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The law precludes reactivation of a registered partnership

On June 17, 2014 the First Hall of the Civil Court held that the court is precluded from reactivating a registered partnership, unlike in the case of a limited liability company.

malcolm_mifsud
Malcolm Mifsud
27 June 2014, 11:50am
Francis Mifsud and Anthony Mifsud had filed an application before the court in which they explained that on 7 July, 1973 they registered a partnership, Chez Francis Hotel.

This partnership, in nom collectif, changed its name in 2002 to AF Enterprises & Co.  Over the years this partnership bought a number of properties and in 2010 both partners agreed to liquidate the partnership and also agreed how to divide the assets between them.  They were given the advice that this should be done by means of a public deed and that the partnership should assign the property to them individually. For this task they engaged a notary.  Apart from this both partners had other property in common which they had inherited.

They appeared on the contract on 25 October, 2010 when they were assigned property from AF Enterprises & Co.  After this contract they liquidated the partnership, which was later struck off.

In 2013 one of the former partners wanted to sell one of the properties he was assigned by the partnership.  From the searches it resulted that there was a contract missing since what actually happened on 25 October, 2010 was a division of assets, some of which belonged to the partnership, and the assignment was not included in the same contract.  As a consequence another contract was required for the partnership to assign the property to the former partners.  The problem lay with the fact that the partnership was struck off and was therefore inexistent.

According to the Companies Act, the Registrar of Companies may reactivate a company but not a partnership. The Mifsuds argued that this prejudiced their position as they were not allowed to have their property assigned to them. For them this was crucial. Therefore, they asked the court to reactivate the partnership for this purpose only.

The Registrar of Companies replied by confirming that the partnership was struck off, but there was no legal provision on how to revive a partnership. The Registrar said that if this particular partnership was revived, it could lead to a dangerous precedent in the sense that there may be those who liquidate their partnership before closing off all their pending issues.

Mr Justice Joseph Zammit McKeon considered the Companies Act, and pointed out that definition of “company” means a company formed and registered under Part V of the Act or the Ordinance, while “”commercial partnership” means a company or other commercial partnership formed and registered under the Act or formed and registered under the Ordinance where applicable;

 

AF Enterprises was not a company but a partnership en nom collectif. The legislator thought of three types of commercial partnerships, the first is found in Part III of the Companies Act and deals with Partnership en nom collectif, the second is found in Part IV partnership en commandite and the third is the limited liability company, regulated in Part V of the Act. The court held that the Mifsuds were asking the court to revive the partnership because of the prejudice they found themselves in. However, the legislator does not give this as a solution. Nowhere in the law does it allow this type of solution and reviving the partnership is impossible. The court said it understands the problem the applicants are in, but just the same it is precluded by the legislator from upholding their request. The duty of the court in a democratic society is not to write the law, the constitution assigns that to the legislator. The courts are duty bound to interpret and apply the law.

Dr Malcolm Mifsud

Partner

Mifsud & Mifsud Advocates

malcolm_mifsud
Malcolm Mifsud is a partner at Mifsud & Associates.
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