between himself and any other creditor not being a member of the company, but any such sum may be taken into account for the purpose of the final adjustment of the rights of the contributories among themselves.

Liability of past directors and shareholders.

217. (1) The provisions of subarticles (2) and (3) shall only apply following the dissolution of a company where a company before its dissolution -

(a) has made a payment out of capital in respect of the redemption or purchase of any of its own shares, which payment is referred to in the following provisions of this article as "the relevant payment"; and

(b) the aggregate amount of the company’s assets and the amounts paid by way of contribution to its assets in terms of article 216, apart from the provisions of this article, is not sufficient for payment of its debts and liabilities, and the expenses of the winding up.

(2) Where the dissolution has occurred within twelve months of the date on which the relevant payment was made, then -

(a) the person from whom the shares were redeemed or purchased, and

(b) the directors who authorised the redemption or purchase, shall, so as to enable the insufficiency referred to in subarticle (1)(b) to be met, be liable to contribute to the company’s assets to the extent referred to in subarticle (3).

(3) A person from whom any of the shares were redeemed or purchased shall be liable to contribute an amount not exceeding so much of the relevant payment as was made by the company in respect of his shares; and the directors shall be jointly and severally liable with that person to contribute that amount.

SUB-TITLE I - WINDING UP BY THE COURT

Chapter I - General Provisions

Dissolution and winding up application.

218. (1) A request to the court (hereinafter referred to as the "winding up application") for the -

(a) winding up of a company by the court in accordance with article 214(1)(a); or

(b) dissolution and winding up of a company by the court in accordance with article 214(2)(a); or

(c) dissolution and winding up of a company in accordance with article 214(2)(b), shall be made by means of an application which may be made either by the company following a decision of the general meeting or by its board of directors, or by any debenture holder, creditor or creditors, or by any contributory or contributories:

Provided that an application in terms of paragraphs (b ) or (c) may also be made by any shareholder or director of the company.

(2) Except as provided in subarticle (3), a contributory shall not be entitled to make a winding up application unless - (a) the shares in respect of which he is a contributory, or some of them, either were originally allotted to him, or have been held by him, and registered in his name, for at least six months during the eighteen months before the date of the company’s dissolution, or have devolved on him through the death of a former shareholder; or

(b) the number of members was reduced and remains reduced below the minimum prescribed by article 72 while he holds shares in respect of which he is a contributory.

(3) Notwithstanding the provisions of subarticle (1), a person who is liable under article 217 to contribute to a company’s assets in the event of its dissolution may only file a winding up application on either of the grounds set out in article 214(2)(a)(ii) and (b)(iii).

(4) The Registrar may file a winding up application where it appears to him that it is expedient and in the public interest that a company should be dissolved and wound up for any of the reasons set out in article 214(2)(b)(ii) and (iii).

(5) By virtue of article 294, a winding up application for a winding up by the Court may be filed notwithstanding that a company is being wound up voluntarily. Such an application may also be made by the official receiver appointed in accordance with the provisions of article 225.

(6) The directors, the company secretary, and every contributory and creditor of the company shall be entitled to make submissions on the hearing of a winding up application made under this article.

(7) In the event of a winding up application made under subarticle (1)(c), if the court decides that the company shall be wound up voluntarily, the provisions of Sub-title II of this Title other than article 265 shall apply.

(8) On the making of a winding up application, a copy thereof shall forthwith be forwarded by the Registrar of Courts to the Registrar for registration.

Powers of the court.

219. (1) On the hearing of the winding up application, the court may either dismiss the application or make an order acceding thereto (hereinafter referred to as a "winding up order") and in either case make such other orders, including provisional orders, and adjourn the hearing conditionally or otherwise as it thinks fit; but no winding up order shall be made before the application has been served on such persons as the court in the circumstances, and upon information given by the applicant, deems it appropriate to call upon to make their submissions.

(2) Notwithstanding the provisions of subarticle (1), where the Court is satisfied that the requirements of article 218(1)(a) have been complied with, the Court shall accede to the application.

Power to stay proceedings against company.

220. At any time after the filing of a winding up application, and before a winding up order has been made, the company, or any creditor or contributory, may apply to the court for a stay of judicial proceedings pending against the company, and the court may stay those proceedings accordingly on such terms as it thinks fit.

Dispositions of property etc., after date of deemed dissolution.

221. In a winding up by the court, any disposition of the property of the company, including any rights of action, and any transfer of shares, or alteration of the status of the members of the company, made after the date of its deemed dissolution, shall be void, unless the court otherwise orders.

Warrants not to be carried into effect against company.

222. When a company is being wound up by the court, any act or warrant, whether precautionary or executive, other than a warrant of prohibitory injunction, issued or carried into effect against the company after the date of its deemed dissolution, shall be void.

Deemed date of dissolution.

223. (1) Where a winding up order has been made, the company shall be deemed to have been dissolved at the time of the filing of the winding up application:

Provided that where a winding up order has been made in terms of article 214(2)(b)(iii), the company shall be deemed to have been dissolved on the date when the winding up order is made:

Provided further that where a winding up order has been made by virtue of article 218(1)(a), the date of dissolution shall be the date of passing of the resolution for dissolution and consequential winding up by the Court or such later date as may be specified in the said resolution.

(2) Notwithstanding the provisions of subarticle (1), where, before the filing of a winding up application, an extraordinary resolution had been passed by the company for it to be dissolved and consequently wound up voluntarily, the company shall be deemed to have been dissolved at the time of the passing of the resolution, and unless the court, upon proof of fraud or mistake thinks fit otherwise to direct, all proceedings taken in the voluntary winding up shall be deemed to have been validly taken.

Consequences of a winding up order.

224. (1) On the making of a winding up order, or on the dismissal of a winding up application, a copy thereof shall forthwith be forwarded by the Registrar of Courts to the Registrar for registration.

(2) Where a winding up order has been made or a provisional administrator has been appointed in accordance with the provisions of article 228, no action or proceeding shall be proceeded with or commenced against the company or its property except by the leave of the court and subject to such terms as the court may impose.

Chapter II - Official Receiver

Official receiver.

225. (1) The Minister shall appoint an individual to be the official receiver for the purposes of this Act and may at any time terminate any such appointment or designation.

(2) The Minister may authorise in writing any individual to assist the official receiver, conferring on any such person all or any of the powers of the official receiver under this Act or any regulations made thereunder.

(3) The Minister may prescribe regulations specifying the fees payable out of a company’s assets for the performance by the official receiver of his general duties as official receiver.

Statement of company’s affairs to be submitted to official receiver.

226. (1) Where the court has made a winding up order or appointed a provisional administrator, there shall be made out and submitted to the official receiver a statement as to the affairs of the company in the prescribed form, or in such form as the official receiver accepts, verified by affidavit, and showing the particulars of its assets, debts and liabilities, the names, residences and occupations of its creditors, the securities held by them respectively, the dates when the securities were respectively given, and such further or other information as may be prescribed or as the official receiver may require.

(2) The statement shall be submitted and verified by one or more of the persons who are at the relevant date the directors of the company and by such of the persons hereinafter in this subarticle mentioned, as the official receiver may require to submit and verify the statement, that is to say, persons -

(a) who are or have been officers of the company at any time in the three years immediately preceding the date of the winding up order;

(b) who have taken part in the formation of the company at any time within twelve months before the relevant date;

(c) who are in the employment of the company, or have been in the employment of the company within the said twelve months, and are in the opinion of the official receiver capable of giving the information required;

(d) who are or have been within the said twelve months officers of or in the employment of a company which is, or within the said twelve months was, an officer of the company to which the statement relates.

(3) The statement shall be submitted within twenty-one days from the relevant date or within such extended period as the official receiver or the court may for special reasons appoint.

(4) Any person making or concurring in making the statement and affidavit required by this article shall be allowed, and shall be paid by the official receiver or provisional administrator, as the case may be, out of the assets of the company such costs and expenses incurred in and about the preparation and making of the statement and affidavit as the official receiver may consider reasonable subject to an appeal to the court.

(5) The official receiver, if he thinks fit, may -

(a) at any time release a person from an obligation imposed on him under subarticle (1) or (2); or

(b) either when giving the period mentioned in subarticle (3) or subsequently, extend the period so mentioned, and where the official receiver has refused to exercise a power conferred by this subarticle, the court, if it thinks fit, may exercise it.

(6) If any person, without reasonable excuse, makes default in complying with the requirements of this article, he shall be liable to a penalty, and, for every day during which the default continues, to a further penalty.

(7) Any person stating himself in writing to be a creditor or contributory of the company shall be entitled personally or by his agent at all reasonable times, on payment of the prescribed fee, to inspect the statement submitted in pursuance of this article, and to a copy thereof or extract therefrom.

(8) In this article the expression "relevant date" means, in a case where a provisional administrator is appointed, the date of his appointment, and, in a case where no such appointment is made, the date of the winding up order.

Report by official receiver.

227. (1) In a case where a winding up order is made, the official receiver shall, as soon as practicable after receipt of the statement to be submitted under article 226 or, in a case where he or the court orders that no statement shall be submitted, as soon as practicable after the date of the order, carry out such investigations as he may deem appropriate and submit to the court a preliminary report, if any, as he thinks fit -

(a) as to the amount of share capital issued, and paid up, and the estimated amount of the assets and liabilities;

(b) if the company has failed, as to the causes of the failure; and

(c) whether in his opinion further enquiry is desirable as to any matter relating to the promotion, formation or failure of the company or the conduct of the business thereof.

(2) The official receiver may also, if he thinks fit, make a further report, or further reports, stating the manner in which the company was formed and whether in his opinion any fraud has been committed by any person in its promotion or formation or by any officer of the company since the formation thereof, and any other matter which, in his opinion, is desirable to bring to the notice of the court.

(3) If the official receiver states in any such further report that in his opinion a fraud has been committed as specified in subarticle (2), the court shall have the further powers provided in article 260, without prejudice to the exercise of any other powers it may have.

Chapter III - Liquidators in a winding up by the court

Appointment and powers of provisional administrator.

228. (1) The court may by order appoint a provisional administrator at any time after the presentation of a winding up application and before the making of a winding up order, and either the official receiver or any other competent person may be so appointed.

(4) The provisional administrator shall carry out such functions and powers in relation to the administration of the estate or business of the company as the court may specify in the order appointing him.

(5) The provisional administrator holds office until such time as the winding up order is made or the winding up application is dismissed unless before such time he resigns or he is removed by the court upon good cause being shown.

Functions of official receiver in relation to office of liquidator.

229. (1) The official receiver, by virtue of his office, becomes the liquidator of the company and continues in office until another person becomes liquidator under the provisions of this Title.

(2) The official receiver is, by virtue of his office, the liquidator during any vacancy.

(3) At any time when he is the liquidator of the company, the official receiver may summon separate meetings of the company’s creditors and contributories for the purpose of choosing a person to be liquidator of the company in place of the official receiver.

(4) It shall be the duty of the official receiver to summon meetings under subarticle (3) if he is at any time requested to do so by one-fourth in value of the company’s creditors.

(5) Without prejudice to the provisions of subarticles (3) and (4), the official receiver shall within a period of twelve weeks from the date of the winding up order give notice to the court and to the company’s creditors and contributories of his intentions whether or not to summon the said meetings. The notice shall indicate the right of the creditors arising under subarticle (3).

230. (1) The provisions of this article shall apply where a company is being wound up by the court and separate meetings of the company’s creditors and contributories are summoned for the purpose of choosing a person to be liquidator of the company in accordance with article 229.

Choice of liquidator at meetings of creditors and contributories.

(2) The creditors and the contributories at their respective meetings may nominate a person to be liquidator. The nomination by the creditors shall be made by resolution of the creditors, and the nomination by the contributories shall be made by a resolution of the contributories.

Meetings of creditors and contributories.

231. (1) The dates of meetings of creditors and contributories shall be fixed and the meetings shall be summoned by the liquidator.

(2) The notices of meetings of creditors and contributories shall state the time and place appointed for the respective meetings. Creditors entitled to vote.

232. (1) In the case of a first meeting of creditors or of an adjournment thereof a person shall not be entitled to vote as a creditor unless he has duly lodged with the liquidator, not later than the time mentioned for that purpose in the notice convening the meeting or adjourned meeting, a proof of the debt which he claims to be due to him from the company.

(2) In the case of a subsequent meeting of creditors held in a winding up by the court, a person shall not be entitled to vote as a creditor unless he has lodged with the liquidator a proof of the debt which he claims to be due to him from the company and such proof has been admitted wholly or in part before the date on which the meeting is held.

(3) The chairman as provided for in article 297(3) shall have power to admit or reject a creditor’s proof of his debt for the purpose of voting, but his decision shall be subject to appeal to the court. If he is in doubt whether a creditor’s proof of his debt shall be admitted or rejected, the chairman shall mark it as objected to and allow the creditor to vote, subject to the vote being declared invalid in the event of the objection being sustained.

(4) A guarantor of a debt owed by the company shall not be deemed a creditor for the purposes of this Title unless he has discharged the guaranteed debt in full.

Notice of first meeting to officers of company.

233. (1) The official receiver shall also give to each of the officers of the company who, in his opinion ought to attend the first meetings of creditors and contributories, seven days’ notice of the time and place appointed for each meeting.

(2) It shall be the duty of every officer who is given notice of such meeting to attend if so required by the official receiver and if such officer fails to attend the official receiver shall report such failure to the court. Summary of statement of affairs.

234. (1) The official receiver shall also, as soon as practicable before the first meeting, send to each creditor mentioned in the company’s statement of affairs, and to each person appearing from the company’s accounting records or otherwise to be a contributory of the company, a summary of the company’s statement of affairs, including the causes of its failure, and any observations thereon which the official receiver may think fit to make, but the proceedings at a meeting shall not be invalidated by reason of any summary aforesaid not having been sent or received before the meeting.

(2) Where prior to the winding up order, winding up of the company has commenced voluntarily, the official receiver may, if in his absolute discretion he sees fit to do so, send to the persons aforesaid or any of them an account of such voluntary winding up showing how such winding up has been conducted and how the property of the company has been disposed of and any further observations he may think fit to make.

Where person other than the official receiver is appointed liquidator.

235. (1) Where in the winding up of a company by the court a person other than the official receiver is appointed liquidator, that person -

(a) shall not be capable of acting as liquidator until he has notified his appointment to the Registrar;

(b) shall give the official receiver such information and such access to and facilities for inspecting the accounts, accounting records and documents of the company and generally such aid as may be requisite for enabling the official receiver to perform his duties under this Act.

(2) The Registrar shall on receipt of the notice of appointment specified in subarticle (1)(a) register it.

(3) Until the person appointed to act as liquidator is capable of acting within the meaning of subarticle (1)(a), the official receiver shall continue to act as liquidator.

General provisions as to liquidators.

236. (1) A liquidator appointed in accordance with the provisions of article 230 may resign or, on the application of any creditor or contributory, may be removed by the court if it is satisfied that there exist sufficient grounds for his removal.

(2) Where a person other than the official receiver is appointed liquidator, he shall be remunerated on such basis as the court may direct.

(3) More than one person may be appointed to exercise the function of liquidator of a company, and the remuneration of each liquidator so appointed shall be determined on such basis as the court may direct.

(4) A vacancy resulting from the death or resignation of a liquidator or from his removal by the court, shall be filled by the court.

(5) If more than one liquidator is appointed by the court, the court shall declare whether any act which is by this Act required or authorised to be done by the liquidator is to be done by all or any one or more of the persons so appointed.

(6) Subject to the provisions of article 305, the acts of a liquidator shall be valid notwithstanding any defects that may afterwards be discovered in his appointment.

Custody and control of company’s property.

237. Where a company is being wound up by the court, the liquidator or the provisional administrator, as the case may be, shall take into his custody or under his control all the property and all rights to which he has reasonable cause to believe the company to be entitled.

Powers of liquidator.

238. (1) The liquidator in a winding up by the court shall have the power, with the sanction either of the court or of the liquidation committee appointed under the provisions of Chapter IV of this Sub-title -

(a) to bring or to defend any action or other legal proceeding in the name and on behalf of the company;

(b) to carry on the business of the company so far as may be necessary for the beneficial winding up thereof;

(d) to make any compromise or arrangement with creditors or persons claiming to be creditors, or having or alleging themselves to have any claim, present or future, certain or contingent, ascertained or which may be due in damages against the company or whereby the company may be rendered liable, and to refer any such matter to arbitration;

(e) to make calls on contributories or alleged contributories and to effect any compromise or arrangement in relation to debts, liabilities and claims of the company present or future, certain or contingent, ascertained or which may be due in damages, subsisting or supposed to subsist between the company and a contributory or alleged contributory or other debtor or alleged debtor, and all questions in any way relating to or affecting the assets or the winding up of the company, on such terms as may be agreed, and take any security for the discharge of any such call, debt, liability or claim and give a complete discharge in respect thereof;

(f) to represent the company in all matters and to do all such things as may be necessary for winding up the affairs of the company and distributing its assets:

Provided that the Court may provide by an order that the liquidator may, where there is no liquidation committee, exercise any of the powers mentioned in paragraphs (a) or (b) without the sanction of the Court.

