A study into the ‘early warning system’ in insolvency prevention as contemplated in Directive (EU) 2019/1023 in relation to Maltese company law

Abstract

This dissertation considers and analyses the importance of implementing an ‘early warning framework’ into Maltese company law by undertaking a critical assessment of the current Maltese laws on company reconstructions, and by considering the provisions of Directive (EU) 2019/1023. The study aims to delve into further detail on the provisions of Article 3 of the Directive by expanding on the types of alert mechanisms which could exist to warn when a debtor who may have defaulted on its obligations, the type of information sourced from public or private entities on the financial status of this debtor, and the initiatives under domestic law that could exist to provide relevant information. Although company recovery procedures are not new to the Maltese legal system, these are arguably ineffective, potentially due to their incorrect application. The current provisions of Maltese company law can hardly be classified as early warning tools, as jurisprudence has shown that debtors generally resort to legal remedies at a stage when the business is no longer viable. A successful transposition and implementation of Directive (EU) 2019/1023 can change this state of affairs. Incentives to debtors to act earlier should improve the likelihood of preventing liquidation. This dissertation includes a comparative study into early warning system in other jurisdictions and recommendations of the author on the types of early warning tools which could be implemented into Maltese company law.