Corporate Law
and the defendant company, were held in solidum and, were both to pay the relative amount to the plaintiff.
3.3.1. The Creditors & Insolvency Maltese company law recognises that directors owe a duty to take into account the interests of the creditors of the company, in an instance where the company under their management and control is in financial distress. This may be seen from Article 316 of the Companies Act, whereby in cases of wrongful trading, the directors are under the obligation to ensure that every step is taken to minimise the potential loss to the company’s creditors, especially where the company has no reasonable prospect of avoiding dissolution due to its financial state or is subject to an impending reality of being unable to pay its debts.52 It is unlikely that general principles of law could be relied upon, in the absence of fraud or breach of the criminal law, to impose duties on directors towards creditors. Given that directors act on behalf of the company, their actions vis-à-vis third parties are generally regarded to be one of the same with the action of the company itself. Professor Muscat opines that it would be an odd occurrence of the courts were to equate the interests of the creditors with the interests of the company.53 Nonetheless, Maltese judgments have recently started to occasionally refer to a duty of directors to take into account the interests of the creditors when the financial position of the company is in a parlous state. For example, in the case of Dr Andrew Borg Cardona vs Price Club Holdings Limited et54, the Civil Court remarked that the financial situation of a company may require the interests of creditors to be taken into consideration. Even if, legally speaking, a director is only an agent of a company and his duties are towards the company he represents, the obligation of the director to consider creditors’ interests is of utmost importance. The Civil Court made an impressive revelation in Maltacom plc vs Mark 52 53 54
Companies Act, Article 316. Andrew Muscat, ‘Principles of Maltese Company Law’, Malta University Press 580. Writ number 25/2003, First Hall, Civil Court (12 October 2007).
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