(2) The liquidator in a winding up by the court shall, in particular, have the power -

(a) to sell the movable and immovable property, including any right, of the company by public auction or private agreement with power to transfer the whole or any part thereof;

(b) to do all acts and to execute, in the name and on behalf of the company, all deeds, receipts and other documents;

(d) to appoint a mandatory to act for him in his capacity as liquidator for particular purposes.

(3) The exercise by the liquidator in a winding up by the court of the powers conferred by this article shall be subject to the control of the court, and any creditor or contributory may apply to the court with respect to any exercise or proposed exercise of any of those powers.

Exercise and control of liquidator’s powers.

239. (1) Subject to the provisions of this Act, the liquidator of a company which is being wound up by the court shall, in the administration of the assets of the company and in the distribution thereof among its creditors, have regard to any directives that might be given by resolution of the creditors or contributories at any general meeting or by the liquidation committee, and any directives given by the creditors and contributories in common shall, in case of conflict with any directives given by the liquidation committee, be deemed to override such latter directives; otherwise the directives given by the liquidation committee shall prevail.

(2) The liquidator may summon general meetings of the creditors or contributories for the purpose of ascertaining their wishes, and it shall be his duty to summon meetings at such times as the creditors or contributories, by resolution, either at the meeting appointing the liquidator or otherwise, may direct, or whenever requested in writing to do so by one-fourth in value of the creditors or contributories, as the case may be.

(3) The liquidator may apply to the court for directions in relation to any particular matter arising under the winding up.

(4) If any person is aggrieved by any act or decision of the liquidator, that person may apply to the court and the court may confirm, reverse or modify the act or decision complained of, and make such order on the matter as it thinks just.

Books to be kept by liquidator.

240. Every liquidator of a company which is being wound up by the court shall keep proper books in which he shall cause to be made entries or minutes of proceedings at meetings, and of such other matters as may be prescribed.

Payments of liquidator into bank.

241. (1) Upon his appointment the liquidator shall notify the Registrar of any bank account which the liquidator shall use for the purposes of receiving and making payments on behalf of the company. The liquidator shall not be entitled to receive and make payments until he has made such notification.

(2) If any such liquidator retains for more than ten days a sum exceeding two hundred liri or such other amount as the Registrar in any particular case authorizes him to retain, then, unless he explains the retention to the satisfaction of the Registrar, the liquidator shall pay interest on the amount so retained in excess, at the annual rate of two percentage points above the Central Bank of Malta minimum discount rate and shall be liable to forfeiture of all or such part of his remuneration as the court may think just, and to be removed from his office by the court, and shall furthermore be liable to pay any expenses occasioned by his default.

(3) A liquidator of a company which is being wound up by the court shall not pay any sums received by him as liquidator into an account or accounts other than an account or accounts which has been notified to the Registrar.

(4) It shall not be lawful to issue precautionary or executive warrants over any accounts opened by the liquidator in accordance with this article.

Audit of liquidator’s accounts.

242. (1) Every liquidator of a company which is being wound up by the court shall, at such times as may be prescribed but not less than twice in each year during his tenure of office, send to the Registrar, and to such other place as the Registrar may direct, an account of his receipts and payments as liquidator.

(2) The account shall be in a proper form, shall be made in duplicate, and shall be duly certified by the liquidator:

Provided that the Minister may make regulations prescribing the proper form in which the account is to be made.

(3) The Registrar may, at the company’s expense, cause such account to be audited, and for the purpose of the audit the liquidator shall furnish the auditor appointed by the Registrar with such vouchers and information as the auditor may require and the auditor may at any time require the production of and inspect any accounting records or documents kept by the liquidator.

(4) When the account has been audited, one copy thereof shall be delivered to the Registrar for registration and the other copy shall be delivered to the court for filing, and each copy shall be open to inspection of any person on payment of the prescribed fee.

Control over liquidators.

243. (1) If an application is made to the court by any creditor or contributory complaining on the conduct of a liquidator of a company the court shall inquire into the matter and take such action thereon as it may think expedient.

(2) The Registrar may at any time require any liquidator of a company which is being wound up by the court to answer any inquiry in relation to any winding up in which he is engaged, and the Registrar may, if he thinks fit, apply to the court to examine the liquidator or any other person on oath concerning the winding up.

(3) The Registrar may also direct an investigation to be made of the accounts, accounting records and documents of the liquidator.

Release of liquidator from his appointment.

244. (1) When the liquidator of a company which is being wound up by the court has realised all the property of the company, or so much thereof as can, in his opinion, be realised without needlessly protracting the liquidation, and has distributed a final payment, if any, to the creditors, and has adjusted the rights of the contributories among themselves, and made a final return, if any, to the contributories, or has resigned, the court shall, on the liquidator’s application, cause a report to be prepared on the liquidator’s accounts at the company’s expense. On being satisfied that the liquidator has complied with the requirements of this Act and such other requirements, if any, as may be laid down by it and, after taking into consideration the report and any objection which may be raised by any creditor or contributory or person interested, the court shall proceed to release the liquidator from his appointment.

(2) The Registrar of Courts shall forthwith deliver a notice of the release to the Registrar for registration.

Chapter IV - Liquidation Committees in a winding up by the court

Determination whether committee is to be appointed.

245. (1) When a winding up order has been made by the court, the separate meeting of the creditors referred to in article 229 summoned for the purpose of choosing a liquidator in place of the official receiver shall determine further whether or not to appoint a liquidation committee to act with the liquidator and who are to be the members of the committee, if appointed.

(2) Where a liquidation committee has not been appointed in accordance with the provisions of subarticle (1), the liquidator, other than the official receiver, may at any time, if he thinks fit, summon a separate meeting of the company’s creditors for the purpose of determining whether such a committee should be appointed and, if it is so determined, of appointing it.

(3) Where a liquidation committee has not been appointed in accordance with the provisions of subarticle (1), the liquidator, other than the official receiver, shall summon a meeting of creditors for the appointment of such a committee if he is requested to do so by one-fourth in value of the company’s creditors.

Constitution and proceedings of liquidation committee.

246. (1) The liquidation committee shall consist of not more than five creditors of the company elected by the meeting of creditors.

(2) Where the meeting of creditors does not appoint a liquidation committee, the meeting of contributories may appoint one of their members to make an application to the court for an order to the liquidator that a further meeting of creditors be summoned for the purpose of appointing a liquidation committee.

(3) If the meeting of creditors so summoned does not appoint a liquidation committee, the meeting of contributories may do so.

(4) The committee shall then consist of not less than three and not more than five contributories elected by that meeting.

(5) The committee shall meet at such times as they may from time to time determine, and, failing such appointment, at least once every six months, and the liquidator or any member of the committee may also call a meeting of the committee as and when he thinks necessary.

(6) A meeting of the committee may not be held unless a majority in number of the committee is present and decisions shall be taken by a majority in number of the members present at the meeting.

(7) A member of the committee may resign by notice in writing signed by him and delivered to the liquidator.

(8) If a member of the committee is absent from five consecutive meetings of the committee without the leave of those members who together with himself represent the creditors or contributories, as the case may be, his office shall thereupon become vacant.

(9) A member of the committee may be removed by a resolution of a meeting of the creditors, if he represents creditors, or by a resolution of a meeting of the contributories, if he represents contributories, in accordance with article 298:

Provided that at least seven days’ notice of the meeting has been given, stating the object of the meeting.

(10) On a vacancy occurring in the committee, the liquidator shall forthwith summon a meeting of creditors or contributories, as the case may require, to fill the vacancy, and the meeting may, by resolution, re- appoint the same or appoint another creditor or contributory to fill the vacancy:

Provided that if the liquidator, having regard to the state of the winding up, is of the opinion that it is unnecessary for the vacancy to be filled he may apply to the court and the court may make an order that the vacancy shall not be filled, or shall not be filled except in such circumstances as may be specified in the order.

(11) The continuing members of the committee, if not less than two, may act notwithstanding any vacancy in the committee.

Powers of official receiver where there is no committee.

247. Where there is no liquidation committee, the official receiver may, on the request of the liquidator, do any act or thing or give any direction or permission which is by this Act authorised or required to be done by the committee.

Chapter V - General Powers of the court in a winding up by the court

Power to stay winding up.

248. (1) The court may at any time after a winding up order, on the application either of the liquidator or the official receiver or any creditor or contributory, and on proof to the satisfaction of the court that all proceedings in relation to the winding up ought to be stayed, make an order staying the proceedings, for such duration and on such terms and conditions as the court thinks fit. Any such stay of proceedings shall not affect the continuing validity and operation of the winding up orders.

(2) On an application under this article the court may, before making an order, require the official receiver or liquidator to furnish to the court a report with respect to any facts or matters which are in its opinion relevant to the application.

(3) A copy of every order made under this article shall forthwith be forwarded by the Registrar of Courts to the Registrar for registration.

Settlement of list of contributories and application of assets.

249. As soon as may be after making a winding up order, the court shall draw up a list of contributories and shall have the power to rectify the register of members, if required, and shall cause the assets of the company to be collected, and applied in the discharge of the company’s liabilities in accordance with the provisions of article 302:

Provided that, where it appears to the court that it will not be necessary to make calls on or adjust the rights of contributories, t he court m a y di sp en se with the d rawin g up of a list of contributories.

Delivery of property to liquidator.

250. The court may, at any time after making a winding up order, require -

(a) any contributory for the time being on the list of contributories; and

(b) any person who holds any money, property or accounting records and documents in his hands to which the company is prima facie entitled, to pay, deliver, convey, transfer or otherwise hand over such money, property, accounting records or documents to the liquidator forthwith or within such time as the court directs.

Debts due by contributory and extent of set-off.

251. (1) The court may at any time after making a winding up order, make an order on any contributory for the time being appearing on the list of contributories to pay, in the manner directed by the order, any money due from him to the company, exclusive of any money payable by him by virtue of any call in pursuance of the provisions of this Act.

(2) When all the creditors are paid in full, any money due on any account whatever to a contributory from the company may be set-off against any subsequent call made on him.

Power to make calls.

252. (1) The court may, at any time after making a winding up order, and either before or after it has ascertained the sufficiency of the assets of the company, make calls on all or any of the contributories for the time being appearing on the list of contributories to the extent of their liability, for payment of any money which the court considers necessary to satisfy the debts and liabilities of the company, and the costs, charges and expenses of w i n d in g u p , a n d f o r t h e a d j us t m e n t o f t h e r i g h t s o f t he contributories among themselves, and make an order for payment of any calls so made.

(2) In making a call the court may take into consideration the probability that some of the contributories may partly or fully fail to pay the call.

Order of court to be conclusive evidence.

253. An order made by the court on a contributory shall, subject to any right of appeal, be conclusive evidence that the money, if any, thereby appearing to be due or ordered to be paid, is due; and all other pertinent matters stated in the order shall be taken as truly stated as against all persons and in all proceedings.

Appointment of special manager.

254. (1) The liquidator or provisional administrator may, if satisfied that the nature of the estate or business of the company, or the interests of the creditors or contributories generally, require the appointment of a special manager of the estate or business of the company other than himself, apply to the court, and the court may, on such application, by order appoint a special manager of the said estate or business to act during such time as the court may direct, with such functions and powers as may be entrusted to him by the court in the order appointing him. The special manager shall restrict his activities to the said functions and powers and to such acts as may be necessary or consequential thereto.

(2) The special manager shall give an account of his management as the court may direct.

(3) The special manager shall receive such remuneration as may be fixed by the court.

Fixing of time for proofs of debt.

255. The court may fix a time or times within which creditors are to prove their debts or claims or are to be excluded from the benefit of any distribution made before those debts are proved.

256. The court shall adjust the rights of the contributories among themselves and distribute any surplus among the persons entitled thereto.

Inspection of books of company.

257. (1) The court may, at any time after making a winding up order, make such order for inspection of accounts, accounting records a nd documents of the company by creditors and contributories as the court thinks fit, and any accounts, accounting records and documents in the possession of the company may be inspected by creditors and contributories in accordance with that order.

(2) Nothing contained in this article shall be construed as excluding or restricting any rights deriving from any law of Malta of a government department or other authority or person acting under the authority of any such department or authority.

Payments of costs of winding up out of assets.

258. (1) The court may, in the event of the assets being insufficient to satisfy the liabilities, make an order as to the payment out of the assets of the costs, charges and expenses incurred in the dissolution and winding up in such order of priority as the court thinks fit.

(2) In so doing the court shall have regard to the following general order of priority -

(a) expenses properly chargeable or incurred by the official receiver or the liquidator in preserving, realising or collecting any of the assets of the company;

(b) any other expenses incurred or disbursements made by the official receiver or under his authority, including those incurred or made in carrying on the business of the company;

(d) the costs of the applicant, and of any person appearing on the application whose costs are allowed by the court;

(e) the remuneration of the special manager, if any;

(f) any amount payable to a person employed or authorised to assist in the preparation of a statement of affairs or of account;

(g) any allowance made by order of the court, towards costs on an application for release from the obligation to submit a statement of affairs, or for an extension of time for submitting such a statement;

(h) any necessary disbursements by the liquidator in the course of his administration, including any expenses incurred by members of the liquidation committee or their representatives and allowed by the liquidator;

(i) the remuneration of any person employed by the liquidator to perform any services for the company, as required or authorised by the provisions of this Act;

(j) the remuneration of the liquidator.

Summoning of persons suspected of having property of the company,

259. The court may, at any time after the appointment of a provisional administrator or the making of a winding up order, summon before it any officer of the company or person known or suspected to have in his possession any property of the company or supposed to be indebted to the company, and any person whom the court deems capable of giving information concerning the promotion, formation, trade, dealings, affairs or property of the company. The court may require any such officer or person to produce any accounting records and documents in his custody relating to the company.

Power to order examination of promoters and officers.

260. (1) Where a winding up order has been made by the court, and the official receiver has made a report under this Act stating that in his opinion a fraud has been committed by any person in the promotion or formation of the company or by an officer of the company in relation to the company since its formation, the court may direct that person or officer to attend before the court on a day appointed by the court for that purpose and be examined as to the promotion or formation or the conduct of the business of the company or as to his conduct and dealings as officer thereof.

(2) The Official Receiver shall take part in the examination, and for that purpose may be assisted by an advocate.

(3) The liquidator, where the official receiver is not the liquidator, and any creditor or contributory may also take part in the examination either personally or represented by an advocate.

(4) The court may put such questions to the person referred to in subarticle (1) as the court thinks fit.

(5) The person shall be examined on oath and shall answer all such questions as the court may put or allow to be put to him.

(6) A person ordered to be examined under this article shall, before his examination, be furnished with a copy of the official receiver ’s report and may, at his own cost be assisted by an advocate, who shall be at liberty to put to him such questions as the court may deem fit for enabling him to explain or qualify any answers given by him:

Provided that, if any such person applies to the court to be discharged from any charges made or suggested against him, it shall be the duty of the official receiver to appear on the hearing of the application and call the attention of the court to any matters which appear to the official receiver to be relevant, and if the court, after hearing any evidence given or witnesses called by the official receiver, grants the application, the court may allow the applicant such costs as in its discretion it may think fit.

(7) Notes of the examination shall be taken down in writing, and shall be read over to or by, and signed by, the person examined, and may thereafter be used in evidence against him, and shall be open to the inspection of any creditor or contributory at all reasonable times.

(8) The court may, if it thinks fit, adjourn the examination from time to time.

(9) An examination under this article may, if the court so directs, be held before a magistrate, and the powers of the court may, in any such case, be exercised by the magistrate before whom the examination is held.

Power to arrest absconding contributory.

261. The court, at any time before or after making a winding up order, on proof of probable cause for believing that a contributory is about to leave Malta or otherwise to abscond or to remove or conceal any of his property for the purpose of evading payment of calls or of avoiding examination respecting the affairs of the company, may cause the contributory to be precluded from leaving Malta and his accounting records, documents and movable property to be seized, and the court may further order the contributory’s detention and the safekeeping of his accounting records, documents and movable property until such time as the court thinks fit.

Powers of court cumulative.

