Issue link: https://maltatoday.uberflip.com/i/1532058
8 maltatoday | SUNDAY • 2 FEBRUARY 2025 LAW Law Report THE Court has the discretion to liqui- date the company which is unable to pay its debts. This was held in a judgment delivered by Mr Justice Ian Spiteri Bailey presid- ing over the Civil Court (Commercial Section) on 29 January 2025. The case is ICE Net SA vs EFT Global Limited. In its sworn application the Plaintiff Company asked the court to declare that the Defendant Company is una- ble to pay its debts in terms of Articles 214(5)(a) and (2)(a) of the Companies Act and as a consequence to order the liquidation of that company. The Plain- tiff Company also asked the Court to appoint an administrator for the De- fendant Company. The Plaintiff Company explained that the First Hall of Civil Court, in its judge- ment of 25 February 2021 ordered that the Defendant company pay it €107,840. A garnishee order was issued and €49,065 was deposited in court by the banks. However, it failed to pay the balance and therefore, Article 214(2)(a)(ii) of the Companies Act allowed the debtor company to be liquidated since it was not in a position to pay its debts. The Defendant company although no- tified of the proceedings did not file a statement of defence. The shareholder of the Plaintiff Com- pany filed an affidavit and explained that it won a court case against the Defend- ant company and it had filed a garnishee order way back in September 2017. It was explained that the Plaintiff Com- pany had tried to enforce the judgment, however payment was never made. As a consequence, it felt that it had no op- tion but to proceed with this action. The Plaintiff Company expressed its doubt that the company was active. In the Malta Business Registry, the last au- dited accounts were for 2018. Mr Justice Spiteri Bailey noted that Article 218(1)(b) of the Companies Act provides that a creditor may ask for the liquidation of a company by means of an application to the court. In this case the Plaintiff Company is a creditor of the Defendant Company and in terms of Article 214(2)(a)(ii) a company may be liquidated if it is unable to pay its debts. This is based on Article 214(5) (a), which states: "(5) For the purposes of sub-article (2) (a)(ii), a company shall be deemed to be unable to pay its debts - Cap. 12.(a) if a debt due by the company has remained unsatisfied in whole or in part after twenty-four weeks from the enforce- ment of an executive title against the company by any of the executive acts specified in article 273 of the Code of Organization and Civil Procedure;" The law allows a liquidation of a com- pany upon the application of a creditor if the debtor company is served with an executive title and fails to pay within 24 hours. This concept is taken from Eng- lish law known as cash flow insolvency. According to the book, Boyle & Birds Company Law, "a company which has a policy of late payment of bills could find itself the subject of a petition for a winding-up order or administration or- der… The Court in examining whether a company is suffering cash flow insol- vency, will consider whether the com- pany is actually paying its debtors." The Court considered the facts of the case: The Defendant Company did not pay the amount it owed and did not file audited accounts. On these grounds the court held that it was proved that the requisites of Article 214(2)(a)(ii) and Article 214(5)(a) of the Companies Act were met and therefore, ordered the liquidation of EFT Global Limited. The Court then moved to uphold the claims and order that the Defendant Company be liquidated under the guid- ance of the Official Receiver. Once a company does not pay its debts the court may liquidate it LAW REPORT MALCOLM MIFSUD Mifsud & Mifsud Advocates The law allows a liquidation of a company upon the application of a creditor if the debtor company is served with an executive title and fails to pay within 24 hours. This concept is taken from English law known as cash flow insolvency.