Five-year time limit to revive struck-off companies for property claims is unconstitutional, judge rules

A recent decision by a court of constitutional jurisdiction could lead to a flood of claims for the return of property forfeited to the government by shareholders of struck-off companies.

Mr Justice Toni Abela, presiding the First Hall of the Civil Court in its Constitutional jurisdiction delivered a landmark ruling on 12 October, in the case filed by Carmel Cortis against the government, the MFSA and the Registrar of Companies.

In terms of the Companies Act, when a company has been inactive and has stopped trading or filing returns with the Malta Business Registry, the Registrar of Companies undertakes a procedure to strike it off from the registry.

When an inactive company is struck off by the Registrar all assets which may have belonged to the company are forfeited in favour of the government and become government property.

The law also creates a five-year window in which one may request that the company be revived in order to try and take back the property which belonged to the company. If this procedure is not filed within that five-year period, it will fail and the company will be considered permanently struck off and its property permanently forfeited to the government.

But now for the first time, a court of constitutional jurisdiction has declared that law unconstitutional and described it as draconian and disproportionate.

“In fact it certainly is not just and much less, proportional, that, because the plaintiffs need to regulate their position with the Registrar of Companies by presenting the necessary documents and/or by paying small sums for administrative payments and penalties for late filing, they are being deprived of and lose properties worth hundreds of thousands of euro and therefore far in excess of that which they owe the Registrar of Companies,” said Abela.

The judge ruled that as the law stands, it is in breach of the fundamental right to property, not only declaring the law to be unconstitutional but also ordering that the company in question be placed back on the register and its property returned to it.

Legal professionals expect the judgment to have massive ramifications, as every person who has lost property to the government because of the lapse of the five-year window, can now be expected to file constitutional cases for the return of their property, in view of the fact that the law which precluded them from doing so before has been declared unconstitutional.

Lawyers Chris Cilia and Timothy Bartolo represented the plaintiffs.