262. Any powers conferred by this Act on the court shall be in addition to any powers exercisable by any person under this Act of instituting proceedings against any contributory or debtor of the company or the estate of any contributory or debtor for the recovery of any call or other sums.

Liquidator may exercise certain powers of court.

263. The powers conferred and the duties imposed on the court by this Act in respect of the following matters -

(a) the holding and conduct of meetings to ascertain the wishes of creditors and contributories;

(b) the drawing up of lists of contributories and the rectification of the register of members, if required, and the collection and application of assets;

(c) the payment, delivery, conveyance, surrender or transfer of money, property, accounting records or documents to the liquidator;

(d) the making of calls;

(e) the fixing of a time within which debts and claims must be proved; may, subject to the provisions of this article or any other provision of this Act, be exercised or performed by the liquidator, subject to the control of the court:

Provided that the liquidator shall not, without the special leave of the court, rectify the register of members and shall not make any call without either the special leave of the court or the sanction of the liquidation committee.

Striking of name of the company off the register.

264. (1) When the affairs of the company have been completely wound up and the requirements of article 244 have been complied with, the court shall make an order that the name of the company be struck off the register from the date of the order.

(2) A copy of the order shall within fourteen days from the date thereof be forwarded by the Registrar of Courts to the Registrar who shall comply therewith.

SUB-TITLE II - VOLUNTARY WINDING UP

Chapter I - General Provisions

Notice of resolution for dissolution and consequential voluntary winding up.

265. (1) When a company has passed a resolution for dissolution and consequential voluntary winding up, it shall, within fourteen days after the date of dissolution of the company, deliver a notice of the resolution to the Registrar for registration.

(2) If default is made by the company in complying with this article, every liquidator or officer of the company who is in default shall be liable to a penalty, and, for every day during which the default continues, to a further penalty.

Date of dissolution in a voluntary winding up.

266. Where a company is dissolved in accordance with the provisions of article 214(1)(b), the date of dissolution shall be the date of the passing of the resolution for dissolution and consequential voluntary winding up or such later date as may be specified in the said resolution:

Provided that where the Court has ordered that the company be wound up voluntarily by virtue of the provisions of article 214(3), the company shall be deemed to have been dissolved at the time of the filing of the winding up application.

Effects of voluntary winding up.

267. (1) In case of a voluntary winding up, the company shall, from the date of dissolution, cease to carry on its business except so far as may be required for the beneficial winding up thereof.

(2) Any transfer of shares, not being a transfer made with the sanction in writing of the liquidator, and any alteration in the status of the members of the company, made after, or so as to have effect after, the date of dissolution, shall be void.

Declaration of solvency.

268. (1) When it is proposed to dissolve and wind up a company voluntarily, in accordance with article 214(1)(b ), the directors of the company, or in the case of a company having more than two directors, the majority of the directors, may, at a meeting of the directors make a declaration to the effect that they have made a full inquiry into the affairs of the company, and that, having so done, they have formed the opinion that the company will be able to pay its debts in full within such period not exceeding twelve months from the date of dissolution as may be specified in the declaration.

(2) A declaration made in accordance with subarticle (1) shall have no effect for the purposes of this Act unless -

(a) it is made within the month immediately preceding the date of the passing of the resolution for dissolution and consequential voluntary winding up of the company and is delivered to the Registrar for registration together with the notice of the said resolution pursuant to article 265(1); and

(b) it contains a statement of the company’s assets and liabilities made up to a date not earlier than the date of the declaration by more than three months.

(3) When the court has ordered that the company be wound up voluntarily by virtue of the provisions of article 214(3), the court shall, before making the winding up order require the directors of the company to make the declaration referred to in subarticle (1) within such time as it may establish and the provisions of subarticle (1) and of subarticle (2)(b) shall apply accordingly.

(4) Any director of a company making a declaration under this article without having reasonable grounds for the opinion that the company will be able to pay its debts in full within the period specified in the declaration, shall be guilty of an offence and liable on conviction to a fine (multa) of not more than twenty thousand liri or to imprisonment for a term not exceeding three years or to both such fine and imprisonment; and if the debts of the company are not paid or provided for in full within the period stated in the declaration, it shall be presumed, until the contrary is shown that the director did not have reasonable grounds for this opinion.

(5) A winding up in relation to which a declaration has been made and delivered in accordance with this article is in this Act referred to as "a members’ voluntary winding up", and a winding up in relation to which a declaration has not been made and delivered as aforesaid is in this Act referred to as "a creditors’ voluntary winding up".

Chapter II - Provisions applicable to a members’ voluntary winding up

269. The provisions contained in articles 270 to 275 shall, subject to the provisions of article 276, apply in relation to a members’ voluntary winding up.

Appointment, remuneration and removal of liquidators.

270. (1) The company shall by extraordinary resolution appoint a liquidator for the purpose of winding up the affairs and d istribu ti ng the asset s of t he co mp any, and may fix the remuneration to be paid to him.

(2) Except where a company has appointed a liquidator at the meeting at which the extraordinary resolution referred to in article 214(1)(b) has been passed, the directors shall call a general meeting of the company, to be held within thirty days after the date of the dissolution, for the purposes of subarticle (1).

(3) If for any cause whatsoever, a liquidator is not appointed by the general meeting, any director shall apply to the court for the appointment of a liquidator and the appointment shall be made by the court; the application to the court for the appointment of a liquidator under this subarticle shall be made within fourteen days from the date for which the general meeting referred to in subarticle (2) was summoned.

(4) If default is made by the directors in complying with the provisions of subarticles (2) and (3), every director who is in default shall be liable to a penalty, and, for every day during which the default continues, to a further penalty.

(5) Notwithstanding the preceding subarticles of this article, where the court has ordered that the company be wound up voluntarily by virtue of the provisions of article 214(3), and a declaration has been made in accordance with article 268, the court shall in the winding up order, at its sole discretion, either appoint a liquidator for the purpose of winding up the affairs and distributing the assets of the company and shall fix the remuneration to be paid to him; or give the necessary directives for the holding of a general meeting for the purpose of appointing a liquidator and for the fixing of the remuneration to be paid to him.

(6) A liquidator appointed in accordance with the provisions of this article may be removed by extraordinary resolution of the company; except where he has been appointed by the court in terms of this article.

Vacancy in office of liquidator.

271. (1) If a vacancy occurs by death, resignation or removal in the office of liquidator appointed by the company, the company shall by extraordinary resolution fill the vacancy.

(2) For the purposes of subarticle (1), a general meeting shall be convened by any member, contributory or, if there were more than one liquidator, by the continuing liquidator or liquidators and notice of the meeting shall be given within fourteen days of the occurrence of the vacancy referred to in subarticle (1).

(3) The general meeting shall be held in the manner provided by this Act or by the memorandum and articles, or in such manner as may, on the application of any member, contributory or by the continuing liquidator, be determined by the court.

(4) If for any cause whatsoever a liquidator is not appointed in the manner specified by subarticle (1), or if a vacancy occurs in the office of a liquidator appointed by the Court, any member, contributory or the continuing liquidator or liquidators may, at any time thereafter, apply to the court for the appointment of a liquidator, and the appointment shall be made by the court.

Duty of liquidator in case of insolvency.

272. (1) If the liquidator is, at any time after a declaration is made in accordance with article 268, of opinion that the company will not be able to pay its debts within the period stated in the said declaration, he shall forthwith summon a meeting of the creditors, and shall lay before the meeting a statement of the assets and liabilities of the company and the provisions of article 276 shall apply.

(2) If the liquidator fails to comply with the provisions of this article, he shall be liable to a penalty.

Liquidator to hold general meeting where winding up continues for more than twelve months.

273. (1) Subject to the provisions of article 276, in the event of the winding up continuing for more than twelve months, the liquidator shall summon a general meeting of the company at the end of the first period of twelve months from the commencement of the winding up, and of each succeeding period of twelve months, or at the first convenient date within three months from the end of the period of twelve months, or within a longer term as the Registrar may allow, and shall lay before the meeting an account of his acts and dealings and of the conduct of the winding up during the preceding twelve months, including a summary of receipts and expenditure.

(5) If the liquidator fails to comply with the provisions of subarticle (1) he shall be liable to a penalty.

(6) A member or members holding not less than one-tenth of the paid up share capital having the right to vote at general meetings of the company may at any time, by request in writing require the liquidator to convene a general meeting of the company. Such request shall be signed by such member or members and shall state the objects of the meeting.

Final meeting.

274. (1) Subject to the provisions of article 276, as soon as the affairs of the company are fully wound up, the liquidator shall make an account of the winding up, showing how the winding up has been conducted and how the property of the company has been disposed of and shall draw up a scheme of distribution indicating the amount due in respect of each share from the assets of the company, where applicable, and he shall cause the account to be audited by one or more auditors appointed by ordinary resolution of the company, or in default by the court. The liquidator shall thereupon call a general meeting of the company for the purpose of laying before it the account and scheme of distribution, if any, together with the auditors’ report, and giving any explanation thereof.

(2) Within seven days after the meeting, the liquidator shall send to the Registrar a copy of the account and of the scheme of distribution, if any, together with the auditors’ report, and shall make a return to him of the holding of the meeting and of its date, and if the copy is not sent or the return is not made in accordance with this subarticle the liquidator shall be liable to a penalty, and, for every day during which the default continues, to a further penalty:

Provided that, if a quorum is not present at the meeting, the liquidator shall, in lieu of the return mentioned in this subarticle, make a return that the meeting was duly summoned and that no quorum was present thereat, and upon such a return being made the provisions of this subarticle as to the making of the return shall be deemed to have been complied with.

(3) If the liquidator fails to call a general meeting of the company as required by this article, he shall be liable to a penalty.

(4) The provisions of article 153 shall apply to an auditor appointed in terms of subarticle (1), and the words "the previous three years" in the said article 153 shall be construed as referring to the previous three years immediately preceding the date of dissolution. Such auditor shall not be a person who has held the office of auditor of the company at any time during the previous three years immediately preceding the date of dissolution.

Striking company’s name off the register.

275. (1) The Registrar, on receiving the account and the scheme of distribution, if any, together with the auditors’ report and either of the returns mentioned in article 274(2), shall forthwith register them, and on the expiration of three months from the publication of the notice referred to in article 401(1)(e), the Registrar shall strike the name of the company off the register:

Provided that the court may, on the application filed within the said period of three months by the liquidator or by any other person who appears to the court to have an interest, make an order deferring the date at which the name of the company shall be struck off the register for such time and subject to such conditions as the court may provide.

(2) When an order by the court is made under the proviso to subarticle (1), the Registrar of Courts shall forthwith forward a copy of it to the Registrar for registration and the Registrar shall defer applying the provisions of subarticle (1) in accordance with the order given by the court referred to in that subarticle.

Alternative provisions in case of insolvency.

276. Where the provisions of article 272 have effect, articles 283 to 285 shall apply to the winding up in lieu of articles 273 to 275, as if the winding up were a creditors’ voluntary winding up and not a members’ voluntary winding up.

Chapter III - Provisions applicable to a creditors’ voluntary winding up

Provisions applicable to creditors’ voluntary winding up.

277. The provisions of articles 278 to 285 shall apply in relation to a creditors’ voluntary winding up.

278. (1) The directors of the company shall cause a meeting of the creditors of the company to be summoned for a day not later than the fourteenth day from the day of the general meeting of the company at which the resolution for dissolution and consequential voluntary winding up is passed, and shall cause the notice of the said meeting of the creditors to be sent by post to the creditors at least seven days before the date of that meeting.

(2) The directors of the company shall -

Meeting of creditors.

(a) cause a full statement of the position of the company’s affairs, together with a list of the creditors of the company and the estimated amount of their claims to be laid before the meeting of the creditors to be held as aforesaid; and

(b) appoint one of their number to preside at the said meeting.

(3) It shall be the duty of the director appointed to preside at the meeting of creditors to attend the meeting and preside thereat.

(4) Where the court has ordered that the company be wound up voluntarily by virtue of the provisions of article 214(3) and a declaration in accordance with article 268 has not been made, the court shall, at its sole discretion, determine whether or not to appoint a liquidator itself in the winding up order. Where no liquidator is so appointed the general meeting of the company and the meeting of the creditors referred to in this article, shall be summoned within fourteen days from the date of the winding up order, and notice thereof shall be given by the directors of the company at least seven days before the date of such meetings; and the provisions of subarticles (2) and (3) shall apply.

(5) The directors of the company shall cause the notice of the meeting of the creditors referred to in this article to be advertised once in at least one local daily newspaper.

(6) If default is made by the directors, or the director, as the case may be, in complying with any of the provisions of this article, every director who is in default shall be liable to a penalty.

Appointment and removal of liquidator.

279. (1) The creditors and the company at their respective meetings mentioned in article 278 may nominate a person to be liquidator for the purpose of winding up the affairs and distributing the assets of the company. The nomination of a person as liquidator by the creditors shall be made by a resolution of the creditors, and the nomination by the company shall be made by an extraordinary resolution of the company. If the creditors and the company nominate different persons, the person nominated by the creditors shall be liquidator, and if no person is nominated by the creditors the person, if any, nominated by the company shall be liquidator.

(2) Where no person is nominated to act as liquidator by either the creditors or the company, an application to the court for the appointment of a liquidator shall be made by any director of the company within fourteen days from the date for which the meeting of the creditors referred to in article 278 was summoned, and the appointment shall be made by the court.

(3) If default is made by the directors in complying with the provisions of subarticle (2), every director who is in default shall be liable to a penalty, and, for every day during which the default continues, to a further penalty.

(4) A liquidator appointed in accordance with the provisions of this article may be removed by a resolution of the creditors except where he has been appointed by the court in terms of article 278 or of this article.

(5) In this article, a resolution of the creditors shall have the meaning assigned to it under article 298.

Liquidation committee.

280. (1) The creditors at the meeting to be held in pursuance of article 278, or at any subsequent meeting may, if they think fit, by resolution appoint not more than five representatives of the creditors to a liquidation committee, and if such committee is appointed, the contributories may by resolution appoint up to five persons to act as their representatives on the committee:

Provided that the creditors may, if they think fit, resolve that all or any of the persons so appointed by the company ought not to be members of the liquidation committee, and, if the creditors so resolve, the persons mentioned in the resolution shall not, unless the court otherwise directs, be qualified to act as members of the committee, and on any application to the court under the provisions of this subarticle the court may, if it thinks fit, appoint other persons to act as such members in place of the persons mentioned in the resolution.

(2) Subject to the provisions of subarticle (1) or as may be otherwise prescribed, the provisions of article 246, other than subarticles (1) to (4) thereof, shall apply with respect to a liquidation committee appointed under this article as they apply with respect to a liquidation committee appointed in a winding up by the court.

Remuneration of liquidator.

281. The liquidation committee or, if there is no such committee, the creditors, shall fix the basis of remuneration to be paid to the liquidator or liquidators.

Vacancy in office of liquidator.

282. If a vacancy occurs, by death, resignation or removal in the office of a liquidator who was not appointed by the Court, a new liquidator shall be appointed in accordance with the provisions of article 279(1):

Provided that if a liquidator is not appointed in accordance with the provisions of the said subarticle, any member or creditor of the company may apply to the court for the appointment of a liquidator and the appointment shall be made by the court.

Liquidator to hold meeting of company and creditors where winding up continues for more than twelve months.

283. (1) In the event of the winding up continuing for more than twelve months, the liquidator shall summon a general meeting of the company and a meeting of the creditors at the end of the first period of twelve months from the commencement of the winding up, and of each succeeding period of twelve months, or at the first convenient date within three months from the end of the period of twelve months, or within a longer term as the Registrar may allow, and shall lay before the meetings an account of his acts and dealings and of the conduct of the winding up during the preceding twelve months, including a summary of receipts and expenditure.

(2) If the liquidator fails to comply with the provisions of subarticle (1), he shall be liable to a penalty.

(3) A member or members holding not less than one tenth of the paid up share capital having the right to vote at general meetings of the company or a creditor or creditors representing not less than one tenth in value of the company creditors may, at any time, by request in writing require the liquidator to convene a general meeting of the company, or a creditors’ meeting, as the case may be. Such request shall be signed by such member or members, or such creditor or creditors, as the case may be, and shall state the objects of the meeting.

Final meetings.

284. (1) As soon as the affairs of the company are fully wound up, the liquidator shall make an account of the winding up, showing how the winding up has been conducted and how the property of the company has been disposed of, and shall draw up a scheme of distribution indicating the amount due in respect of each share from the assets of the company, where applicable, and he shall cause the account to be audited by one or more auditors appointed by resolution of the creditors, or in default by the court. The liquidator shall thereupon call a general meeting of the company and a meeting of the creditors for the purpose of laying the account and scheme of distribution, if any, together with the auditors’ report, before the meetings and giving any explanations thereof.

