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