Fraudulent preference under the companies act

Abstract

This thesis will focus on the legal implications of transactions carried out by a company during the six months preceding its dissolution. This study will examine these transactions in light of Article 303 of the Companies Act, which constitutes the legislative basis of fraudulent preference under Maltese Law, and Maltese jurisprudence thereon. The thesis will also involve an examination of the fraudulent preference provision under the Companies Act in light of the analogous sections and rules under the UK Insolvency Act 1986. Primarily, the aim of this thesis will be to identify the salient elements comprised in Article 303, to examine the preconditions giving rise to a fraudulent preference and to delve into the implications and consequences thereof. This study will move on to address procedural elements related to the setting-up of Article 303 which do not result directly from the provisions of the Article. In this context, the thesis will delve into how the principle objective of Article 303 may be achieved, whilst addressing the position at Maltese jurisprudence through critical analysis. Liabilities attached to fraudulent preferences will be reviewed following an examination of Article 304. Ultimately, the purpose behind the extensive study into fraudulent preference is to create an awareness of its existence in the Companies Act so that it may be adopted more widely by the parties who may avail themselves of it and developed more profoundly by the Maltese Courts. The comparative analysis to the UK Insolvency Act 1986 feeds into the potential idea of enhancing the legislative mechanism behind Article 303 which may provide our creditors with finer restorative measures in the manner of restoring their credit following default on the part of the debtor company.