(2) Within seven days after the date of the meetings or, if the meetings are not held on the same date, after the date of the later meeting, the liquidator shall send to the Registrar a copy of the account and of the scheme of distribution, if any, together with the auditors’ report, and shall make a return to him of the holding of the meetings and of their dates; and if the copy is not sent or the return is not made in accordance with this subarticle the liquidator shall be liable to a penalty, and, for every day during which the default continues, to a further penalty:

Provided that, if a quorum is not present at either such meeting, the liquidator shall, in lieu of the return mentioned in this subarticle, make a return that the meeting was duly summoned and that no quorum was present thereat and upon such a return being made the provisions of this subarticle as to the making of the return shall, in respect of that meeting, be deemed to have been complied with.

(3) If the liquidator fails to call a general meeting of the company or a meeting of the creditors as required by this article, he shall be liable to a penalty.

(4) The provisions of article 274(4) shall apply to an auditor appointed in terms of subarticle (1).

Striking company’s name off the register.

285. (1) The Registrar shall, on receiving the account and the scheme of distribution, if any, together with the auditors’ report and, in respect of each such meeting as is referred to in article 284, the return or returns as mentioned in that article, forthwith register them, and on the expiration of three months from the publication of the notice referred to in article 401(1)(e), the Registrar shall strike the name of the company off the register:

Provided that the court may, on an application filed within the said period of three months by the liquidator or by any other person who appears to the court to have an interest, make an order deferring the date at which the name of the company shall be struck off the register for such time and subject to such conditions as the court may provide.

Chapter IV - Provisions applicable to every voluntary winding up

Provisions applicable to every voluntary winding up.

286. The provisions contained in articles 287 to 294 shall apply to every voluntary winding up, whether a members’ or a creditors’ voluntary winding up.

Distribution of property of company.

287. Subject to the provisions of this Act and of any other law as to preferential debts or payments, the property of a company shall, on its winding up, be applied in satisfaction of its liabilities pari passu, and, subject to such application, shall, unless the articles otherwise provide, be distributed among the members according to their rights and interests in the company.

Powers and duties of liquidator.

288. (1) The liquidator may -

(a) in the case of a members’ voluntary winding up, with the sanction of an extraordinary resolution of the company, and, in the case of a creditors’ voluntary winding up, with the sanction of the court or of the liquidation committee or, if there is no such committee, of a meeting of the creditors, exercise any of the powers given by article 238(1)(c), (d) and (e) to a liquidator in a winding up by the court;

(b) without sanction, exercise any of the other powers given by this Act to a liquidator in a winding up by the court;

(c) exercise the power of the court under this Act of drawing up a list of contributories, which list shall be prima facie evidence of the liability of the persons named therein to be contributories;

(d) exercise the power of the court of making calls;

(e) summon general meetings of the company for the purpose of obtaining the sanction of the company by extraordinary resolution or for any other purpose he may think fit.

(2) The liquidator shall pay the debts of the company and shall adjust the rights of the contributories among themselves.

(3) More than one person may be appointed to exercise the function of liquidator of a company. Where more than one liquidator is appointed, any power given by this Act may be exercised by one or more of them as may be determined at the time of their appointment, or in default of such determination, by any two of them acting jointly.

(4) Subject to the provisions of article 305, the acts of a liquidator shall be valid notwithstanding any defects that may afterwards be discovered in his appointment.

Powers of the court to remove liquidators.

289. (1) The court may, on the application of any member, creditor or contributory, remove a liquidator if it is satisfied that there exist sufficient grounds to warrant his removal and appoint another liquidator.

(2) A vacancy resulting from the death or resignation of a liquidator appointed by the Court may, on the application of any member, creditor or contributory, be filled by the Court.

(3) The person who applied to the Court in terms of subarticle

(2) shall, in the case of a vacancy resulting from the death of a liquidator, inform the Registrar of the demise of the liquidator.

Notice by liquidator of his appointment.

290. (1) The liquidator shall, within fourteen days after his appointment, deliver to the Registrar for registration a notice of his appointment stating his name and residence.

(2) If the liquidator fails to comply with the requirements of this article he shall be liable to a penalty, and, for every day during which the default continues, to a further penalty.

When arrangement is binding on members.

291. (1) Any arrangement entered into between a company in the course of being wound up, and its creditors shall, subject to the right of appeal under this article, be binding on the company if sanctioned by an extraordinary resolution, and on the creditors if acceded to by two-thirds in value.

(2) Any creditor or contributory may, within fourteen days from the completion of the arrangement, apply to the court contesting the arrangement, and the court may thereupon, as it thinks fit, amend, vary or confirm the arrangement.

Court may determine questions and exercise powers.

292. (1) The liquidator or any member, contributory or creditor may apply to the court to determine any question arising in the course of winding up of a company, or to exercise, as respects the enforcement of calls or any other matter, all or any of the powers which the court might exercise if the company were being wound up by the court.

(2) The liquidator may apply to the Court to fix a time or times within which creditors are to prove their debts or claims or to be excluded from the benefit of any distribution made before those debts are proved.

(3) The court, if satisfied that the determination of the question or the required exercise of power referred to in subarticles (1) and

(2) will be just and beneficial, may accede wholly or partially to the application on such terms and conditions as it thinks fit or may make such other order on the application as it so determines.

(4) A copy of any order made by virtue of this article staying the proceedings in the winding up shall forthwith be forwarded by the Registrar of Courts to the Registrar who shall make a minute of the order in the register relating to the company.

Costs of voluntary winding up.

293. All costs, charges and expenses properly incurred in the winding up, including the remuneration of the liquidator, shall be payable out of the assets of the company in priority to all other claims, and they shall, in so far as applicable, be paid in the order of priority established under article 258, unless the court otherwise directs.

Savings for rights of creditors and contributories.

294. The voluntary winding up of a company shall not bar the right of any creditor or contributory to have it wound up by the court, but in the case of an application by a contributory the court must be satisfied that the rights of the contributories will be prejudiced by a voluntary winding up, and the provisions of article 223(2) shall apply.

SUB-TITLE III - PROVISIONS APPLICABLE TO EVERY

MODE OF WINDING UP

Chapter I - Effect of appointment of liquidator and convening of meetings

Powers of directors and company secretary to cease.

295. On the appointment of a liquidator, all the powers of the directors and of the company secretary shall cease, except as may be otherwise provided in this Title.

Summoning of meetings.

296. (1) The liquidator, including the official receiver while occupying the office of liquidator, shall summon all meetings of creditors or contributories by giving not less than fourteen days’ notice thereof in a daily newspaper circulating wholly or mainly in Malta; and shall, not less than fourteen days before the day appointed for the meeting, send by post to every person appearing in the company’s accounting records to be a creditor of the company, notice of the meeting of creditors, and, to every person appearing in the company’s accounting records or otherwise to be a c o n t r i b u t o r y o f t h e c o m p a n y, n o t i c e o f t h e m e e t i n g o f contributories.

(2) The notice to each creditor shall be sent to the address given in the creditors’ proof of his debt, or, if he has not proved his debt, to the address given in the statement of affairs of the company, if any, or to such other address as may be known to the person summoning the meeting.

(3) Where there is no continuing liquidator, any member, creditor or contributory may apply to the court for directions as to the summoning and holding of a meeting.

(4) The provisions of this article shall not apply to meetings held under article 278 or article 284.

Proof of notice and chairman of meeting.

297. (1) A certificate by the official receiver, or an affidavit by the liquidator or creditor, or as the case may be by some officer of the company, that the notice of any meeting has been duly posted, shall be sufficient evidence of such notice having been duly sent to the person to whom the same was addressed.

(2) The involuntary omission of any notice required to be given by article 296 or any other provision of this Title shall not invalidate the meeting.

(3) Where a meeting is summoned by the official receiver or the liquidator, he or someone nominated by him shall be chairman of the meeting.

Resolutions of creditors and contributories.

298. (1) (a) At a meeting of creditors a resolution shall be deemed to be passed when a majority in value of the creditors present personally or by proxy and voting on the resolution have voted in favour of the resolution.

(b) At a meeting of contributories a resolution shall be deemed to be passed when three -fourths in value of the contributories present in person or by proxy and voting on the resolution, or a majority in value of all the contributories, have voted in favour of the resolution. The value of the contributories shall be determined according to the number of votes conferred on each contributory by the memorandum or articles of the company or, if the memorandum and articles are silent, according to the value of their respective liabilities to contribute.

(2) The provisions of this Act and of the memorandum or articles of the company with respect to proxies at general meetings of the company shall apply to proxies at meetings of creditors and contributories, with such modifications and adaptations as may be required.

(3) A copy of every resolution of a meeting of creditors or contributories in a winding up by the court shall be certified by the official receiver or the liquidator, as the case may be, and filed in the Registry of the Superior Courts.

(4) Where a resolution is passed at an adjourned meeting of any creditors or contributories of a company, the resolution shall, for all purposes, be treated as having been passed on the date on which it was in fact passed, and shall not be deemed to have been passed at any earlier date.

Other proceedings at meetings.

299. (1) A meeting of creditors or contributories may act provided there is a quorum present consisting of:

(a) in the case of a creditors’ meeting, at least three creditors or all the creditors where these number less than three; and

(b) in the case of a meeting of contributories, at least three contributories, or all the contributories where these number less than three.

(2) If within half an hour from the time appointed for the meeting, a quorum of creditors or contributories, as the case may be, is not present or represented, the meeting shall be adjourned to the same day in the following week at the same time and place or to such other day or time or place as the chairman may appoint, but so that the day appointed shall be not less than seven and not more than twenty-one days from the day from which the meeting was adjourned, and at such adjourned meeting the number present or represented shall form a quorum and may act for any purpose.

(3) The chairman may, with the consent of the meeting, adjourn it from time to time and from place to place, but the adjourned meeting shall be held at the same place as the original meeting unless in the resolution for adjournment another place is specified or unless the court otherwise orders.

(4) The chairman shall cause minutes of the proceedings of meetings to be drawn up and properly entered in a book kept for that purpose and the minutes shall be signed by him.

(5) A list of creditors and contributories present at every meeting shall be made and kept in such form as the chairman may deem appropriate or as may be prescribed.

Notice of resignation or removal of liquidator.

300. (1) Upon the resignation of a liquidator from his office, he shall deliver to the Registrar for registration a notice of his resignation and the resignation shall only become effective on such registration.

(2) Where a liquidator is removed from office by the court in accordance with the provisions of this Title, the Registrar of Courts shall forthwith deliver a notice of such removal to the Registrar for registration.

(3) Where a liquidator has been removed by an extraordinary resolution of the company in a members’ voluntary winding up, a notice thereof shall be delivered to the Registrar for registration by any member of the company who has duly been authorised by the same resolution or by the company in general meeting.

(4) Where a liquidator has been removed by a resolution of the creditors in terms of article 298, in a creditors’ voluntary winding up, a notice thereof shall be delivered to the Registrar for registration by any creditor of the company who has been duly authorised by the same resolution or by the creditors’ meeting.

Rectification of scheme of distribution.

300A. (1) Where in the course of the winding up of a company the liquidator has not taken into account any asset of the company, and the name of the company has been struck off the register, any interested person may, by an application, request the Court to order the rectification of the scheme of distribution, and the Court may, where it considers it appropriate, order such rectification under those terms and conditions it may deem fit.

(2) Where a company has made a distribution to its shareholders pursuant to a scheme of distribution and the name of such company has been struck off the register, any creditor whose claim against the company has not been satisfied may, by an application, claim what is due to him from the shareholders of the company pro rata to the amount received by the shareholders upon the distribution, and the Court may, where it considers it appropriate, order that payments be made by the shareholders to such creditor under those terms and conditions it may deem fit:

Provided that in no case shall a shareholder be required to contribute an amount exceeding that received by him upon distribution.

(3) No application may be made under this article after the expiration of five years from the date on which the name of the company has been struck off the register.

Restoration of company name on register.

(3) No application may be made under this article after the expiration of five years from the date on which the name of the company has been struck off the register.

300B. (1) Where a company has been struck off the register, any interested person may, by an application, request the Court to order that the name of the company be restored to the register and the winding up be reopened.

(2) Where, on an application made in terms of subarticle (1), the Court is satisfied that the winding up and striking off of the company has been vitiated by fraud or illegality of a material nature, the Court may order that the name of the company be restored to the register and the winding up be reopened for such purposes and such period as the Court shall specify in its decision, and the Court shall give such directives and impose such conditions as it may consider appropriate.

(3) The Court shall only accede to the application where it is satisfied that this is the only remedy available.

(4) In its decision the Court shall also determine whether its orders and directives shall be effective in favour of all persons or shall apply limitedly to specified persons indicated in the decision.

(5) No application may be made under this article after the expiration of five years from the date on which the name of the company has been struck off the register.

Chapter II - Proof and ranking of claims

Debts of all descriptions may be proved.

301. In every winding up of a company the assets of which are sufficient to meet the liabilities, all debts payable on a contingency, and all claims against the company, present or future, certain or contingent, ascertained or which may be due in damages, shall be admissible as proof against the company, a just estimate being made, so far as possible, of the value of such debts or claims as may be subject to any contingency or which are due in damages but not ascertained, or which for some other reason do not bear a certain value.

Application of rules on ranking.

302. In the winding up of a company the assets of which are insufficient to meet the liabilities, the rights of secured and unsecured creditors and the priority and ranking of their debts shall be regulated by the law for the time being in force.

Chapter III - Effects of winding up on antecedent transactions

Fraudulent preference.

303. (1) Every privilege, hypothec or other charge, or transfer or other disposal of property or rights, and any payment, execution or other act relating to property or rights made or done by or against a company, and any obligation incurred by the company within six months before the dissolution of the company shall be deemed to be a fraudulent preference against its creditors whether it is of a gratuitous nature or an onerous nature if it constitutes a transaction at an undervalue or if a preference is given, unless the person in whose favour it is made, done or incurred, proves that he did not know and did not have reason to believe that the company was likely to be dissolved by reason of insolvency, and in the event of the company being so dissolved every such fraudulent preference shall be void.

(2) For the purposes of this article -

(a) a company enters into a transaction at an undervalue if:

(i) the company makes a gift or otherwise enters into a transaction on terms that provide for the company to receive no consideration, or

(ii) the company enters into a transaction for a consideration the value of which, in money or money’s worth, is significantly less than the value in money or money’s worth of the consideration provided by the company;

(b) a company gives a preference to a person if:

(i) that person is one of the company’s creditors or a surety or guarantor for any of the company’s debts or other liabilities; and

(ii) the company does anything or suffers anything to be done which, in either case, has the effect of putting that person into a position which, in the event of the company going into insolvent winding up, will be better than the position he would have been had that act or omission not occurred.

304. (1) Where anything made or done after the appointed day is void under article 303 as a fraudulent preference of a person interested in property privileged, hypothecated or otherwise charged to secure the company’s debt, then, without prejudice to any rights or liabilities arising apart from the provisions of this article, the person preferred shall be subject to the same liabilities and shall have the same rights as if he had undertaken to be personally liable as surety for the debt to the extent of the charge on the property or the value of his interest, whichever is the less.

(2) The value of the preferred person’s interest shall be determined as at the date of the transaction constituting the fraudulent preference, and shall be determined as if the interest were free of all encumbrances or burdens other than those to which the charge for the company’s debt referred to in subarticle (1) was then subject.

(3) On any application made to the court with respect to any payment on the ground that the payment was a fraudulent preference of a surety or guarantor, the court may determine any questions with respect to the payment arising between the person to whom the payment was made and the surety or guarantor and to grant relief in respect thereto.

(4) The provisions of subarticle (3) shall apply, with the necessary modifications, in relation to transactions other than payments of money, as they apply in relation to such payments.

Chapter IV - Qualification of Liquidators and Prohibition of Certain Transfers by Liquidators

Qualification of liquidators.

305. (1) A person shall not be qualified to act as liquidator unless he is an advocate or is an individual who is a certified public accountant or certified public accountant and auditor, or is registered with the Registrar as fit and proper to exercise the function of liquidator.

(2) A person who is qualified to act as liquidator in virtue of subarticle (1), may not act as liquidator if he has held the office of director or company secretary or has held any other appointment with or in connection with that company, at any time during the four years prior to the date of dissolution of the company as determined in accordance with the provisions of this Act.

For the purposes of this subarticle, director includes a person in accordance with whose directions or instructions the directors of the company are or have been accustomed to act.

Prohibition of certain transfers by liquidators.

