Malta has in December of 2022 introduced a new insolvency framework by publishing two new sets of legislation namely ‘The Insolvency Practitioners Act’ and ‘The Pre-Insolvency Act’ while amending the Commercial Code. The aim of this is to provide a more reliable framework, both for the debtors facing insolvency, their creditors, and the professionals involved in the process.
The Pre-Insolvency Act has been enacted to partially transpose EU Directive 2019/1023 on preventive restructuring frameworks, on discharge of debt and disqualifications, and on measures to increase the efficiency of procedures concerning restructuring, insolvency and discharge of debt. This legislation provides for an updated legal framework in which emphasis is placed on early warning signs of insolvency and restructuring procedures directed at avoiding insolvency. This approach gives a potential second chance to companies, individuals and other legal entities facing financial difficulties.
The Insolvency Practitioners Act has been enacted to regulate the activities of insolvency practitioners and to partially transpose the same Directive. The legislation introduces the regulation of insolvency practitioners, defined as “a person who is authorised, by the competent authority, to carry out the functions of an insolvency practitioner in accordance with article 4(2) of the Act. Such practitioners need to be authorised to act as an insolvency practitioner. The Act also introduces the Insolvency and Receivership Service within the Malta Business Registry to act as the Competent Authority, which will regulate the conduct of insolvency practitioners.
The main objectives of the reform of the insolvency framework are to introduce an early warning signals, to provide easily accessible restructuring procedures, to ensure an efficient discharge of debt framework and most importantly to strike the right balance between the debtor and the creditor’s rights.