The application of the warrant of seizure of a commercial going concern in the context of corporate insolvency

Abstract

Act XIV of 2006, as amended by Act VII of 2007, introduces various amendments to the Code of Organisation and Civil Procedure one of which being the warrant of seizure of a commercial going concern, hereinafter referred to as the warrant of seizure. In virtue of this innovation, the Maltese legislator is addressing the present legal vacuum in the area, particularly in an insolvent scenario, thus enabling the seizure and the sale of the business enterprise as a going concern, and indeed as a real universitas of movable, rather than the separate sale of various individual movable effects making up the business concern. This step should prove beneficial both for the creditor and the debtor. In this thesis, I will be analysing the afore-mentioned amendments in the context of corporate insolvency. I will also be looking into the legislator's intention behind this amending act, which was primarily introduced in order to protect the "assets, including licences and goodwill so that the company may be sold as a whole" and ergo maintain it as a commercial going concern throughout the proceedings. Since current legislation provides only minimal protection to the creditors, a comparative exercise between the legislation as it stands today and the legislation once the amending act comes into force will be undertaken. These differences will be highlighted vis-a-vis corporate insolvency. A brief exposition of corporate insolvency, as provided for by the Companies Act, will then follow. Corporate insolvency refers to particular proceedings relating to companies which are unable to pay their debts. Insolvency is a crucial state of affairs because it determines the particular mode of winding up. Particular attention will be paid to the way in which the role of the administrator under the warrant of seizure of a going concern will affect the role of the administrator under the Companies Act. This is due to the fact that the amending act on the warrant of seizure of a going concern envisages the appointment of an administrator, whose role is to oversee the management of the commercial going concern pending its sale. Finally, a comparative analysis with foreign legal systems will be carried out in order to evaluate the extent of the amendments to the Maltese legal system in the light of such foreign systems and, if need be, suggest improvements in the amending act.