306. (1) A liquidator shall be prohibited from transferring or disposing of any assets of a company, directly or indirectly, in favour of -

(a) the liquidator himself, his partners or employees, or to the spouse of the liquidator, or to any other person related to him by consanguinity or affinity in the direct line, or, up to the third degree, in the collateral line; or

(b) a commercial partnership, other than a company, of which he is a partner; or

(c) a company of which he is a director, or of which he holds more than half in nominal value of its issued share capital, or in which he is entitled to more than half its voting power, or to a subsidiary or parent company thereof.

(2) A person who acts in contravention of any of the provisions of subarticle (1) or of article 305 shall be guilty of an offence and liable on conviction to a fine (multa) of not more than five thousand liri.

Chapter V - Offences antecedent to dissolution or in course of winding up

Fraud in anticipation of dissolution

307. (1) When a company has been dissolved in accordance with the provisions of article 214, any person, being a past or present officer of the company, shall be guilty of an offence if, within the twelve months immediately preceding the deemed date of dissolution, he has -

(a) concealed any part of the company’s property, or concealed any debt due to or from the company; or

(b) fraudulently removed any part of the company’s property; or

(c) concealed, destroyed, mutilated or falsified any book or paper affecting or relating to the company’s property or affairs; or

(d) made any false entry in any book or paper affecting or relating to the company’s property or affairs; or

(e) fraudulently parted with, or altered any document affecting or relating to the company’s property or affairs; or

(f) pledged or disposed of any property of the company which has been obtained on credit and has not been paid for, unless the pledging or disposal was in the ordinary course of the company’s business; or

(g) by any false representation or other fraud, obtained property for or on behalf of the company on credit which the company does not subsequently pay for; or

(h) exercised any false representation or fraud for the purpose of obtaining the consent of the creditors of the company or of any of them to an agreement with reference to the affairs of the company or to its dissolution.

(2) Such person shall be guilty of an offence if within the period mentioned in subarticle (1) he has been a party to the doing by others of any of the things mentioned in paragraphs (c), (d) and (e) thereof, and he shall be guilty of an offence if, at any time after the deemed date of dissolution, he does any of the things mentioned in paragraphs (a) to (h) of the said subarticle, or is party to the doing by others of any of the things mentioned in paragraphs (c) to (e) of that subarticle.

(3) It shall be a defence for a person charged to prove that he had no intent to defraud or to conceal the affairs of the company or to defeat the law.

(4) Where a person pledges or otherwise disposes of any property in circumstances which amount to an offence under subarticle (1)(f), every person who receives the property on pledge or otherwise receives the property knowing it to be pledged or disposed of in such circumstances, shall be guilty of an offence.

(5) For the purposes of this article, the expression "officer" shall include any person in accordance with whose directions or instructions the directors of a company have been accustomed to act.

(6) A person guilty of an offence under this article shall be liable on conviction to a fine (multa) of not more than one hundred thousand liri or to imprisonment for a term not exceeding five years or to both such fine and imprisonment.

308. (1) When a company is being wound up by the court or voluntarily, a person shall be guilty of an offence if, being an officer of the company, he -

(a) has made or caused to be made any gift or transfer of, or charge on, or has caused or connived at the enforcement of any executive title against, the property of the company; or

(b) has concealed or removed any part of the property of the company since, or within two months before, the date of any unsatisfied judgment or order for payment of money against the company.

(2) A person shall not be guilty of an offence under subarticle (1) if he proves that, at the time of the conduct constituting the offence, he had no intent to defraud the company’s creditors.

(3) A person guilty of an offence under this article shall be liable on conviction to a fine (multa) of not more than one hundred thousand liri or imprisonment for a term not exceeding five years or to both such fine and imprisonment.

(4) For the purposes of this article, the expression "officer" shall include any person in accordance with whose directions or instructions the directors of a company have been accustomed to act. Other offences by officers of companies being wound up.

309. (1) If any person, being a past or present officer of a company -

(a) does not to the best of his knowledge and belief fully and truly reveal to the liquidator all the property, movable and immovable, corporeal or incorporeal, of the company, and how and to whom and for what consideration and when the company disposed of any part thereof, except such part as has been disposed of in the ordinary course of the business of the company; or

(b) does not deliver up to the liquidator, or as the liquidator directs, all or such part of the property of the company as is in his custody or under his control, and which he is required by law to deliver up; or

(c) does not deliver up to the liquidator, or as the liquidator directs, all accounts, accounting records and documents in his custody or under his control belonging to the company and which he is required by law to deliver up; or

(d) makes any material omission in any statement relating to the affairs of the company; or

(e) knowing or believing that a false debt has been proved by any person in the winding up, fails for the period of one month to inform the liquidator thereof; or

(f) after the dissolution of the company prevents theproduction of any book or paper affecting or relating to the property or affairs of the company; or

(g) after the dissolution of the company or at any meeting of the creditors of the company within twelve months immediately preceding the dissolution of the company attempts to account for any part of the property of the company by fictitious losses or expenses, he shall be guilty of an offence and shall be liable on conviction to a fine (multa) of not more than one hundred thousand liri or to imprisonment for a term not exceeding five years or to both such fine and imprisonment if, at the time of the commission of the alleged offence, the company is being wound up, whether by the court or voluntarily, or if, subsequent to the commission of the alleged offence, the company is dissolved in accordance with the provisions of article 214.

(2) For the purposes of this article, the expression "officer" shall include any person in accordance with whose directions or instructions the directors of a company have been accustomed to act.

Defence to a charge under article 309.

310. It shall be a good defence to a charge under any of paragraphs (a), (b), (c) and (d) of article 309(1), if the accused proves that he had no intent to defraud; and to a charge under paragraph (f) of the said article, if he proves that he had no intent to conceal the state of affairs of the company or to defeat the law.

Fraud by contributory.

311. If any contributory of any company being wound up destroys, mutilates, alters or falsifies any accounts, accounting records, documents, books or securities, or makes or is party to the making of any false or fraudulent entry in any register, accounting record or document belonging to the company with intent to defraud or deceive any person, he shall be guilty of an offence and shall be liable on conviction to a fine (multa) of not more than one hundred thousand liri or to imprisonment for a term not exceeding five years or to both such fine and imprisonment.

Remedy against delinquent directors, liquidators, etc.

312. (1) The provisions of this article shall apply if in the course of the winding up of a company, whether by the court or voluntarily, it appears that a person who -

(a) is or has been an officer of the company;

(b) has acted as liquidator of the company; or

(b), is or has been concerned, or has taken part in the promotion, formation or management of the company, has misapplied or retained or become accountable for, any money or other property of the company, or been guilty of any improper performance or breach of duty in relation to the company.

(2) The court may, on the application of the official receiver or the liquidator, or of any creditor or contributory, examine the conduct of any person referred to in subarticle (1) and may compel him -

(a) to repay, restore or account for the money or property or any part of it, with interest at such rate as the court thinks fit; or

(b) to contribute such sum to the company’s assets by way of compensation in respect of the improper performance or breach of duty as the court thinks fit.

Fraud by officers of companies subsequently dissolved.

313. (1) If any person, being at the time of the commission of the alleged offence, an officer of a company which is subsequently dissolved in accordance with the provisions of article 214, has -

(a) by false pretences or by means of any other fraud induced any person to give credit to the company; or

(b) with intent to defraud creditors of the company, made or caused to be made any gift or transfer of or charge on, or has caused or connived at the enforcement of any executive title against, the property of the company; or

(c) with intent to defraud creditors of the company, concealed or removed any part of the property of the company since, or within two months before, the date of any unsatisfied judgment or order for payment of money obtained against the company, he shall be guilty of an offence and shall be liable on conviction to a fine (multa ) of not more than one hundred thousand liri or imprisonment for a term not exceeding five years or to both such fine and imprisonment.

(2) A person shall not be guilty of an offence under subarticle (1) by reason of conduct constituting an offence under paragraph (b) of the said subarticle which occurred more than five years before the date of deemed dissolution.

Liability when proper accounting records are not kept by insolvent company.

314. If, where a company is dissolved, it is shown that proper accounting records were not kept by the company throughout the period of two years immediately preceding the dissolution or the period between the registration of the company and the dissolution, whichever is the shorter, and it is furthermore shown that the company was, at the moment of its dissolution, unable to pay its debts, every officer of the company who is in default shall, unless he shows that he acted diligently and that in the circumstances in which the business of the company was carried on the default was excusable, be guilty of an offence and liable on conviction to a fine (multa) of not more than twenty thousand liri, or imprisonment for a term not exceeding three years, or to both such fine and imprisonment.

Responsibility for fraudulent trading.

315. (1) If in the course of the winding up of a company, whether by the court or voluntarily, it appears that any business of the company has been carried on with intent to defraud creditors of the company or creditors of any other person or for any fraudulent purpose, the court on the application of the official receiver, or the liquidator or any creditor or contributory of the company, may, if it thinks proper so to do, declare that any persons who were knowingly parties to the carrying on of the business in the manner aforesaid be personally responsible, without any limitation of liability for all or any of the debts or other liabilities of the company as the court may direct.

(2) Where the business of a company is carried on with such intent or for such purposes as is mentioned in subarticle (1), every person who was knowingly a party in the carrying on of the business in the manner aforesaid, shall be guilty of an offence and liable on conviction to a fine ( multa ) of not more than one hundred thousand liri or imprisonment for a term not exceeding five years, or to both such fine and imprisonment.

Wrongful trading.

316. (1) The provisions of this article shall apply where a company has been dissolved and is insolvent and it appears that a person who was a director of the company knew, or ought to have known prior to the dissolution of the company that there was no reasonable prospect that the company would avoid being dissolved due to its insolvency.

(2) The court, on the application of the liquidator of a company to which this article applies, may declare the person who was a director referred to in subarticle (1) liable to make a payment towards the company’s assets as the court thinks fit.

(3) The court shall not grant an application under this article if it is satisfied that the person who was a director knew that there was no reasonable prospect that the company would avoid being dissolved due to its insolvency and accordingly took every step he ought to have taken with a view to minimising the potential loss to the company’s creditors.

(4) For the purposes of subarticles (2) and (3), the facts which a director of a company ought to know or ascertain, the conclusions which he ought to reach and the steps which he ought to take, are those which would be known or ascertained, or reached or taken, by a reasonably diligent person having both -

(a) the knowledge, skill and experience that may reasonably be expected of a person carrying out the same functions as are carried out by or entrusted to that director in relation to the company; and

(b) the knowledge, skill and experience that the director has.

(5) For the purposes of this article, "director" includes a person in accordance with whose directions or instructions the directors of the company are accustomed to act.

Restriction on reuse of company names.

317. (1) The provisions of this article shall apply to a person who, on or after the appointed day, was a director of a company ("the company being wound up") at any time in the twelve months preceding its dissolution and the company is insolvent upon such dissolution.

(2) Except with leave of the court, or in such circumstances as may be prescribed, any person referred to in subarticle (1) shall not at any time during the winding up of the company and up to two years from the date when its name is struck off the register -

(a) be a director of a company that is known by a name which is prohibited by virtue of the provisions of subarticle (3): or

(b) in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of any such company; or

(c) in any way, whether directly or indirectly, be concerned or take part in the carrying on of a business carried on under such a prohibited name.

(3) For the purposes of subarticle (2), a name is a prohibited name in relation to any person referred to in subarticle (1) if -

(a) it is a name by which the company being wound up was known at any time in that period of twelve months; or

(b) it is a name which is so similar to a name falling within paragraph (a) as to suggest an association with that company.

(4) A person who acts in contravention of the provisions of this article shall be guilty of an offence and liable on conviction to a fine (multa) of not more than five thousand liri. Such person shall also be personally responsible for the debts of any company referred to in subarticle (2)(a) and (b) which are incurred while he acts in relation to the company in the manner described in those paragraphs.

(5) For the purposes of this article, "director" includes a person in accordance with whose directions or instructions the directors of the company are accustomed to act.

Reference by court for prosecution of delinquent officers, etc.

318. If it appears to the court in the course of a winding up by the court that any past or present officers, or any member of the company, or any other person, has been guilty of any offence in relation to the company which is an offence under this Act or for which he is otherwise criminally liable, the court shall, either on the application of any person interested in the winding up or of its own motion, refer the matter to the Commissioner of Police through the Registrar of Courts.

Report by liquidator for prosecution of delinquent officers, etc.

319. If it appears to the liquidator in the course of a voluntary winding up that any past or present officer, or any member, of the company has been guilty of an offence in relation to the company which is an offence under this Act or for which he is otherwise criminally liable, he shall forthwith report the matter to the Commissioner of Police.

Disqualification orders.

320. (1) The court, upon the application of the Attorney General or the Registrar, may make a disqualification order against any person who is found guilty of an offence under this Act, other than an offence punishable only with a fine, or who has infringed any requirement of this Act with the consequence that the person becomes liable to contribute to the assets of a company or becomes personally liable for the debts of the company.

(2) The court, upon the application of the Attorney General or the Registrar, may also make a disqualification order against any person if it is satisfied -

(a) that 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

(b) 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.

(i) A disqualification order made under this article may be for a minimum period of one year and a maximum period of fifteen years.

(ii) For the purposes of this article, a disqualification order is an order whereby a person shall not, without leave of the court, be -

(a) a director or company secretary of a company; or

(b) a liquidator or provisional administrator of a company; or

(d) concerned in any way, whether directly or indirectly, or take part in the promotion, formation or management of a company, for a specified period beginning with the date of the order.

(5) A notice of a disqualification order made under this article shall -

(a) be delivered by the Registrar of Courts to the Registrar for registration;

(b) be furthermore recorded in a register to be kept for this purpose by the Registrar and which shall be open for public inspection.

(6) Any person who, while being subject to a disqualification order, acts in contravention thereof, shall be guilty of an offence and liable on conviction to a fine (multa ) of not more than twenty thousand liri or imprisonment for a term not exceeding three years or to both such fine and imprisonment.

Other remedies.

321. The provisions of this Chapter shall be without prejudice to any other offences or remedies which may exist under any other law.

Chapter VI - Supplementary Provisions

Statement by liquidator in respect of pending winding up.

322. (1) If, where a company is being wound up, whether by the court or voluntarily, the winding up is not concluded within twelve months after the dissolution of the company, the liquidator, not being the official receiver, shall, within thirty days from the expiry of the said period of twelve months, and subsequently at intervals of six months, until the winding up is concluded, send to the Registrar for registration a statement with respect to the proceedings in and position of the winding up commencing on the date when the liquidator was first appointed and drawn to the end of the period in respect of which the statement is due, and made in such form and containing such particulars as may be prescribed. In a winding up by the court, where the assets of the company have been fully realised and distributed before the expiration of a six-monthly interval, a final statement shall be sent to the Registrar for registration.

(2) If a liquidator fails to comply with the provisions of this article, he shall be liable to a penalty and, for every day during which the default continues, to a further penalty.

323. (1) The court may, with respect to all matters relating to the dissolution and winding up of a company, have regard to the wishes of the creditors or contributories of the company, as proved to it by any sufficient evidence, and may, if it thinks fit, for the purpose of ascertaining those wishes direct that meetings of the creditors or contributories be called, held and conducted in such manner as the court considers appropriate and may appoint a person to act as chairman of any such meeting and to report the result thereof to the court.

(2) In the case of creditors, regard shall be had to the value of each creditors’ debt; and in the case of contributories, regard shall be had to the number of votes conferred on each contributory by the memorandum or articles of the company or, if the memorandum and articles are silent, to the value of their respective liabilities to contribute.

Publication of striking off and disposal of accounting records of company.

324. (1) Where the name of a company is struck off the register, the Registrar shall forthwith proceed to publish a notice thereof in the Gazette or on a website maintained by the Registrar.

(2) The liquidator shall keep the accounts, accounting records and documents of the company for a period of ten years from the date of publication of the striking of the company’s name off the register.

(3) If the liquidator fails to comply with subarticle (2) he shall be liable to a penalty.

Defunct companies.

325. (1) Where the Registrar has reasonable cause to believe that a company is not carrying on business or is not in operation, he may send to the company by post a letter inquiring whether the company is carrying on business or is in operation.

(2) If the Registrar receives an answer to the effect that the company is not carrying on business or is not in operation, or does not within one month of sending the letter receive an answer thereto, he may send to the company by post and publish a notice in the Gazette or on a website maintained by the Registrar and in a daily newspaper circulating wholly or mainly in Malta that, at the expiration of three months from the date of the last publication of the said notice, the company’s name shall, unless cause is previously 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; and the assets of the company shall devolve upon the Government of Malta.

