Investigations into the affairs of companies under Maltese law

Abstract

Fraud and improper conduct on the part of officers of a company, as well as the use of corporate vehicles for the commission of fraudulent acts are actions which would give rise to investigation and sanction on the part of the competent authorities in Malta. The commission of one particular incident of fraud could give rise to investigations and sanctions on the part of multiple regulatory authorities vested with the power to monitor the activities of corporate vehicles under Maltese Law. This dissertation looks into the underlying rationale behind having strong regulation in certain markets, pai1icularly within the field of financial services. It considers whether it is reasonable, even from an economic perspective that markets should be so regulated. It considers whether the powers granted to regulatory authorities are granted in order to ensure good order and a level playing field between operators, or whether the intention is simply that of protecting investors and shareholders of a pat1icular company, as well as creditors. This dissertation further examines the nature and extent of the powers of the Registrar of Companies under Part XII of the Companies Act 1995, and it outlines the differences in the extent of the powers of the Registrar in relation to companies which are registered in terms of Maltese Law, and oversea companies which are registered in terms of the laws of a third country, but operate through, a branch in Malta. The extent to which such investigative powers of the Registrar of Companies can also cover third parties who have some form of relationship with the said companies, has also been examined. The dissertation also examines the powers of investigation vested in the Malta Financial Services Authority (the "MFSA") in terms of the Malta Financial Services Authority Act and other financial services legislation. The manner in which the investigative powers of the MFSA and those of the Registrar of Companies interact has also been considered. In this regard, the disse1iation examines the manner in which Ireland has dealt with such issues. With a view to distinguishing between the traditional roles of a registrar of companies and a regulatory authority, the dissertation considers the advantages or otherwise of adopting a system which is similar to the one adopted by the Irish authorities, where the role of the Registrar is kept very much distinct from that of the Director of Corporate Enforcement. Consideration is given to whether the Maltese authorities should follow on these lines and adopt a regime in terms of which the Registrar of Companies will retain responsibility for strict company registration duties (such as actual registration of companies and issuance of company Certificates of Registration; maintaining a public company registry; and ensuring compliance with company registration requirements), while a separate "Regulator'' will be appointed to take on the investigative and enforcement powers currently also vested in the Maltese Registrar of Companies. Finally, consideration has also been given to the manner in which regulatory authorities in Malta co-operate with their foreign counterparts in the investigation of companies and their directors and officers.