(3) If, in any case where a company is being wound up voluntarily, the Registrar has reasonable cause to believe either that no liquidator is acting or that the affairs of the company are fully wound up, and the returns required to be made by the liquidator in terms of article 322 are overdue by six months or more, the Registrar may publish in the Gazette or on a website maintained by the Registrar and in a daily newspaper circulating wholly or mainly in Malta, a notice that at the expiration of three months from the date of the last publication of the said notice, the winding up of the company shall, unless cause is previously shown to the contrary, be deemed to be concluded and consequently that the company’s name be struck off the register. The Registrar shall also cause a copy of the said notice to be sent by post to the company and to the liquidator, if any. At the expiration of the aforesaid period of three months the winding up of the company shall, unless cause is previously shown to the contrary, be deemed to be concluded and the Registrar shall strike the name of the company off the register and the company’s assets shall devolve upon the Government of Malta.

(4) If any member or creditor of the company, or any other person who appears to the Court to have an interest feels aggrieved by the fact that the name of the company has been struck off the register by virtue of this article, the Court on an application made by the member or creditor or such other person before the expiration of five years from the publication of the notice of the striking off provided for in subarticles (2) and (3) may, if satisfied that it is proper that the name of the company be restored to the register, order that such name be restored to the register, and upon an official copy of the order being delivered by the Registrar of the Courts to the Registrar for registration, the company shall be deemed to have continued in existence as if its name had not been struck off; and the Court may by its order give such directions and make such provisions as seem fit for placing the company and all other persons in the same position as nearly as may be as if the name of the company had not been struck off. The Registrar shall forthwith proceed to publish a notice in the Gazette or on a website maintained by the Registrar and in a daily newspaper circulating wholly or mainly in Malta that the name of the company has been restored to the register.

(5) A notice to be sent under this article to a liquidator may be addressed to the liquidator at his last known place of business or address, and a letter or notice to be sent under this article to a company may be addressed to the company at its registered office.

(6) Notwithstanding that the name of the company has been struck off the register in terms of the preceding provisions of this article, the liability, if any, of every director or other officer of the company and of every member of the company shall continue and may be enforced as if the name of the company had not been struck off the register.

(7) Notwithstanding the provisions of article 429(1), the provisions of this article shall apply to companies whose dissolution and consequential winding up is regulated by the Ordinance.

Relationship with enactments on bankruptcy.

326. (1) Part III of the Commercial Code relating to bankruptcy shall not apply to a company.

(2) References in other laws other than Part III of the Commercial Code to a bankrupt shall, when the context requires, be interpreted as including references to a company being wound up in circumstances of insolvency under the provisions of this Title, and references to bankrupt shall be construed accordingly.

PART VI - COMPANY RECONSTRUCTIONS

Power of company to compromise with creditors and members.

327. (1) Where a compromise or arrangement is proposed between a company and its creditors, or any class of them, or between the company and its members, or any class of them, the court may on the application of the company or any creditor or member of it or, in the case of a company being wound up, the liquidator, order a meeting of the creditors or class of creditors, or of the members of the company or class of members, as the case may be, to be summoned in such manner as the court directs.

(2) If a majority in number representing three-fourths in value of the creditors or class of creditors or members or class of members, as the case may be, present and voting either in person or by proxy at the meeting, agree to any compromise or arrangement, the compromise or arrangement, if sanctioned by the court, shall be binding on all creditors or the class of creditors or on the members or class of members, as the case may be, and also on the company or, in the case of a company in the course of being wound up, on the liquidator and contributories of the company.

(3) The court’s order under subarticle (2) shall have no effect until a copy of it has been delivered to the Registrar for registration in accordance with article 329(5); and a copy of every such order shall be annexed to every copy of the company’s memorandum issued after the order has been made.

(4) If a company makes default in complying with subarticle (3), the company and every officer thereof who is in default shall be liable to a penalty.

(5) For the purposes of this article and article 328 -

(a) "company" means any company which is unable to pay its debts in terms of article 214(5) or in those circumstances where the court is of the opinion that there are grounds of sufficient gravity that would have otherwise warranted the dissolution and consequent winding up of the company in terms of article 214(2)(b)(iii); and

(b) "arrangement" includes a reorganisation of the company’s share capital by the consolidation of shares of different classes or by the division of shares into shares of different classes, or by both of those methods.

Information as to compromise to be circulated.

328. (1) The provisions of this article shall apply where a meeting of creditors or any class of creditors, or of members or any class of members, is summoned under article 327.

(2) With every notice summoning the meeting which is sent to a creditor or member there shall be sent also a statement explaining the effect of the compromise or arrangement and in particular stating any material interests of the directors of the company, whether as directors or as members or as creditors of the company or otherwise, and the effect on those interests of the compromise or arrangement, in so far as it is different from the effect on the like interests of other persons.

(3) In every notice summoning the meeting which is given by advertisement there shall be included either such a statement as abovementioned or a notification of the place at which, and the manner in which, creditors or members entitled to attend the meeting may obtain copies of the statement.

(4) Where the compromise or arrangement affects the rights of debenture holders of the company, the statement shall give the like explanation as regards the holders of any security for the issue of the debentures as it is required to give as regards the company’s directors.

(5) Where a notice given by advertisement includes a notification that copies of a statement explaining the effect of the compromise or arrangement proposed can be obtained by creditors or members entitled to attend the meeting, every such creditor or member shall, on making a request in the manner indicated by the notice, be furnished by the company free of charge with a copy of the statement.

(6) If a company makes default in complying with any requirement of this article, the company and every officer thereof who is in default shall be liable to a penalty; and for this purpose a liquidator of the company shall be deemed to be an officer of the company:

Provided that a person shall not be liable under this subarticle if he shows that the default was due to the refusal of another person, being a director, to supply the necessary particulars of his interests.

(7) It shall be the duty of any director of the company to give notice to the company and to any debenture holders of such matters relating to himself as may be necessary for purposes of this article; and any person who makes default in complying with this subarticle shall be liable to a penalty.

329. (1) The provisions of this article shall apply where application is made to the court under article 327 for the sanctioning of a compromise or arrangement proposed between a company and any such persons as are mentioned in that article.

(2) If it is shown -

(a) that the compromise or arrangement has been proposed for the purposes of, or in connection with, a scheme for the reconstruction of any company or companies, or the amalgamation of any two or more companies; and

(b) that under the scheme the whole or any part of the undertaking or the property of any company concerned in the scheme (in this article referred to as "a transferor company") is to be transferred to another company (in this article referred to as "the transferee company"), the court may, either by the order sanctioning the compromise or arrangement or by any subsequent order, make provision for all or any of the matters specified in subarticle (3).

(3) The matters for which the court’s order may make provision are -

(a) the transfer to the transferee company of the whole or any part of the undertaking and of the property or liabilities of any transferor company;

(b) the allotting or appropriation by the transferee company of any shares, debentures, securities or other like interests in that company which under the compromise or arrangement are to be allotted or appropriated by that company to or for any person;

(c) the continuation by or against the transferee company of any legal proceedings pending by or against any transferor company;

(d) the dissolution of any transferor company and the striking off of its name, without its having to be wound up;

(e) the provision to be made for any persons who, within such time and in such manner as the court directs, dissent from the compromise or arrangement;

(f) such incidental, consequential and supplemental matters as are necessary to secure that the reconstruction or amalgamation is fully and effectively carried out.

(4) If an order under this article provides for the transfer of property or liabilities, then -

(a) that property shall by virtue of the order be transferred to, and vest in, the transferee company; and

(b) those liabilities shall, by virtue of the order, be transferred to and become liabilities of that company, and property, if the order so directs, shall vest freed from any charge or other burden which shall, by virtue of the compromise or arrangement, cease to have effect.

(5) Where an order is made under this article, every company in relation to which the order is made shall cause a certified copy of the order to be delivered to the Registrar for registration within seven days after its making; and if default is made in complying with this subarticle, the company and every officer thereof who is in default shall be liable to a penalty, and, for every day during which the default continues, to a further penalty.

Duties of directors where company unable to pay debts.

329A. Where the directors of a company become aware that the company is unable to pay its debts or is imminently likely to become unable to pay its debts, they shall forthwith, not later than thirty days from when the fact became known to them, duly convene a general meeting of the company by means of a notice to that effect for a date not later than forty days from the date of the notice for the purpose of reviewing the company’s position and of determining what steps should be taken to deal with the situation, including consideration as to whether the company should be dissolved or, where applicable, whether the company should make a company recovery application in terms of article 329B.

Company recovery procedure.

329B. (1) (a) Where a company is unable to pay its debts or is imminently likely to become unable to pay its debts, a company recovery application may be made to the Court requesting the Court to place the company under the company recovery procedure and to appoint a special controller to take over, manage and administer the business of the company for a period to be specified by the Court subject to the limitation imposed by paragraph (c).

(b) A company recovery application, hereinafter in this article also referred to as the "application", shall be made by means of an application which may be made:

(i) by the company following an extraordinary resolution;

(ii) by the directors following a decision of the board of directors; or

(iii) by creditors of the company representing more than half in value of the company’s creditors.

(c) The appointment of a special controller shall be made for a period not exceeding twelve months; provided that, at any time during which the company recovery procedure is in force, the Court may, upon good cause being shown, extend the period by such additional period or periods which in aggregate do not exceed a further twelve months.

(d) The provisions of this article shall apply to:

(i) all companies other than companies which qualify as "small companies" in terms of article 185; and

(ii) to "small companies" having more than Lm200,000 in value owed to creditors.

(e) The Minister may, by regulations, amend or substitute the criteria set out in paragraph (d) for the purpose of establishing the applicability of the provisions of this article.

(f) No application may be submitted by a company after it has been dissolved voluntarily or if, in respect of the same company, a winding-up order has already been made.

(2) (a) The application shall, as far as possible, give the full facts, circumstances and reasons which led to the company’s inability or likely imminent inability to pay its debts, together with a statement by the applicants as to how the financial and economic situation of the company can be improved in the interests of its creditors, employees and of the company itself as a viable going concern.

(b) Where an application is made by the company, the following documents shall be annexed to it:

(i) a statement of the company’s assets and liabilities made up to a date not earlier than the date of the application by more than two months; and

(ii) a list containing the names and addresses of the creditors together with an indication of the amount due to each such creditor and the security, if any, of the respective creditors.

(c) Where the application is made by the creditors, it shall be accompanied by appropriate supporting documentation and statements.

Power of the Court.

(3) (a) On the hearing of an application, the Court may, after examining all the circumstances and the options that are available, either dismiss the application or issue a company recovery order, hereinafter also referred to in this article as an "order", acceding thereto and placing the company under the company recovery procedure.

(b) The Court shall accede to the application, and accordingly place the company under the company recovery procedure and issue an order, only if -

(i) it is satisfied that the company is, or is imminently likely to become, unable to pay its debts within the meaning of article 214(5); and

(ii) if it considers that the making of the order would be likely to achieve one of the following purposes:

the survival of the company as a viable going concern in part or in whole; or

the sanctioning under article 327 of a compromise or arrangement between the company and any of its creditors or members.

(i) the best interests of the creditors, shareholders and of the company itself, and the possibility of

safeguarding employment as appears to be reasonably and financially possible in the circumstances; and

(ii) the cost that would have to be incurred by adopting the company recovery procedure, particularly the fees and charges that would have to be incurred.

(d) Where the company is in possession of a licence or other authorisation under the laws regulating banking, insurance, investment services, financial institutions or listing of securities on a recognised investment exchange, the court shall not proceed to make an order without first having consulted with the relevant competent authority responsible for supervising that company or any of its activities.

(e) The Court shall take its decision whether to dismiss the application or to make a company recovery order within not more than twenty working days from the filing of the application.

Effect of the company recovery order.

(4) Upon the submission of an application and unless it is dismissed, or during the period during which the company recovery procedure is in force:

(a) any pending or new winding up application shall be stayed;

(b) no resolution for the dissolution and consequential winding up of the company may be passed or given effect to;

(c) the execution of claims of a monetary nature against the company and any interest that may otherwise accrue thereon shall be stayed;

(d) during the tenure of the lease, no landlord or other person to whom rent is payable may exercise any right of termination of lease in relation to premises leased to the company in respect of a failure by the company to comply with any term or condition of its tenancy of such premises, except with leave of the Court and subject to such terms as the Court may deem fit to impose;

(e) no other steps may be taken to enforce any security over the property of the company, or to repossess goods in the possession of the company under any hire-purchase agreement, except with the leave of the Court and subject to such terms as the Court may deem fit to impose;

(f) no precautionary or executive act or warrant mentioned in the Code of Organization and Civil Procedure shall be made against the company or any property of the company except with leave of the Court and subject to such terms as the Court may deem fit to impose; and

(g) no judicial proceedings shall be commenced or continued against the company or its property except with leave of the Court and subject to such terms as the Court thinks fit to impose.

Appointment of special controller.

(5) (a) In the order, the Court shall:

(i) appoint an individual to act as a special controller and to carry out such functions and powers as the Court may entrust to him in the administration and management of the property and business of the company;

(ii) fix such reasonable remuneration of the special controller, as the Court may consider appropriate after taking into account the company’s financial position, business and assets;

(iii) determine the period, not exceeding ten working days from the making of the company recovery order, within which the company shall deposit a sum of money in Court or offer other suitable guarantee or other appropriate arrangement, which, in the opinion of the Court, is sufficient to cover the remuneration, and charges of the special controller connected to his appointment.

(b) The Court shall appoint as the special controller an individual who the Court has ascertained to its satisfaction enjoys proven competence and experience in the management of business enterprises, is qualified and willing to accept the appointment, and has no conflict of interest in relation to his appointment.

(c) For so long as the special controller holds office, the fact of his appointment to such office and his full name together with his residential or business address shall be clearly indicated in all the business letters, order forms, invoices and any other documents of the company.

Powers and duties of the special controller.

(6) (a) During the period that an order is in force, the company shall continue to carry on its normal activities under the management of the special controller.

(b) The special controller shall, as soon as possible upon his appointment, take into his custody or under his control all the property of the company and he shall thenceforth be responsible to manage and supervise its activities, business and property.

(c) The special controller shall examine the assets, affairs and business performance of the company and shall ascertain and verify whether there is a reasonable expectation of the company’s recovery and continuation as a viable going concern, in whole or in part, and he shall submit an initial report thereon to the Court not later than two months from the date of his appointment.

(d) On the appointment of the special controller, any power conferred on the company, its directors or its officers, whether by this Act, by any other law, or by the Memorandum or Articles of Association of the company, shall be suspended unless the consent of the special controller to exercise such power has been obtained, which consent may be given either generally or in relation to a particular case or cases, and no meeting of the company may be summoned except with leave of the Court and subject to such terms as the Court may deem fit to impose.

(e) During such time as the company recovery procedure is in force, any duty conferred on the company, its directors or its officers, whether by this Act, by any other law, or by the Memorandum or Articles of Association of the company, shall be assumed and exercised by the special controller.

(f) In addition and without prejudice to any other duty assigned to the special controller by the Court or this Act or any other law, the special controller shall be obliged to perform his functions fairly and equitably taking into account the best interests of the company, its shareholders and creditors together with the interests of any other interested party.

(g) In addition to the functions and powers entrusted to him by the Court, the special controller shall have the power:

(i) after informing the Court, by means of a note, to remove any director of the company and to appoint any individual to serve as a manager;

(ii) to engage persons for the provision of professional or administrative services, and commit the company to the payment of their respective fees or charges; or

(iii) to call any meeting of the members or creditors of the company.

(h) The special controller shall not, without the prior express authorisation of the Court:

(i) engage the company into any commitment of more than six months duration; or

(ii) terminate the employment of company employees as he considers necessary for insuring the continuation of the company as a viable going concern in whole or in part; or

(iii) sell or otherwise dispose of property of the company to himself, or to his spouse or relatives and the provisions of article 306 shall apply as though references to the liquidator were references to the special controller.

(i) The Court may, upon the request of the special controller, and upon good cause being shown, extend his appointment and relative functions and powers to any company being a group company in relation to the company placed under the company recovery procedure, provided that, in so far as possible, the Court shall, before so doing, hear the views of the directors, or any of them, of such group company, as it may deem appropriate.

Meeting of creditors and members.

(a) Within one month from his appointment, the special controller shall convene a meeting or meetings of creditors and members, whether separately or jointly as he may consider appropriate, for the purpose of -

(i) laying before them for their information and review a comprehensive statement of the company’s affairs together with preliminary proposals on the future prospects and management of the company; and

(ii) appointing a joint creditors and members committee, consisting of not more than three creditors and not more than three members, to render such advice and assistance as the special controller may require in the management of the affairs, business and property of the company and its recovery as a viable going concern.

(b) Not less than fourteen days notice shall be given of the holding of any such meeting or meetings, and the special controller shall also send a copy of the notice convening the meeting to any directors or other officers of the company, including persons who have been directors or other officers in the past, whose presence at the meeting is, in the opinion of the special controller, required.

(c) The special controller shall publish a notice of the meetings of creditors and members in a daily newspaper circulating wholly or mainly in Malta, not later than fourteen days before the holding of the meeting.

(d) Where for any reason the creditors or the members or both do not appoint their representatives on the joint creditors’ and members’ committee, the special controller may proceed to continue in the exercise of his functions without such committee or solely with a creditors’ or members’ committee, as the case may be.

Fraudulent trading.

(a) If during such time as the company recovery procedure is in force, it appears that any business of the company has been carried on with intent to defraud creditors of the company or for any fraudulent purpose, the Court on the application of the special controller, may, if it thinks proper so to do, declare that any persons who were knowingly parties to the carrying on of the business in the manner aforesaid be personally responsible, without any limitation of liability for all or any of the debts or other liabilities of the company as the Court may direct.

(b) Where the business of a company is carried on with such intent or for such purposes as is mentioned in paragraph ( a), every person who was knowingly a party in the carrying on of the business in the manner aforesaid, shall be guilty of an offence and liable on conviction to a fine (multa) of not more than one hundred thousand liri or imprisonment for a term not exceeding five years, or to both such fine and imprisonment.

Wrongful trading.

(9) (a) The provisions of this subarticle shall apply where a company recovery procedure is in force and it appears that a person who is a director of the company knew, or ought to have known, that the company is unable to pay its debts or is imminently likely to become unable to pay its debts.

(b) The Court, on the application of the special controller of a company to which this subarticle applies, may declare the person being a director referred to in paragraph (a) liable to make a payment towards the company’s assets as the Court thinks fit.

(c) The Court shall not grant an application under this subarticle if it is satisfied that the person who is a director took every step he ought to have taken with a view to minimising the potential loss to the company’s creditors.

(d) For the purposes of paragraphs (b) and (c), the facts which a director of a company ought to know or ascertain, the conclusions which he ought to reach and the steps which he ought to take, are those which would be known or ascertained, or reached or taken, by a reasonably diligent person having both -

(i) the knowledge, skill and experience that may reasonably be expected of a person carrying out the same functions as are carried out by or entrusted to that director in relation to the company; and

(ii) the knowledge, skill and experience that the director has.

(e) For the purposes of this subarticle, director includes a person in accordance with whose directions or instructions the directors of the company are accustomed to act.

Removal or vacancy in the office of special controller.

(10) (a) If a vacancy occurs by reason of death, resignation or otherwise in the office of the special controller, the Court may appoint another individual to fill the vacancy on an application made for this purpose by the outgoing special controller, by a creditor, by a member, by a director, or by the Court of its own motion, as the case may be.

(b) The Court may, of its own motion or on the application of any member or creditor, review, confirm, modify or reverse any act or decision of the special controller and give him such directions or orders as it deems fit or remove a special controller if it is satisfied that there exist sufficient grounds to warrant his removal and appoint another special controller.

Reports to be submitted by the special controller.

(a) At the end of every period of four months commencing from the date of the making of the order until the termination of his appointment, the special controller shall submit to the Court a comprehensive report in writing on the proceedings of his administration and of his proposals regarding the prospects for the recovery of the company as a viable going concern in whole or in part.

(b) When the special controller submits to the Court the report referred to in paragraph (a), the Registrar of Courts shall forthwith forward a copy of it to the Registrar for registration.

Termination of company recovery order.

(12) (a) If, at any time during which a company recovery procedure is in force, it results to the special controller, after consulting the joint creditors’ and members’ committee, that it would serve no useful purpose for the company to continue with the said procedure, the special controller shall forthwith make an application to the Court for the termination of the company recovery procedure, containing his detailed and comprehensive reasons therefor.

Following the receipt of the application made by the special controller for the termination of the company recovery procedure, the Court shall order that the company be wound up by the Court. On the making of the winding up order, a copy thereof shall forthwith be forwarded by the Registrar of Courts to the Registrar for registration.

(b) If, at any time during which a company recovery procedure is in force, it results to the special controller, after consulting the joint creditors’ and members’ committee, that the affairs of the company have improved to the extent that it is in a position to pay its debts, he shall submit an application to the Court, containing his detailed and comprehensive reasons to that effect, and requesting the Court to issue an order for the termination of the company recovery procedure. In the event that the Court accedes the application, it shall make such provisions and conditions, as it may consider necessary in the circumstances of the case.

(c) If, at any time during which a company recovery procedure is in force, the directors of the company or the members at an extraordinary general meeting become satisfied that the affairs of the company have improved to the extent that it is in a position to pay its debts, they may submit an application to the Court, accompanied by appropriate supporting documentation and information, confirming that they are so satisfied, and requesting the Court to issue an order for the termination of the company recovery procedure, and the Court shall not proceed to make an order acceding to or declining the application without having first heard the special controller.

In the event that the Court accedes the application, it shall make such provisions and conditions, as it may consider necessary in the circumstances of the case.

(d) At the end of the period of his appointment, the special controller shall submit a written final report to the Court containing his detailed and comprehensive opinions and reasons as to whether or not the company has a reasonable prospect of continuing as a viable going concern in whole or in part and will be in a position to pay its debts regularly in the future.

(e) Where the final report submitted by the special controller expresses the opinion that the company has a reasonable prospect of continuing as a viable going concern, in whole or in part, or where an application is made to the Court by the special controller under paragraph ( b), it shall additionally have attached to it a precise and detailed recovery plan which shall contain all the proposals required to enable the company to continue as a viable going concern, with such explanations as may be required to give effect to such recovery, including proposals in relation to financial resources, the retention of employees and the future management of the company. The said recovery plan shall also explain the proposed manner of paying creditors the whole or a proportion of their claims, whether a voluntary compromise has been reached with all the creditors, or whether it is proposed that the Court sanction a compromise which has not been approved by all the creditors.

(f) Following receipt of the application referred to in paragraph (b) or of the final report and the recovery plan, the Court may request any explanations and clarifications as it may consider appropriate which shall be provided either verbally or in writing as the Court may direct.

(g) The Court may either reject the proposed recovery plan, or it may accept and approve it in whole or in part and may require amendments thereto. Where the Court approves the recovery plan submitted by the special controller, whether with or without amendments as the Court may direct, the recovery plan shall be effective and binding on all interested parties for all purposes of law.

Submission of documents to Registrar for registration.

(13) (a) Upon the submission of a company recovery application, the issue of a company recovery order, the appointment and termination of the appointment of a s p e c i a l c o n t r o l l e r a n d t h e a p p o i n t m e n t o f a replacement thereof, the submission of an application for the termination of a company recovery order and the order of the Court terminating the company recovery procedure for any reason, the Registrar of Courts shall forthwith submit a copy of any such application, Court order or other relevant document to the Registrar for registration.

(b) The Registrar of Courts shall forthwith forward a true copy of the final report, as accepted and approved by the Court, to the Registrar for registration.

(c) Notwithstanding the provisions of paragraphs (a ) and (b), a copy of the recovery plan, attached to the final report or required to be attached to an application for the termination of a company recovery order, shall not be delivered to the Registrar together with such report or application.

Winding up by the Court.

(14) Where, in terms of any of the provisions of this article, the Court issues an order for the termination of the company recovery procedure on the grounds that the company has no reasonable prospect of continuing as a viable going concern and will not be in a position to pay its debts regularly in the future, it shall order that the company be wound up by the Court. On the making of the winding up order, a copy thereof shall forthwith be forwarded by the Registrar of Courts to the Registrar for registration.

Power to make regulations.

(15) The Minister may make regulations for the better carrying out of any of the provisions of this article.

PART VII - CONVERSION OF COMMERCIAL

PARTNERSHIPS

Requirements for conversion of commercial partnerships.

330. (1) A commercial partnership (in this Chapter referred to as "the commercial partnership to be converted") may, by complying with the requirements prescribed in relation to the formation, share capital and validity of the kind of commercial partnership into which it is to be converted, be converted into a commercial partnership of that kind (in this Chapter referred to as "the commercial partnership resulting from the conversion").

(2) Where the commercial partnership to be converted is either an en nom collectif or an en commandite or limited partnership the conversion may only be made by a decision taken in accordance with the provisions of the deed of partnership or, in the absence of any such provision, with the consent of all the partners both general and limited:

Provided that where one or more limited partners holding in the aggregate not more than one-fourth of the total contribution of the limited partners of a partnership en commandite or limited partnership, the capital of which is not divided into shares, or one-tenth of the share capital of the partnership en commandite or limited partnership, the capital of which is divided into shares, have not given their consent, the commercial partnership may nevertheless proceed with the conversion, but it shall be required, for the purposes of the conversion, to liquidate and re-imburse to every limited partner who has not given his consent, if he so requests, his interest in the commercial partnership or to redeem the shares held by him on such terms as may be agreed or as the court, on a demand of either the commercial partnership or the limited partner, thinks fit to order.

(3) Where the commercial partnership to be converted is a company, whether public or private, the conversion may only be made if it has been approved by an extraordinary resolution taken at a general meeting of the company. The company shall be required, for the purpose of the conversion, to redeem the shares held by the dissenting members, if they so request, on such terms as may be agreed or as the court, on a demand of either the company or the dissenting members, thinks fit to order.

(4) The commercial partnership to be converted shall be dissolved without having to be wound up in accordance with the provisions of Title II of Part V of this Act in relation to a company and with the relevant provisions of Part III of this Act in relation to the other kinds of commercial partnerships; and dissolution shall be deemed to take place when the conversion becomes effective in accordance with the provisions of article 332.

Registration of the conversion of commercial partnerships.

331. (1) The decision or resolution approving the conversion of a commercial partnership together with the instruments giving effect to the decision or resolution, or an authentic copy thereof, shall be delivered for registration to the Registrar who, being satisfied that the requirements of article 330 have been complied with, shall register it.

(2) The aforesaid delivery shall be made by any of the partners or directors of the new commercial partnership as the case may be.

Where commercial partnership ceases to exist on conversion.

332. (1) Upon the conversion of a commercial partnership which has become effective either through the lapse of the period referred to in article 334 or, where objection is made under that article, by a decision of the court, the Registrar shall strike the name of the commercial partnership that has been converted off the register and shall issue a new certificate of registration for the commercial partnership resulting from the conversion, denoting the fact of the formation of that commercial partnership as a result of the conversion. Where a conversion which has been registered under this article becomes ineffective by a decision of the court under article 334, the Registrar shall amend the registration accordingly.

(2) The Registrar shall, in the cases specified in subarticle (1), either proceed to publish the conversion after it has become effective or to publish a notice that the conversion has become ineffective by decision of the court under article 334, in accordance with the provisions of article 401(1)(e).

Partners with unlimited liability to remain bound unless creditors consent to conversion.

333. The conversion of a commercial partnership shall not discharge partners with unlimited liability from liability for the obligations of the commercial partnership contracted prior to the publication of the statement referred to in article 401(1)(e) unless it is proved that the creditors of the commercial partnership have given their consent to the conversion.

Rights of creditors to oppose conversion

334. (1) The conversion of a commercial partnership shall not take effect until three months from the date of the publication of the statement referred to in article 401(1)(e) relating to the decision or resolution approving the conversion.

(2) During the aforesaid period of three months any creditor of the commercial partnership whose debt existed prior to the publication of the statement referred to in subarticle (1) may by writ of summons object to the conversion and, if he shows good cause why it should not take effect, the court shall either uphold the objection or allow the conversion on sufficient security being given.

(3) Without prejudice to the provisions of subarticle (2) any partner or shareholder, as the case may be, of the commercial partnership being converted, or the Registrar, shall have the right to challenge the validity of the conversion only within the aforesaid period of three months by means of a writ of summons.

(4) Where as a result of the proceedings for which provision is made in subarticle (3), the court is satisfied that the conversion is not valid, the court shall disallow the said conversion:

Provided that the court shall have the right to suspend its decision disallowing the conversion and to grant time, which shall not be in excess of six months, to the commercial partnership in default, to remedy the default rendering the conversion invalid; and if the default is remedied within the time allowed the conversion shall take effect Commercial partnership formed succeeds commercial partnership ceasing to exist.

335. (1) The commercial partnership resulting from the conversion shall succeed to all the assets, rights, liabilities and obligations without the requirement of any formalities other than those arising under this Part, and shall retain the same legal personality of the commercial partnership that has been converted; and the said succession shall be effective as regards third parties.

(2) Where the commercial partnership resulting from the conversion is a partnership en nom collectif or a partnership en commandite or limited partnership the unlimited liability of all the partners in the partnership en nom collectif and that of the general partners in the partnership en commandite or limited partnership, as the case may be, shall also extend to the obligations of the commercial partnership that has been converted.

(3) The succession to all assets, rights, liabilities and obligations of the commercial partnership that has been converted, by the commercial partnership resulting from the conversion referred to in subarticle (1), shall not give rise to any liability to the payment of any duty or tax under the Duty on Documents and Transfers Act or the Income Tax Act:

Provided that this subarticle shall not apply to such duty and any other fees that may be payable upon the registration of the commercial partnership resulting from the conversion.

PART VIII - AMALGAMATION OF COMMERCIAL

PARTNERSHIPS

TITLE I - AMALGAMATION OF PARTNERSHIPS EN NOM COLLECTIF AND EN COMMANDITE

Application of articles 337 to 342.

336. (1) The provisions of articles 337 to 342 shall apply to the amalgamation of partnerships en nom collectif and partnerships en commandite or limited partnerships.

(2) Amalgamation between two or more commercial partnerships (referred to in this Part as "the amalgamating commercial partnerships") may be effected where all the amalgamating commercial partnerships are en nom collectif or where they are all en commandite or or limited partnerships or where at least one of the commercial partnerships being amalgamated is en nom collectif and the other commercial partnership or partnerships are en commandite or limited partnerships, or vice versa.

Requirements for amalgamation of commercial partnerships.

337. (1) The provisions of article 330(2) shall apply to the amalgamation of any two or more commercial partnerships whether such an amalgamation is effected by the formation of a new commercial partnership (referred to in this Part as "the new commercial partnership") instead of the existing commercial partnerships (referred to in this Part as "the commercial partnerships to be substituted") or by the merger of one or more commercial partnerships (referred to in this Part as "the commercial partnerships to be acquired") with another existing commercial partnership (referred to in this Part as "the acquiring commercial partnership") as though references to conversion therein were references to amalgamation.

(2) The commercial partnerships to be acquired or, as the case may be, the commercial partnerships to be substituted, shall be dissolved without having to be wound up in accordance with the relevant provisions of Part III of this Act, and dissolution shall be deemed to take place when the amalgamation becomes effective in accordance with the provisions of article 339.

Registration of the amalgamation of commercial partnerships.

338. (1) The decisions taken by each of the amalgamating commercial partnerships approving the amalgamation together with the instruments giving effect thereto, or an authentic copy thereof, shall be delivered for registration to the Registrar, who, being satisfied that the requirements of article 337 have been complied with, shall register them.

(2) The aforesaid delivery shall be made by any of the partners of the new commercial partnership or of the acquiring commercial partnership as the case may be.

Where a commercial partnership ceases or partnerships cease to exist on amalgamation.

339. (1) Upon the amalgamation of two or more commercial partnerships which has become effective either through the lapse of the period referred to in article 341 or where objection is made under that article, by a decision of the court, the Registrar shall strike the name of the commercial partnership or of each of the commercial partnerships ceasing to exist off the register and shall, according to the case, either issue a new certificate of registration for the new commercial partnership denoting the fact of the formation of the commercial partnership as a result of the amalgamation, or issue a certificate of registration altered to meet the circumstances of the case and denoting the fact of the amalgamation for the acquiring commercial partnership; and where an amalgamation which has been registered under this article becomes ineffective by a decision of the court under article 341, the Registrar shall amend the registration accordingly.

(2) The Registrar shall, in the cases specified in subarticle (1), in respect of every one of the amalgamating commercial partnerships, either proceed to publish the amalgamation after it has become effective or to publish a notice that the amalgamation has become ineffective by decision of the court under article 341, in accordance with the provisions of article 401(1)(e).

Partners with unlimited liability to remain bound unless creditors consent to amalgamation.

340. The amalgamation of two or more commercial partnerships shall not discharge partners with unlimited liability from liability for the obligations of the amalgamating commercial partnerships contracted prior to the publication of the statement referred to in article 401(1)(e), unless it is proven that the creditors of the amalgamating commercial partnerships have given their consent to the amalgamation.

Right of creditors to oppose amalgamation.

341. (1) The amalgamation of two or more commercial partnerships shall not take effect until three months from the date of the publication of the statement referred to in article 401(1)(e) relating to the decisions approving the amalgamation.

(2) During the aforesaid period of three months any creditor of any of the amalgamating commercial partnerships whose debt existed prior to the publication of the statement referred to in subarticle (1) may by writ of summons object to the amalgamation, and if he shows good cause why it should not take effect, the court shall either uphold the objection or allow the amalgamation to proceed upon sufficient security being given.

(3) Without prejudice to the provisions of subarticle (2) any partner of any of the amalgamating commercial partnerships or the Registrar shall have the right to challenge the validity of the amalgamation only within the aforesaid period of three months by means of a writ of summons.

(4) Where as a result of the proceedings for which provision is made in subarticle (3), the court is satisfied that the amalgamation is not valid, the court shall disallow the said amalgamation:

Provided that the court shall have the right to suspend its decision disallowing the amalgamation and to grant time which shall not be in excess of six months, to the commercial partnership or partnerships in default to remedy the default rendering the amalgamation invalid; and if the default is remedied within the time allowed, the amalgamation shall take effect.

Acquiring or new commercial partnership succeeds commercial partnership ceasing to exist.

342. (1) An acquiring commercial partnership or, where a new commercial partnership is formed, the new commercial partnership, shall succeed to all the assets, rights, liabilities and obligations of the commercial partnership or partnerships ceasing to exist, without the requirement of any formalities other than those required under this Title, and the said succession shall be effective as regards third parties.

(2) Where the acquiring commercial partnership or the new commercial partnership, as the case may be, is a partnership en nom collectif, the unlimited liability of all the partners thereof shall also extend to the obligations of the commercial partnership or partnerships ceasing to exist.

(3) Where the acquiring commercial partnership or the new commercial partnership as the case may be is a partnership en commandite or limited partnership the unlimited liability of all the general partners thereof shall also extend to the obligations of the commercial partnership or partnerships ceasing to exist.

TITLE II - AMALGAMATION OF COMPANIES

Amalgamation in the form of a "merger by formation of a new company" or "merger by acquisition".

343. (1) Amalgamation of two or more companies may be effected by -

(a) merger by acquisition; or

(b) merger by formation of a new company.

(2) Merger by acquisition is the operation whereby a company (referred to in this Part as "the acquiring company") acquires all the assets and liabilities of one or more other companies (referred to in this Part as "the companies being acquired") in exchange for the issue to the shareholders of the companies being acquired of shares in the acquiring company and a cash payment, if any, not exceeding ten per cent of the nominal value of the shares so issued.

(3) Merger by formation of a new company is the operation whereby two or more companies (referred to in this Part as "the merging companies") deliver to a company which they set up (referred to in this Part as "the new company") all their assets and liabilities in exchange for the issue to the shareholders of the merging companies of shares in the new company and a cash payment, if any, not exceeding ten per cent of the nominal value of the shares so issued.

(4) The companies being acquired or, as the case may be, the merging companies, shall be dissolved without having to be wound up in accordance with the provisions of Title II of Part V of this Act an d di sso luti on sh all be deem ed t o t ak e pl ace when the amalgamation becomes effective in accordance with the provisions of article 353.

(5) The fact that one or more of the companies being acquired, or one or more of the merging companies has been dissolved voluntarily by an extraordinary resolution, and a declaration of solvency has been filed shall not prevent such companies taking part in the amalgamation provided that none of their assets have been distributed to shareholders after dissolution. Any provision of this Part requiring the directors of a company to act shall be interpreted in relation to a company which has been dissolved as requiring the liquidator to act.

(6) The fact that one or more of the companies being acquired or one or more of the merging companies has been dissolved by the court in terms of article 214, and in the case of a voluntary winding up a declaration of solvency has not been filed, shall invalidate the amalgamation with respect to all the amalgamating companies.

(7) A company may only be amalgamated with one or more companies, and may not be amalgamated with any other kind of commercial partnership.

Chapter I - Merger by acquisition

Draft terms of merger.

344. (1) The directors of the acquiring company and of each of the companies being acquired (hereinafter referred to in this Part as "the amalgamating companies") shall draw up draft terms of merger in writing.

(2) The draft terms of merger shall specify the following:

(a) the status, name and registered office of each of the amalgamating companies;

(b) the share exchange ratio and the amount of any cash payment;

(d) the date from which the holding of such shares entitles the holders to participate in profits and any special conditions affecting that entitlement;

(e) the date from which the transactions of each of the companies being acquired shall be treated for accounting purposes as being those of the acquiring company;

(f) the rights conferred by the acquiring company on the holders of shares to which special rights are attached and on the holders of debentures or other securities, or the measures proposed concerning them; and

(g) any special advantage granted to the experts referred to in article 348 acting on behalf of each of the amalgamating companies authorised to examine the draft terms of merger and to draw up a written report to the shareholders, and to the directors of each of the amalgamating companies.

(3) The draft terms of merger, duly completed, shall be signed by at least one director and the company secretary of each of the amalgamating companies, and forwarded to the Registrar for registration, who being satisfied that the requirements of subarticle (2) have been complied with, shall register them.

Approval by extraordinary resolution of amalgamation.

345. (1) A merger by acquisition shall only be made if it has been approved by an extraordinary resolution of each of the amalgamating companies. Each of such companies shall be required to redeem the shares held by the dissenting members, if they so request, on such terms as may be agreed or as the court, on a demand by either the company or the dissenting members, thinks fit to order.

(2) For the purposes of subarticle (1), approval shall not be valid unless the extraordinary resolution is adopted at least one month after the publication of the draft terms of merger and not later than three months therefrom.

(3) The provisions of this Act governing alterations and additions to the memorandum and articles shall, as appropriate, apply to any alterations and additions to the memorandum and articles necessitated by any amalgamation referred to in this Part.

(4) Where there is more than one class of shares in any of the amalgamating companies the extraordinary resolutions of those companies concerning the amalgamation shall be subject to a separate vote by at least each class of shareholders whose rights are affected thereby.

(5) The extraordinary resolution taken by each of the amalgamating companies shall cover both the approval of the draft terms of merger and any alterations and additions to the memorandum and articles necessitated by the amalgamation.

(6) The approval of the general meeting of the acquiring company shall not be required if the following conditions are fulfilled -

(a) the draft terms of the merger for the acquiring company have been duly published in accordance with paragraph ( e) of subarticle (1) of article 401 by the Registrar at least one month before, and not more than three months before the date fixed for the general meeting of the company or the latest of the separate general meetings of the companies being acquired which are to decide on the draft terms of merger; and

(b) at least one month before the date specified in paragraph (a), all shareholders of the acquiring company shall be entitled to inspect the documents referred to in article 349, at the registered office of the acquiring company:

Provided that, in any case, one or more shareholders of the acquiring company holding at least five per cent of the issued share capital of the company entitled to vote at general meetings of the company shall have the right to require that a general meeting of the acquiring company be called to decide whether to approve the amalgamation.

Drawing up of detailed written report on draft terms of merger by directors.

346. The directors of each of the amalgamating companies shall draw up a detailed written report explaining the draft terms of the merger and setting out the legal and economic grounds for them, in particular the share exchange ratio, and shall describe any special valuation difficulties which have arisen.

Non applicability of article 73(4), (5) and (6) in certain cases of amalgamation.

347. In the event of an increase in the issued share capital made to pay the shareholders of the companies being acquired in order to give effect to an amalgamation, article 73(4), (5) and (6) shall not apply.

Written report to shareholders to be drawn up by one or more experts.

348. (1) One or more experts acting on behalf of each of the amalgamating companies, but independent of them and approved by the Registrar, shall examine the draft terms of the merger and draw up a written report to the shareholders.

(2) The report shall specify whether the share exchange ratio is fair and reasonable and to this effect it shall -

(a) indicate the method or methods used to arrive at the share exchange ratio proposed; and

(b) state whether such method or methods are adequate in the case in question, indicating the values arrived at using each such method and giving an opinion on the relative importance attributed to such method or methods in arriving at the value decided on.

(3) The report shall describe any special valuation difficulties which have arisen.

(4) Each expert shall be entitled to obtain from the amalgamating companies all relevant information and documents and to carry out all necessary investigations.

(5) One or more independent experts may be appointed to draw up a joint report for all the amalgamating companies by the Registrar at the joint request of the companies involved.

Documents which shareholders of amalgamating companies are entitled to inspect.

349. (1) All shareholders of every amalgamating company are entitled to inspect the following documents at the registered office of each company at least one month before the date fixed for the general meeting which is to decide on the draft terms of merger -

(a) the draft terms of merger;

(b) the annual accounts and the directors’ reports of the amalgamating companies for the preceding three accounting periods;

(c) an accounting statement drawn up as at a date which shall not be earlier than the first day of the third month preceding the date of the draft terms of the merger, if the latest annual accounts relate to an accounting period which ended more than six months before that date;

(d) the reports of the directors of the amalgamating companies relating to the amalgamation; and

(e) the reports of the experts relating to the amalgamation.

(2) The accounting statement provided for in paragraph (c ) of subarticle (1) shall be drawn up using the same methods and the same layout as used for the latest balance sheet:

Provided that -

(a) it shall not be necessary to take a fresh physical inventory; and

(b) the valuations shown in the latest balance sheet shall be altered only to reflect entries in the accounting records.

Notwithstanding the provisions of paragraphs (a) and (b), interim depreciation and provisions as well as material changes in actual values not shown in the accounting records shall be taken into account.

(3) Every shareholder shall be entitled to obtain, on request and free of charge, full or, if so desired, partial copies of the documents mentioned in subarticle (1).

Registration of the amalgamation of companies.

350. The extraordinary resolutions taken by each of the amalgamating companies approving the amalgamation together with the instruments giving effect thereto, or an authentic copy thereof, shall be delivered for registration to the Registrar, who, being satisfied that the requirements of this Part have been complied with, shall register them.

Rights of creditors to oppose amalgamation.

351. (1) The amalgamation of two or more companies shall not take effect until three months from the date of the last publication of the statement referred to in article 401(1)(e) relating to the extraordinary resolutions approving the amalgamation, referred to in article 350.

(2) During the aforesaid period of three months any creditor of any of the amalgamating companies whose debt existed prior to the publication of the draft terms of merger in terms of article 345(6)(a) may by writ of summons object to the amalgamation and, if he shows good cause why it should not take effect, the court shall either uphold the objection or allow the amalgamation on sufficient security being given.

(3) The provisions of subarticles (1) and (2) shall apply to the debenture holders of the amalgamating companies so long as the merger has not already been approved by the debenture holders individually, or by a special meeting of the debenture holders called specifically for the purpose, at which meeting all the debenture holders shall signify their consent.

Rights of creditors to oppose amalgamation.

Protection of holders of securities in an amalgamation.

352. The holders of securities, other than shares, in the companies being acquired, to which special rights are attached shall be given rights against the acquiring company in accordance with the draft terms of merger at least equivalent to those they possessed in the companies being acquired, unless -

(a) the holders of those securities individually agree to the alteration of their rights; or

(b) the alteration has been approved by a meeting of the holders of those securities called specifically for the purpose, at which meeting all the holders of such securities shall signify their consent; or

Duties of Registrar in respect of amalgamations.

353. (1) Upon the amalgamation of two or more companies which has become effective either through the lapse of the period referred to in article 351 or, where objection is made under that article, by decision of the court, the Registrar shall strike the name of the companies being acquired off the register and issue a certificate of registration, altered to meet the circumstances of the case and denoting the fact of the merger for the acquiring company; and where an amalgamation which has been registered under this Part does not become effective pursuant to a decision of the court under article 351, the Registrar shall amend the registration accordingly.

(2) The Registrar shall in respect of every one of the amalgamating companies, either proceed to publish a notice of the amalgamation after it has become effective or to publish a notice that the amalgamation has not become effective pursuant to a decision of the court under article 351, in both cases as specified in subarticle (1).

Consequences of amalgamation.

354. (1) An amalgamation shall have the following consequences:

(a) the acquiring company shall succeed to all the assets, rights, liabilities and obligations of the companies being acquired, both as between the companies being acquired and the acquiring company and as regards third parties, without the requirement of any formalities other than those arising under this Title;

(b) the shareholders of the companies being acquired shall become shareholders of the acquiring company; and

(2) No shares in the acquiring company shall be exchanged for shares in the companies being acquired held either - (a) by the acquiring company; or

(b) by the companies being acquired.

Liability of director or expert for misconduct.

6. Any director of any of the amalgamating companies answerable for wilful or negligent misconduct in the preparation and the implementation of the amalgamation, or any expert responsible for drawing up, on behalf of any of the amalgamating companies, of the report on the draft terms of the merger answerable for wilful or negligent misconduct in the performance of his duties, shall be liable for all damages occasioned to any shareholder of any of the am algamating companies as a consequence of his misconduct.

Appeal from decision of the Registrar.

7. Any interested party may contest the registration made by the Registrar, by virtue either of article 344 or article 350 before the court in accordance with the following conditions:

(a) the contestation shall be made by application against the Registrar within one month from the publication following the registration referred to in article 344 on the grounds that the draft terms of merger were not drawn up in accordance with the provisions of article 344; or within three months from the publication following the registration referred to in article 350 on the grounds that the resolution of the extraordinary general meeting was void or voidable; notice of the application shall be published by the Registrar in the Gazette or on a website maintained by the Registrar;

(b) where it is possible to remedy a defect liable to render an amalgamation void or voidable, the court shall grant the companies involved a period within which to rectify the situation;

(c) a notice that the judgment of the court has been delivered shall be published by the Registrar in the Gazette or on a website maintained by the Registrar, which notice shall specify whether the application has been allowed or dismissed;

(d) a judgment declaring an amalgamation void or voidable shall not of itself affect the validity of obligations owed by or in relation to the acquiring company which arose before the judgment was delivered and after the date of registration of the draft terms of merger referred to in article 344 or of the resolutions and the other instruments referred to in article 350 according to the case;

(e) companies which have been parties to an amalgamation shall be jointly and severally liable in respect of the obligations of the acquiring company referred to in paragraph (d);

(f) the amalgamation shall not take effect until the lapse of the three months referred to in paragraph (a) or, if an application is filed, until the date of the final judgment, if the application is refused; and

(g) upon the delivery of the judgment the Registrar shall, where the application is allowed, amend the registration accordingly as if the amalgamation procedure had never commenced.

Chapter II - Merger by formation of a new company

Application of articles 344 to 356 to merger by formation of a new company.

357. (1) The provisions of articles 344 to 356 other than article 345(6) shall apply to merger by formation of a new company as though references to the acquiring company were references to the new company and as though references to the amalgamating companies and to the companies being acquired were references to the merging companies:

Provided that, in the case of a merger by formation of a new company, the draft terms of merger shall only be drawn up by each of the merging companies:

Provided further that in article 344(2)( a), the reference to amalgamating companies shall also include the new company.

(2) The draft terms of merger of each of the merging companies and the memorandum and articles of association of the new company shall be approved by an extraordinary resolution of each of the merging companies.

(3) The new company shall be formed in accordance with the provisions of this Act except that the rules governing the verification of any consideration other than cash laid down in article 73(4), (5) and (6) shall not apply.

(4) The Registrar shall, after striking the name of the company being acquired off the register in accordance with the provisions of article 353(1), proceed to issue a certificate of registration for the new company denoting the fact of the formation of that company as a result of the merger.

Chapter III - Acquisition of one company by another which holds ninety per cent or more of its shares

Acquisition of one company by another which holds all its shares.

358. (1) The operation whereby the assets and liabilities of one or more companies are delivered to another company which is the holder of all their shares and whereby the former companies are dissolved without having to be wound up shall be regulated by articles 344 to 356 to the exclusion of the provisions contained in article 344(2)(b), (c) and (d), article 346, article 348, particle 349(1)(d) and (e), article 354(1)(b) and article 355.

(2) For the purpose of this article and of article 359, any reference to "draft terms of acquisition" shall be taken to be a reference to "draft terms of merger" as specified in article 344.

(3) The approval of the general meeting of each of the companies involved in the operation shall not be required and article 345 shall not apply to the operation specified in subarticle (1), if the following conditions are fulfilled:

(a) the draft terms of acquisition as regards each company involved in the operation shall be delivered to the Registrar for registration and shall be published by him at least three months before the operation takes effect; and

(b) within the period mentioned in paragraph (a), all shareholders of the acquiring company shall be entitled to inspect at the registered office of the company the documents specified in article 349(1)(a), (b) and (c ) which those same shareholders would be entitled to inspect in case of an amalgamation made in any of the manners specified in article 343; and the provisions of article 349(2) and (3) shall apply:

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